INDIANA EMPLOYMENT LAW Baker & Daniels LLP

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1 Last Updated: January 2010 INDIANA EMPLOYMENT LAW Baker & Daniels LLP Table of Contents 1. Indiana Employment Introduction 2. At will Employment in Indiana and Other General Issues 3. Indiana Employment Policies, Handbooks, and Required Employment Posters 4. Indiana Employment Applications and the Hiring Process 5. Indiana Compensation and Benefits 6. Indiana Termination of Employment 7. Immigration 8. Other Indiana Specific Considerations 9. Indiana Employment Law Resources 1. Introduction The following provides a summary of Indiana employment laws that apply to employers doing business in Indiana. This overview is not intended to provide a comprehensive or complete analysis of all potentially applicable employment laws in Indiana. It is provided as a brief summation of Indiana employment laws. Accordingly, appropriate legal advice should be obtained in connection with any particular employment case, issue or situation. Employment laws vary from state to state. Therefore, issues concerning employment matters in another state should be addressed through review of the employment law pages of LawForChange for the state in question and consultation with legal counsel. 2. At will Employment in Indiana and Other General Issues a. At Will Employment Indiana employers may enter into contractual relationships with employees setting forth terms and conditions of employment including with respect to issues concerning termination of employment. In such cases, the terms of the contract will be the main evidence affecting the outcome of disputes between the employer and employee, 1

2 assuming that the contract is sufficiently detailed to cover the point(s) of dispute. Further, employers in Indiana can set forth a set duration or period of employment during which an employee typically cannot be terminated without some reason or cause sufficient to justify the termination of an at will employment relationship. Alternatively, an employee hired for an indefinite period of time and without an employment contract is called an at will employee. What this means is that the employer or the employee may terminate the employment relationship with or without cause, and at any time. Further, there is no legal requirement of providing advance notice of the termination of an at will employment relationship. Indiana law recognizes the at will employment doctrine, but subject to certain narrowly defined exceptions. There are also federal law restrictions on an employer's right to terminate an otherwise at will employee. Indiana State law exceptions to the general at will employment doctrine include the following judicially-created and narrowly-construed exceptions that apply when the employee is exercising a statutorily-protected right or performing a statutorily-required duty. Recognized exceptions include: attendance at jury duty, filing (or threatening to file) a worker s compensation claim, and refusal to perform an illegal act (i.e., refusing to drive a truck that is in excess of legal weight limits). Also, employment that is for a fixed term for which the employer and employee have agreed to restricted reasons for discharge, or in which the employee was hired by the employer with knowledge that the employee gave up job protected status with a prior employer to take the new employment, is not at will. When an employer hires an employee for a temporary period or for a season, the temporary employee is still an at will employee of the employer, and the relationship is governed by the same laws as those applicable to at will employees. As with permanent employees, legally mandated benefits, such as workers compensation insurance and unemployment insurance, must be offered to temporary employees. Optional benefits, such as 401(k) plans, need not be offered to temporary employees. b. Independent Contractors Some employers may choose to hire or use the services of independent contractors to perform certain services. A true independent contractor is not considered an employee of the employer. However, it is important to note that courts and government agencies reviewing the relationship between an employer and individuals, who are alleged to be independent contractors, will look beyond the label given to the relationship by the employer and 2

3 individual. Instead, the courts and agencies will examine the substance of the working relationship. For instance, federal and state governmental agencies (such as tax agencies like the Indiana Department of Revenue, worker's compensation agencies such as the Indiana Workers Compensation Board, Indiana and federal departments of labor, etc.) have a variety of tests for determining whether a worker is truly an employee or an independent contractor. The exact tests will vary, to some extent, by agency. However, for the most part, the tests deal with whether the employer had the right to direct and control not only the end result of the work being done, but also the manner in which the work was to be performed. Furthermore, there will be some review of other factors including: whether the individual held himself/herself out to other employers or the general public as performing the same or similar services; the manner of payment to the individual for the services; and the length of the working relationship. Incorrectly classifying an employee as an independent contractor is an extremely serious matter. Not only can claims be made for things such as overtime pay and employee benefits, there can also be assessment and collection of unpaid payroll taxes, interest, and penalties and exposure to employment-related lawsuits and administrative claims. The cumulative impact of these claims, lawsuits and penalties can be sufficiently serious to cause the employer to go out of business and close its doors. c. Employment Agreements and Enforceability As mentioned above, employers can enter into an employment agreement with an employee and such agreements are generally enforceable under Indiana law (assuming unlawful provisions are not part of the agreements). Such agreements can contain covenants: not to compete (in various forms); to maintain confidentiality over certain information/data; not to attempt to recruit employees away following the employee's employment; not to solicit employer customers/clients following the employee's employment, etc. Under Indiana law, there are, of course, requirements that certain such covenants be reasonable and tailored to the employer's protectable interests. d. Employment Records For the most part, federal law supplies retention requirements for employment records. Nonetheless, we recommend that Indiana employers maintain the following records, for the time periods specified below. Employers are free to maintain records for longer periods and should do so when there is litigation or a reasonable risk of litigation, as directed by counsel and litigation "hold" policies and directives. In Indiana, employees of private employers do not have any rights to access personnel records, except as part of discovery in litigation. Public sector employees do have access to records under certain circumstances. 3

4 Overview of Common Record Retention Requirements Under Indiana and Federal Law Period of Retention Records to be Retained 1 year Personnel records relating to (1) job applications, resumes or other replies to job advertisements, including records pertaining to failure to hire; (2) promotion, demotion, transfer, selection for training, layoff, recall or discharge; (3) job orders submitted to employment agency or union; (4) results of any physical examination if the employer considered it in connection with any personnel action; (5) records of employer-administered aptitude or other test; and (6) job advertisements or notices to employees regarding openings, promotions, training programs, or opportunities for overtime work. (ADEA, ADA, Title VII) Personnel and employment records are required by Executive Order if the employer/federal contractor has fewer than 150 employees or does not have a contract with the federal government of at least $150,000. An employer/federal contractor with more than 150 employees or a contract of more than $150,000 must retain relevant records for two years. (OFCCP Regs) 2 years For government contractors and any other entity governed by the Rehabilitation Act: job descriptions, job postings and advertisements, records of job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures and personnel files. (Rehabilitation Act, Executive Order 11246) Personnel or employment records of public elementary or secondary schools. (Title VII, ADA) From date of last entry, basic employment and earnings records, wage rate tables, records of additions to or deductions from wages paid, work time schedules, orders, shipping and billing records, job evaluations, merit or seniority systems, or other matters that describe or explain the basis for payment of any wage differentials to employees of the opposite sex in the same establishment, and records of deductions from or additions to pay. (FLSA, Title VII, Walsh-Healey, Davis-Bacon) Reasonable accommodation requests. (ADA) 4

5 Overview of Common Record Retention Requirements Under Indiana and Federal Law (cont'd) Period of Retention Records to be Retained 3 years From last date of entry, payroll records containing each employee's name, address, date of birth, occupation, rate of pay and compensation earned per week. (ADEA) Basic certificates payroll records, relevant union or individual employment contracts, collective-bargaining agreements, applicable and notices of Wage-Hour Administrator, and sales and purchase records. Also, injury frequency rates, gender and identifying contract number for Walsh-Healey. Substantiation records must be kept for at least two years. (FLSA, Walsh-Healey, Davis-Bacon, ADEA) Records relating to discrimination charges. (Title VII, ADA, ADEA, Rehabilitation Act) Records relating to sex and occupation of members of workforce and basis of wage differentials. (EPA) Employment eligibility verification (Form I-9) (IRCA) (Statute requires I-9s be retained until the later of (1) three years from employee's date of hire; or (2) one year after the employee's termination.) Dates leave taken under FMLA, copies of employee notice, documents describing employee benefits, employer policies regarding paid and unpaid leaves. (FMLA) Polygraph tests and results. (Employee Polygraph Protection Act) Bloodborne pathogen safety training. (OSHA) 5 years Records pertaining to payments to union representatives and employees, payments for interfering with employee rights and arrangements with labor consultants. (Landrum-Griffin Act) Form 301; Form 300 Log and Summary of Occupational Injuries and Illnesses, Privacy Case List, and Annual Summary. (OSHA) Payroll and certain personnel records. (Rules of the Indiana Department of Employment and Training Services.) 5

6 Overview of Common Record Retention Requirements Under Indiana and Federal Law (cont'd) Period of Retention Records to be Retained 6 years ERISA plan disclosures, annual reports and summaries. 30 years Medical records for employees with occupational exposure to bloodborne pathogens. (OSHA) All employee medical and exposure records under OSHA's Toxic and Hazardous Substances Standards (must be preserved and maintained for at least the duration of employment plus 30 years). Pending Litigation From the time that a company has notice of a Charge of discrimination or other employment-related litigation, particular effort must be made to preserve documentation which could be relevant to the defense or prosecution of the claim. This includes the personnel file of not only the charging party, but also of other potential comparables. Special care should be taken to preserve electronic data which could be relevant. Upon receipt of a Charge of Discrimination or other litigation, a company's IT department should be notified to immediately preserve electronic data which could be relevant. Such documentation should not be destroyed until final disposition of the matter and even then only if the documentation does not pertain to other potential claims. (Title VII, ADA, Executive Order, Zublake) Period Employee benefit plans, written seniority or merit rating plan, period plan or system is in effect plus one year. (ADEA) Not Specified Written affirmative action plans. (OFCCP Regs) EEO-1 reports that are required of employers with 100 or more employees. (Title VII) Certificates of Age must be retained for the duration of the employee's employment. (ADEA) 6

7 Medical records and other confidential documents, such as investigative files for harassment claims, should be maintained apart from an employee s regular personnel file and should be kept confidential and access should be restricted to those management officials with a legitimate business need for such information. 3. Employment Policies, Handbooks, and Required Employment Posters It is recommended that employers maintain written employment policies in order to set forth the employer's workplace rules, requirements, and expectations. Further, such written (and enforced) policies are important in complying with Indiana and federal law requirements. Also, both Indiana and federal law mandate that employment posters be displayed in areas commonly accessed by all employees, such as in break rooms, lunch rooms, etc. A variety of such posters can be ordered from the Indiana Department of Labor ( or through certain chambers of commerce. Policies for any employment manual or handbook should include, among other subjects, the following topics: a. Nondiscrimination Under Indiana and federal law, employers are prohibited from discriminating on the basis of race, color, religion, sex, national origin, veteran status, pregnancy, age, or disability. These anti-discrimination laws prohibit employment decisions, such as hiring, disciplinary action, promotions, other terms and conditions of employment based upon a person s protected status. Further, Indiana law protects employees who use tobacco offduty. Therefore, such employees cannot be discriminated against in hiring or other terms of employment. The Indiana age discrimination laws apply only to those employers not covered under the federal age discrimination laws. Under federal law, with respect to a person's immigration status and where the person is lawfully permitted to be employed in the United States, it is unlawful for an employer to discriminate against that person due to the person's immigration status. Certain laws also require affirmative steps to be taken in reasonably accommodating individuals. For example, under disability law, reasonable accommodation of an individual's disability is required. Under these anti-discrimination laws, employers may not retaliate against employees who seek the protections of such laws. In addition, some Indiana municipalities have passed ordinances providing for protections beyond those mandated by federal or Indiana state law. For instance, Marion County/Indianapolis maintains an ordinance prohibiting discrimination based upon sexual orientation or gender identity. Other Indiana communities have passed similar 7

8 ordinances. Accordingly, local laws should always be checked to determine whether employers are faced with any additional anti-discrimination requirements. b. Harassment Harassment is a form of discrimination and is prohibited by federal and Indiana law. Harassment can affect any of the classes of employees protected under federal and state discrimination law. Harassment can occur when there are comments, gestures, touching or other activity that creates an offensive working environment. This type of harassment is often referred to as "hostile environment" harassment. Harassment can also take place when a manager or supervisor conditions work benefits and actions upon receipt of such things as sexual activity (called quid pro quo harassment). To meet state and federal law requirements, employers need to maintain and enforce policies against harassment. The policy should encourage employees promptly to report wrongful or inappropriate conduct. More than one company official should be identified so that there is no issue with respect to an employee's comfort level in reporting such conduct. Policies should also prohibit retaliation against those who report such conduct. c. Workplace Safety Under the federal OSHA Act, employers are required to furnish their employees with a place of employment free from recognized hazards that are causing, or are likely to cause, them death or serious physical harm. Employers must also comply with occupational safety and health standards which are issued under the Act. "Right to know" regulations issued under OSHA require that employees in certain industries be warned about hazardous materials and chemicals to which they may be exposed. OSHA sets forth a detailed procedure for adopting safety and health standards and provides for inspection, investigation and enforcement. Citations issued for noncompliance can result in civil and criminal penalties, including fines and, for violations causing the death of an employee, imprisonment. States are allowed to develop and enforce their own plans setting and enforcing occupational safety and health standards. Some industries have specific statutes which regulate employee safety and health. Indiana has an approved "State Plan" under the Occupational Safety and Health Act ("OSHA"). Accordingly, it must maintain certain levels of protection at least equivalent to those required of employers under OSHA. Under Indiana law, enforcement of safety requirements cannot be more stringent than enforcement of the same requirements under federal law. Workplace safety requirements are enforced in Indiana by the Indiana Occupational and Safety Health Administration ("IOSHA"). Many employers include a workplace safety policy to deal with occupational hazards including with respect to reducing the potential for violence in the workplace. As in the case of the federal 8

9 voluntary protection plans or programs ("VPPs"), Indiana's state plan offers similar voluntary programs. 4. Employment Applications and the Hiring Process The type of inquiries that employers can make in the application/hiring process is limited, primarily by federal law. Such inquiries are limited whether in the form of an application or during employment interviews. For instance, questions about an applicant's disability are prohibited. Other inquiries, such as age and child-bearing decisions or other plans that seek data about areas of protected status are also not advised. Immigration matters are regulated under federal law and require employers to confirm that new hires are U.S. citizens or legally authorized to work in the United States. Federal law also restricts the manner in which background checks are conducted where an employer enlists the assistance of a vendor or credit checking agency. Employers who use outside organizations to conduct background checks must comply with federal creditreporting law under the Fair Credit Reporting Act, which requires certain disclosure and reports be made available to applicants. It is important to note that Indiana and federal law may prohibit a pre-employment test if it is found to have had a disparate impact on certain protected categories of applicants and where there is no reasonable relationship between the test and job requirements. Indiana law requires that health care and child care employers conduct criminal background checks. Drug testing remains an important part of the hiring process and employers should carefully develop and implement a uniform policy in this area. 5. Compensation and Benefits a. Wages Both Indiana and federal law cover various issues regarding wages and hours of work. Indiana law requires that employees be paid within ten (10) days of the close of the pay period in which wages are earned. For Indiana employers not otherwise covered under the federal wage and hour law, any employer employing at least two employees during a workweek must also pay the State-required minimum wage of $7.25 per hour. Indiana law similarly extends the requirement to pay overtime at time and one-half for over 40 hours in a workweek to employers who are not otherwise covered under the federal wage and hour law. Also, as of July 24, 2009, the federal minimum wage is $7.25 per hour. For those employers covered under federal wage and hour law, such employers must pay employees an amount that is at least the statutory minimum wage based upon an employee's hours of work in a work week. For employees who are not exempt from 9

10 overtime pay requirements under the wage/hour laws, employers must pay those employees additional compensation for overtime hours. Overtime pay requirements apply to all employees, except those who fall into one of the exempt classifications under federal law. Even certain employees who are paid on a "salary" basis may need to be paid overtime, depending upon the nature and extent of their job duties. b. Bonuses and Awards Written policies should be developed so that employees understand the method by which bonuses are calculated. Well crafted and written policies are critical to setting forth the details about bonuses to avoid confusion and claims of improper bonus payment calculations. Furthermore, in designing bonus structures, employers must also be careful in determining whether its employees' overtime wage calculations are affected by bonuses, awards, and other things of value provided to the employees. c. Taxes Employers are required to withhold Indiana and federal income taxes and social security taxes from taxable wages paid to employees. A failure on the part of the employer to collect, account for, and pay withholding taxes will subject the employer to significant monetary penalties (both under Indiana and federal law). Significantly, where there is a failure to properly collect and/or pay over such taxes, both the Indiana Department of Revenue and the Internal Revenue Service can assess personal liability on those "responsible persons" charged with the responsibility for remitting the withholding taxes or managing that responsibility. Most employers, including nonprofit organizations that are not 501(c)(3) organizations, must also file an Employer s Annual Federal Unemployment (FUTA) Tax Return (IRS Form 940) and pay any balance due on or before January 31 of each year. Details may be found in IRS Circular E, available at Employers who are 501(c)(3) organizations, however, are not required to file a FUTA Tax Return. If payment of tax is required, any balance is due on or before January 31 of each year. Details may be found in IRS Circular E, available at and in Publication 15A. d. Mandatory Benefits i) Workers Compensation Subject to certain exemptions, all Indiana employers with one or more employees must provide workers compensation insurance for their employees. There is a process by which Indiana employers may self-insure their workers compensation obligations, subject to the approval of the Indiana Workers Compensation Board. 10

11 If an employee is injured by accident, arising out of and in the course of employment, that employee's exclusive remedy for compensation against his/her employer is under the Indiana workers compensation laws for benefits. Accordingly, that employee is generally barred from suing his/her employer, except in the case of an intentional tort committed by the employer with intent to produce injury. ii) Unemployment Insurance Indiana employers must pay taxes for unemployment compensation under the mixed federal/state system. In Indiana, unemployment issues are generally dealt with by the Department of Workforce Development. iii) Other Indiana Laws Indiana courts have held that earned and unpaid vacation pay is wages and must be paid with the final paycheck at separation of employment. The same is true of earned bonuses and commissions under certain circumstances. Also, Indiana courts recognize that employers may implement vacation pay, bonus or commission policies restricting employees entitlement to pay on any conditions the employer desires to implement. Thus, the employer may have language in its written policies making clear that separated employees will not receive pay for any bonuses, vacation, or commissions under specified circumstances. Employees are not entitled, at separation, to pay for unused sick days unless the employer s policy specifically provides otherwise. A terminated employee s final paycheck is due on the next regular payday on which the employee would have been paid had the employee continued in employment. There is no requirement for accelerated payment. Upon written request of a terminated employee, the employer must issue a letter, signed by the employer, setting forth the nature and character of service rendered by the employee, the duration of the service, and the cause, if any, the employee quit or was discharged (this requirement is not applicable to any employer which does not require written recommendations or written applications showing qualifications or experience for employment). If employment benefits are provided, the provision and administration of such benefits must be handled in a non-discriminatory fashion and are subject to applicable federal laws regulating employment benefits, such as ERISA, HIPAA and COBRA. e. Mandatory Leave of Absence Federal and Indiana laws regulate certain issues concerning various kinds of leaves of absence. 11

12 With certain exceptions, the federal Family and Medical Leave Act ( FMLA ) requires employers with 50 or more employees to provide unpaid family or medical leave of up to 12 weeks in a 12-month period for the birth or adoption of a child, for the serious health condition of the employee or spouse, parent or child of the employee, or for a qualifying exigency arising out of the fact that a spouse, child or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in the support of a contingency operation. A serious health condition includes inpatient hospitalization and subsequent treatment therefore and continuing treatment by a health care provider, including pregnancy. To be eligible for FMLA leave, the employee must have worked 12 months or longer, performed at least 1,250 hours of service for the employer in the 12 months prior to the date of leave, and must work at a site within 75 miles of which the employer has 50 or more employees. If the employee s need for leave is foreseeable, the employee must provide his or her employer with 30 days notice before taking leave. When the need for leave is unforeseeable, the employee is required to provide notice as soon as practicable. An individual who believes his or her FMLA rights have been violated is entitled to file a lawsuit. Remedies include lost compensation, liquidated damages, other out of pocket expenses, equitable relief, and attorneys fees Indiana maintains a military family leave law that affects employers with at least 50 employees for each working day during each of at least 20 calendar weeks. The law provides job-protected leave to certain family members of individuals on active duty in the Armed Forces of the United States or the Indiana Army or Air National Guard. Eligible employees include: spouses, parents, biological or adoptive mothers or fathers, brothers or sisters, biological grandparents and court-appointed guardians and custodians. Eligible employees may take up to 10 days leave from work per year for qualifying circumstances during: the 30-day period before active duty orders are in effect; a leave provided to the active duty serviceperson while active duty orders are in effect; or the 30- day period after the termination of the active duty orders. Also, employers are barred from retaliating against or penalizing an employee who elects to take such leave. To be eligible for such leave, the employee must have been employed by the employer for at least 12 months and worked at least 1,500 hours during the 12-month period immediately preceding the date on which the leave is to begin. f. Voluntary Benefits To the extent that employers choose to offer benefits that are not required by law, it is important that such benefits be provided and maintained in a non-discriminatory and uniform manner. Further, benefits such as: retirement benefits, severance pay, or other voluntary benefits may be regulated under ERISA, a federal law that sets forth procedural and substantive requirements. 12

13 6. Termination of Employment Assuming that an employee is employed on an at will basis, that employee may generally be terminated with or without cause or advance notice, provided there is no violation of otherwise applicable law, such as whistleblower, anti-discrimination, or anti-retaliation laws. For example, Indiana prohibits the termination of an employee in retaliation for filing a workers compensation claim. Indeed, an employment termination that occurs within "temporal proximity" of the time when an employee sought to avail himself/herself of the benefits provided by the Indiana workers compensation laws will likely be viewed as suspicious by the Indiana courts. Further, termination or layoff of employees may engender litigation or charges filed with governmental agencies such as the federal Equal Employment Opportunity Commission ("EEOC"), the Indiana Civil Rights Commission ("ICRC"), etc. Therefore, employers should consider whether the facts of each particular case justify termination of employment. In some cases, termination may not be appropriate or timely. Further, there may be some lesser sanction that is appropriate. It is important to consider all circumstances in deciding upon a disciplinary course of action. Moreover, in terminating employment, employers should assess the risks of workplace violence and take detailed precautions, where appropriate. Employment counsel may need to be consulted before terminating employees. In addition, large-scale reductions in force call into play other employment laws that require even more analysis to confirm whether there is a disparate impact on protected categories of employees. Moreover, if there are a sufficiently large number of employees affected by a reduction in force, the federal Worker Adjustment and Retraining Notification Act ("WARN") may require 60-days' advance written notice to affected employees, certain union representatives (if any), and state/local government officials. Unlike many states that maintain their own state law versions of WARN, there is no separate Indiana WARN act. Employers in Indiana are regulated under federal WARN. a. Pay All earned wages (including earned/accrued and unpaid vacation pay which is regarded as wages ) must be paid with the final paycheck at separation of employment. The same may be true of earned bonuses and commissions, under certain circumstances. b. Severance Agreements / Releases Severance pay is not required under Indiana law. However, an employer may commit to paying severance compensation in an enforceable agreement, subject to the terms of that agreement. If the employer wishes to have the employee sign a release of claims in consideration of the severance pay (which must be in addition to any compensation to 13

14 which the employee was already entitled), federal law contains specific statutory requirements for waivers of age discrimination claims. Also, federal law prohibits the waiver of certain claims, such as wage claims. c. Unemployment Insurance / Compensation The purpose of unemployment compensation is to provide benefits to those who are unemployed through no fault of their own. Therefore, to be eligible for payments, an applicant generally must either (1) have quit for good cause attributable to his or her employer or (2) have been terminated for reasons other than serious misconduct connected with his or her work. In addition, an applicant must be available and actively looking for work during the entire period of benefits, and (1) have earned wages in at least 2 quarters in the base year; (2) be unemployed for a waiting period of one week; (3) make a claim for benefits for each week of unemployment; (4) have registered to work and continue to report to the employment office; (5) be available and able to work; and (6) actively seek, but be unable to obtain work during the benefit year (365 days). Unemployment benefits come from taxes paid by employers on wages of their workers. These taxes are put in a special trust fund that is used solely to pay unemployment benefits to workers who lose their jobs through no fault of their own. The benefits are intended to be temporary to help people with basic needs while seeking new employment. Most employers pay contributions under the experience rating provisions of the law at a rate of 2.7 to 5.4% of their total payroll. The employer s contribution rate depends on its individual benefit ratio (benefits charged to its account for a certain period divided by its total payroll for the same period) as well as the level of funding of the Unemployment Compensation Fund. To be unemployed, individuals must perform no services in a given week and receive no remuneration. In situations where individuals receive payments from their employers for periods in which they render no personal services, e.g., back pay awards, holiday and vacation pay, certain severance payments or employer funded disability pay, they are not unemployed and are not entitled to unemployment benefits. d. Health Care Continuation (COBRA) Requirements There is no Indiana law regulating notice to employees regarding the cessation of certain employment benefits upon their termination (or resignation) from employment. Instead, such notification arises under a federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985 ( COBRA ). The Consolidated Omnibus Budget Reconciliation Act of 1985 ( COBRA ) requires employers who provide employee health and medical benefits to provide notification to 14

15 employees of their COBRA rights at the time of a qualifying event such as a resignation or an involuntary termination of employment. COBRA applies to employers with more than 20 employees. See Federal Law section below. 7. Immigration With globalization and the increasing benefits of a diverse workforce, social sector employers located in the U.S. often seek to employ foreign personnel. This is particularly true with social sector organizations that are already working and addressing problems not just in the U.S. but around the world. A variety of permanent and temporary visas are available depending on various factors such as the job proposed for the alien, the alien s qualifications, and the relationship between the U.S. employer and the foreign employer. Permanent residents are authorized to work where and for whom they wish. Temporary visa holders have authorization to remain in the U.S. for a temporary time and often the employment authorization is limited to specific employers, jobs, and even specific work sites. There are no laws in Indiana regulating immigration. Such laws are federal in nature and include regulation under the following laws: the Immigration and Nationality Act ( INA ) (addressing things such as employment eligibility, employment verification and nondiscrimination); and the Immigration Reform and Control Act ( IRCA ) (addressing inspection and verification of documentation establishing the identity of an individual and his/her eligibility to work in the United States). When planning to bring foreign personnel to the U.S., U.S. employers should allow several months for processing by the United States Citizenship and Immigration Services ( USCIS ), as well as the Department of State and Department of Labor. Furthermore, employers should be aware that certain corporate changes, including stock or asset sales, job position restructuring, change of job sites, and changes in job duties, may dramatically affect (if not invalidate) the employment authorization of foreign employees. a. Permanent Residency (the green card ) Permanent residency is commonly based on either family relationships, such as marriage to a U.S. citizen, or an offer of employment. Permanent residence gained through employment often involves a time-consuming process that can take several years. Therefore, employers considering the permanent residence avenue for an alien employee should ascertain the requirements for that immigration filing prior to bringing the employee to the U.S. b. Temporary Visas. The following are the most commonly used temporary visas: 15

16 i) B-1 Business Visitors and B-2 Visitors for Pleasure These visas are commonly utilized for brief visits to the U.S. of six months or less. Neither visa authorizes employment in the U.S. B-1 business visitors are often sent by their overseas employers to negotiate contracts, to attend business conferences or board meetings, or to fill contractual obligations such as repairing equipment for brief periods in the U.S. B-1 or B-2 visitors cannot be on the U.S. payroll or receive U.S.-source remuneration. ii) F-1 Academic Student Visas Including Practical Training Often foreign students come to the U.S. in F-1 status for academic training or M-1 status for vocational training. Students in F-1 status can often engage, within certain constraints, in on-campus employment and/or off-campus curricular or optional practical training for limited periods of time. Vocational students cannot obtain curricular work authorization but may receive some postcompletion practical training in limited instances. iii) J-1 Exchange Visitor Visas These visas are for academic students, scholars, researchers, and teachers traveling to the U.S. to participate in an approved exchange program. Training, not employment, is authorized. Potential employers should note that some J-1 exchange visitors and their dependents are subject to a two-year foreign residence requirement abroad before being allowed to change status and remain or return to the U.S. iv) TN Professionals Under the North American Free Trade Agreement, certain Canadians and Mexicans who qualify and fill specific defined professional positions can qualify for TN status. Such professions include some medical/allied health professionals, engineers, computer systems analysts, and management consultants. TN holders are granted one-year stays for specific employers and other employment is not allowed without prior USCIS approval. Particularly with regard to Canadians, paperwork required for filing these requests is minimal. v) E-1 Treaty Trader and E-2 Treaty Investor Visas These are temporary visas for persons in managerial, executive or essential skills capacities who individually qualify for or are employed by companies that engage in substantial trade with or investment in the U.S. E visas are commonly used to transfer managers, executives or engineers with specialized knowledge about the proprietary processes or practices of a foreign company to assist the company at its U.S. operations. Generally, E visa holders receive a five-year visa stamp but only two-year entries at any time. 16

17 vi) E-3 Treaty Alien in a Specialty Occupation Visas for Australian Citizens E-3 visas are for Australian citizens who will be employed in the U.S. in specialty occupations that require at least a bachelor s degree. Like H-1B visas, the U.S. employer must pay the E-3 worker the higher of the actual wage paid by such employer to U.S. workers or the prevailing wage paid to U.S. workers in local commuting area as determined by Department of Labor online wage library or other valid salary survey. These temporary visas are granted for a period of 2 years and are renewable indefinitely. vii) H-1B Specialty Occupation Visas H-1B visas are for persons in specialty occupations that require at least a bachelor s degree. Examples of such professionals are computer programmers, engineers, architects, accountants, and, on occasion, business persons. Initially, H-1B temporary workers are given three-year temporary stays with possible extensions of up to an aggregate of six years. H-1B visas are employer-and jobspecific. A U.S. employer must pay H-1B workers the higher of actual wage paid by such employer to U.S. workers or the prevailing wage paid to U.S. workers in local commuting area as determined by Department of Labor online wage library or other valid salary survey. viii) L-1 Intra-company Transferee Visas Most often utilized in the transfer of executives, managers or persons with specialized knowledge from international companies to U.S.-related companies, L-1 visas provide employer-specific work authorization for an initial three-year period with possible extensions of up to seven years in certain categories. L-1A visas are designed for the transfer of executives and managers while L-1B for specialized knowledge persons. As in the case of certain E visa capacities, some L managers or executives may qualify for a shortcut in any permanent residence filings. ix) O-1 and O-2 Visas for Extraordinary Ability Persons O-1 and O-2 visas are for persons who have extraordinary abilities in the sciences, arts, education, business or athletics and sustained national or international acclaim. Also included in this category are those persons who assist in such O-1 artistic or athletic performances. x) P-1 Athletes/Group Entertainers and P-2 Reciprocal Exchange Visitor Visas These temporary visas allow certain athletes who compete at internationally recognized levels or entertainment groups who have been internationally recognized as outstanding for a substantial period of time, to come to the U.S. and work. Essential support personnel can also be included in this category. xi) Others 17

18 There are a number of other non- immigrant visas categories that may apply to specific desired entries. c. Immigration and Nationality Act ( INA ) The Immigration and Nationality Act ( INA ) includes provisions addressing employment eligibility, employment verification and nondiscrimination. Employers may hire only persons who may legally work in the U.S. (i.e., citizens and nationals of the U.S.) and aliens authorized to work in the U.S. The employer must verify the identity and employment eligibility of anyone to be hired, which includes completing Employment Eligibility Verification Form (I-9). Employers must keep each I-9 on file for at least three years, or one year after employment ends, whichever is longer. d. Immigration Reform and Control Act ( IRCA ) The Immigration Reform and Control Act ( IRCA ) requires that employers, regardless of size, inspect and verify documentation establishing the identity and eligibility to work in the U.S. of every newly hired employee, and makes it unlawful to hire an alien who is ineligible for work in the U.S. Employers are subject to significant fines and penalties for failure to comply with documentation requirements under the IRCA, as well as for hiring unauthorized workers. IRCA also prohibits employers of four or more workers from discriminating against lawfully admitted aliens. 8. Federal Law Described below are some of the more significant federal laws and regulations, not including immigration, affecting the employment relationship. a. Title VII of the Civil Rights Act of 1964 ( Title VII ) Title VII of the Civil Rights Act of 1964 ( Title VII ) prohibits employment discrimination based on race, sex, color, national origin, or religion. Title VII applies to all employers with 15 or more employees and prohibits discrimination in areas of advertising, recruiting, hiring, promotion, compensation, benefits administration, and termination. Title VII also prohibits harassment based on an individual s protected characteristics, as well as retaliation for engaging in conduct protected by Title VII. To recover damages, any individual who has suffered such discrimination must file a complaint with the Equal Employment Opportunity Commission ( EEOC ) within 180 days of the alleged discrimination. If an employee files a charge with the state fairemployment agency, however, this time period is extended to 300 days from the alleged discrimination. Once the EEOC investigates the allegations and makes a determination regarding the sufficiency of the evidence to prove the alleged discrimination, the EEOC will notify the employee in writing of his or her right to bring a civil action. Regardless 18

19 of the EEOC s determination, the employee may, within 90 days of receipt of the notice, bring a legal action based on his or her allegations. An individual s possible remedies under Title VII include compensatory and punitive damages, back pay and front pay, reinstatement, and attorneys fees. b. Age Discrimination in Employment Act ("ADEA") The Age Discrimination in Employment Act ("ADEA") makes it unlawful for employers to fail or refuse to hire, to discharge, limit, segregate or classify protected employees, or otherwise discriminate against them with respect to their compensation, terms, conditions or privileges of employment because of their age. The ADEA protects employees who are at least 40 years old and applies to all employers with 20 or more employees employed in an industry affecting commerce. There are limited exceptions to the ADEA where age is a "bona fide occupational qualification" necessary to the particular business, or where the differentiation is based on reasonable factors other than age. Employees may file charges of discrimination with the EEOC, which enforces the ADEA. The employee or the EEOC may then sue in federal court for damages and other relief. Remedies under the ADEA include reinstatement or front pay, back pay, liquidated damages, and attorneys fees. c. Americans with Disabilities Act ( ADA ) The Americans with Disabilities Act ( ADA ) makes it unlawful for employers to discriminate against a qualified individual with a disability based on the existence of a disability, a record of a disability, or on the employer s perception that an employee is disabled. The ADA requires that employers take reasonable steps to accommodate disabled individuals in the workplace unless such measures would constitute an undue hardship on the employer. The ADA applies to employers engaged in interstate commerce that have 15 or more employees. The procedures for pursuing a claim under the ADA, as well as the available remedies, are similar to those provided by Title VII. d. The Pregnancy Discrimination Act of 1978 ( PDA ) The Pregnancy Discrimination Act of 1978 ( PDA ) explicitly prohibits discrimination based on pregnancy and its related conditions. e. Employee Polygraph Protection Act ( EPPA ) Employee Polygraph Protection Act ( EPPA ) generally prohibits the use of polygraph machines by an employer in determining whether to hire, promote or terminate an individual. Some private employers, including those within the security field, those involved in the protection of the public, those involved in operations impacting national security, and those authorized to manufacture, distribute, or dispense any controlled 19

20 substance, are exempt from the EPPA. The EPPA also permits the use of a lie detector by any employer when the employer sustains an economic loss, the employee to be tested had access to the property that is the subject of the investigation, the employer has a reasonable suspicion that the employee was involved in the incident being investigated, and the employer obtains a statement from the employee authorizing the test. Even in these limited situations where use of a lie detector is permissible, an employee being tested can terminate the examination at any time. Either the Secretary of Labor or an aggrieved employee can bring an action against an employer for violating the EPPA. Remedies include reinstatement, promotion, back pay, and attorneys fees. The Department of Labor may also impose a fine up to $10,000. f. The Equal Pay Act of 1963 ( EPA ) The Equal Pay Act of 1963 requires employers to pay men and women equal wages for equal work. Equal pay is required for any jobs "the performance of which require equal skill, effort and responsibility and which are performed under similar working conditions." There are exceptions for seniority systems, merit systems, pay systems based on quantity or quality of production, or other pay differentials based on factors other than sex. The Equal Pay Act applies to employers who have two or more employees engaged in interstate commerce, in the production of goods for interstate commerce, or in handling or working with goods and materials in interstate commerce. An employee who believes his or her employer has violated the EPA may bring an action in federal court or file a charge with the EEOC. The employee need not first bring the claim before the EEOC in order to sue. Remedies include back pay, attorneys fees, and court costs. g. The Federal Fair Labor Standards Act ("FLSA") The Federal Fair Labor Standards Act ("FLSA") regulates wages and hours of certain covered employees. Employers must keep accurate records of hours worked by covered employees and those employees must receive a regular rate of pay for each hour they work up to 40 hours in a week. The regular rate must be at least equal to the required "minimum wage," which was increased to $7.25 on July 24, All hours over 40 in a week are considered "overtime." Generally, an employer must provide compensation to any covered (i.e., non-exempt) employee who works in excess of 40 hours in a week at an amount not less than one and a half times the worker s regular rate of pay for each hour of overtime. These protections may not be eliminated by individual agreement or by union contract. While appearing simple, the FLSA is subject to many regulations, exceptions, interpretations and exemptions and is not capable of short summary. For example, professional, executive and administrative employees, as defined by regulations, are exempt from both the minimum wage and overtime pay requirements and some occupations and industries have special minimum wage provisions. Employers who violate the FLSA are subject to civil penalties, including fines, and prevailing employees 20