An Employee is Suing Me for Wrongful Termination. Isn’t Indiana an At-Will State?

The question in this article’s title is a common refrain for any employer who has received a wrongful termination lawsuit. Unfortunately, the answer to the question does not lend itself to a straightforward “Yes” or “No” answer.

Yes, Indiana is an “at-will” employment state, which means that absent a contract stating otherwise, either party in an employment relationship may terminate the relationship at any time with or without any reason. But like so many things in the law, there are exceptions to this general rule. This article will help employers gain a basic understanding of those exceptions, which in turn can help them adopt strategies to minimize the risk of a wrongful termination claim.

Is the Employment Relationship At-Will?

The initial question is whether an employment relationship is at-will or for a definite term. If the employer and employee agree (either in writing or verbally) that the employee will work for the employer for a specific length of time, then, absent explicit at-will language in the agreement, the employer cannot terminate the employee without good cause during that term. Though there is a presumption that an employment relationship is at-will, employers should state this explicitly in their employment agreements, offer letters, job postings, and employee handbooks.

Exceptions to At-Will Employment

If the relationship is at-will, then the employee or employer can terminate the employment relationship at any time, with or without cause, except in three instances: (1) adequate independent consideration; (2) violation of a clear statutory expression of a right or duty; and (3) promissory estoppel.

Adequate Independent Consideration

“Adequate independent consideration” means that if an employee sacrificed something to obtain the security of employment, the employer cannot terminate employment without cause. Examples of this include giving up a competing business or agreeing to dismiss a personal injury claim in exchange for employment. In contrast, Indiana courts have stated that, without more, simply passing up on another job does not constitute independent consideration.

Violating a Clear Statutory Right or Duty

The second exception, violating a clear statutory right or duty, prohibits employers from terminating at-will employees for doing things they have a legal right to do, such as filing a worker’s compensation claim, filing a complaint regarding occupational safety and health, or serving on a jury. Additionally, an employer cannot terminate an at-will employee who refuses to break the law or commit an illegal act for which the employee would be personally liable, such as lying to state regulators or stealing from a client.

Employers should be sensitive to timing issues related to this exception. For example, if an employee with performance issues recently filed a worker’s compensation claim, ideally the employer should have documentation demonstrating that it had decided on termination (or at least was seriously considering it) before it became aware of the worker’s compensation claim. In this way, the otherwise suspicious timing of the discharge and retaliatory inference is weakened by existing documentation that reveals the true reason for discharge.

Promissory Estoppel

The last exception is known as promissory estoppel. This exception can apply if the employer made a promise to the employee, and the employee relied on the promise to his or her detriment. For example, if an employer told an employee that she will not be discharged except for good cause and the employee relied on that promise by moving, buying a house, and incurring other related expenses, then the conditions are ripe for a promissory estoppel argument if the employer were to terminate without cause.

Anti-Discrimination Laws

In addition to the three exceptions to at-will employment, employers should be mindful of anti-discrimination laws, which prohibit employers from terminating employees, including at-will employees, for a discriminatory reason. In Indiana, employment discrimination laws protect employees for being fired or harassed due to several protected categories, including race, color, sex (including sexual orientation and gender identity), religion, national origin, disability, veteran status, or age if the employee is 40 or over. Employers should also be aware that if any employees are part of an organized labor union, then there are likely additional procedures and protections under the union’s collective bargaining agreement with the employer.

Contact the Labor + Employment Law attorneys at CCHA with your wrongful termination questions

If you have been sued for wrongful termination, contact the employment litigation team at Church Church Hittle + Antrim. For over 100 years, our firm has developed one of the premier litigation practices in Indiana – helping individuals, families, and business owners find answers to and recover from life’s most tragic and significant events. We are here to help you.