You can legally be fired for almost any reason. How does 'at-will' employment work in Indiana?

At-will employment gives employers the right to fire anyone for almost any reason. It has been predominant in Indiana and across the United States since the late 1800s.

Many don’t know the laws exist or understand them fully, said Indianapolis employment attorney Amber Boyd Moorman. Often people who think they’ve been wrongfully terminated come to her for legal help.

“They [say] 'Amber, this is very unfair.' And I have to go through the dialogue of 'well, they can do this. They can do unfair things,'" Moorman said. “They just can’t have illegal practices.”

While the law prohibits employers from firing people for certain reasons, it ultimately falls to the former employee to seek accountability and prove their case in civil court. The American Civil Liberties Union estimates at least 150,000 people are unjustly fired every year.

There were few reasons an employer couldn’t fire someone as at-will employment first developed throughout the country.

“The first, major exception was the National Labor Relations Act of 1935,” said Matthew Finkin, University of Illinois law professor. “You can dismiss for any reason, but not for joining or supporting a union.”

Other exceptions followed in the decades after. Now, nationally, an employer can’t legally fire someone based on their race, ethnicity, religion, disability, veteran status, gender, sexual orientation or other protected class. These exceptions and a few others apply to workers in all states because they’re set in federal law.

But some states go further. For example, Indiana and most other states also have a “public policy exemption.” That, in part, makes it illegal to fire someone for refusing to break the law or reporting illegal activity at their company

“Indiana has very narrowly tailored exceptions to at-will employment,” said Indianapolis attorney Moorman. “If you are a nurse or somebody who is in that sector and you're filing a complaint because there has been abuse or neglect, you could fall into [the public policy exemption].”

Some states go further than Indiana, according to the National Conference of State Legislatures, by including protections for employees who report or refuse to participate in violations of “administrative rules and regulations” or even “professional codes of ethics.”

Employees can also be protected by their employment contract if it says they can only be fired for just cause, will be employed for a specific amount of time or includes other similar guarantees.

But Indiana doesn’t recognize the “implied contract exemption” like some other states. That exemption can protect employees from being fired without cause if, for example, a supervisor verbally assured them that wouldn’t happen or if an employee handbook outlined firing processes that weren’t followed. In Indiana, if those assurances are not explicitly in a contract, they don’t count.

The final major exception a few states recognize is the “covenant of good faith and fair dealing.” The way the exception works varies, but often it prohibits employers from firing someone “in bad faith or motivated by malice,” according to a Monthly Labor Review article.

That could look like an employer firing someone after they make a big sale just to keep them from making a commission off of it. Or firing a long-time employee to keep them from getting retirement benefits.

Indiana courts do not recognize that exception, according to law firm Ogletree Deakins.

People can have employment contracts that make them non-at-will. In those cases, how and why they can be fired is determined by the contract and laws relevant to it.

How employees can protect themselves

Not all states require employers to even give an explanation for a termination. Indiana law does, in some cases.

Employers must explain reasons for firing in a termination letter if the fired employee had to provide letters of recommendation or “written applications showing qualifications or experience” to get the job initially.

Some states require the termination letter be given to the fired employee by default. Indiana, however, only requires the letter if the former employee requests it.

If an employee believes their firing violated the law, it's on them to prove it, Moorman said.

“Typically, what I find is, when there has been discrimination, there are also people who are lying. So there are emails, there's corroborating evidence we can get,” Moorman said, who has been practicing for almost 20 years. “I'm not saying it's not an uphill battle, but there's just work that has to be done.”

The process of proving wrongful termination can be time-consuming and costly for the employee, experts say. Moorman urges workers to help themselves in the future by keeping diligent records now.

“We have to be a society – and really a people – that has some documentation regarding their employment. So you can be proactive if something does happen to you,” she said. “So if you make a complaint to HR about someone treating you unfairly ... or you're requesting accommodation, and you're not receiving the accommodation, document all those things.”

Moorman also recommends keeping records of “good things” like positive performance reviews or emails with words of thanks from clients.

“And keep the document for yourself, don't just keep it on the company's computer,” she added.

Moorman said unions are an alternative to at-will employment. Collective bargaining agreements generally force employers to prove just cause for firings before an impartial arbitrator.

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Alternatives to at-will employment

A few audience members wanted to know: is there any chance Indiana law would shift away from at-will to statutes that require employers to fire people for just cause?

“As an outsider, I'd be skeptical,” University of Illinois law professor Finkin said.

Finkin points to a 1991 attempt by the Uniform Law Commission to get states to pass an Employment Termination Act that would create a “substantive right to 'good cause' protections against” being fired.

Indiana and many other states have taken and applied versions of legislation proposed by the ULC in the past. Indiana‘s legislature considered three bills based on ULC models in the 2022 session. Two of them passed and received the governor’s signature.

But not a single state has passed the Employment Termination Act since it was proposed.

“No other country permits employers arbitrarily and without reason to dismiss employees. Japan doesn't, Australia doesn't, Germany doesn't,” Finkin said.

He said Puerto Rico and Montana have some similar protections.

“The German system is a good example. A dismissal must be socially justified. That's the statutory test," Finkin said. "And if you've been fired by your employer, you can walk off the street into the labor court.”

Such systems tend to resolve cases more efficiently, Finkin argues. In Germany, 60 percent of the cases are resolved within three months, he said, while wrongful termination cases can drag on for years in the U.S.

“Most of the industrial world recognizes that employees, once they're past a probationary period, have a right not to be dismissed except for good or just cause,” he said. “And they provide a public forum that will decide the question, so there's really, very little cost to the employee.”

Many argue shifting away from at-will would deter job creation in the U.S., Finkin said.

“That's been one of the major claims, employers will be reluctant to hire people because it's expensive to fire them,” he said. “And the economic research that I'm aware of suggests that there is no close connection or no connection. Hiring and firing is really a product of the much larger dynamics of an economy.”

And often employees who win arbitration cases in non-at-will jurisdictions primarily get back pay and/or severance, rather than large amounts of damages.

“If [workers] have access to a union arbitration procedure, how often do they win? And the data there we do have [shows] the management wins about 60 percent of the time,” he said. “And they should, because the contract requires them to investigate these cases carefully, not to discharge arbitrarily, and they know that a union is available to take the case to arbitration.”

Some note at-will also guarantees employees the right to quit a job for any reason. In non-at-will jurisdictions, like the United Kingdom and Germany, employees can still quit but may be required to provide a few weeks' notice.

Data tells us Indiana's very tight labor market could potentially see some major shifts soon. But numbers don't capture the full story. Is this affecting you, your family or your business? Share your story with reporter Adam at arayes@wvpe.org or on Twitter at @arayesIPB.