What Is ‘At Will’ Employment?

As a small business owner, you’ve probably heard that Indiana and other states are at will employment states. But do you really understand what that means you are allowed to do or not do when it comes to terminating employees? Even in this area of your payroll process, The Payroll Department can help with information you need.

Basically, at will employment means you can terminate an employee with or without cause, at any time, without adverse legal consequences. However, you cannot terminate an employee for illegal reasons. Additionally, you don’t have to provide advance notice of termination. For example, at-will employers can:

• Promote and demote employees.
• Make unannounced pay and benefits cuts. As long as the pay cut doesn’t take the employee’s wage below applicable federal or state minimum wage.
• Reduce paid time off.
• Change work schedules – limiting hours or requiring on-call work.
• Set your own policies.

Alternatively, employees can leave a job at any time, with or without a reason, without legal recriminations, too.

However, there are state and federal exceptions to this law. You cannot terminate employment for any of the following reasons:

• Discrimination or harassment based on race, gender, national origin, religion, age (40 and older) and disability. This discrimination may occur before, during or at the end of employee’s
• Retaliation against employees who complain about discrimination or harassment toward themselves or others, or within the company, or who participate in an agency or court proceeding concerning discrimination or harassment.
• Jury duty attendance.
• Filing or threatening to file a worker’s compensation claim or claim for unpaid wages.
• Refusing to perform an illegal act, such as refusing to drive a truck that exceeds legal weight limits, or reporting illegal activity.

Additionally, you cannot terminate an employee at will if:

• The employee has an employment contract which states the employee is employed for a set time period, or outlines specific situations or employee actions that may lead to termination for cause. Reasons for-cause termination may include poor employee performance, employee misconduct or economic necessity.
• The employee is covered by a collective bargaining agreement that specifies the employee can only be terminated for cause.
• The employee gave up job protected status with their former employer to work for you.

As a small business owner, you’re probably more knowledgeable in the actual running of your company rather than every local, state and federal law concerning employment, payroll and taxes. Therefore, to avoid errors that can lead to substantial fines and penalties, consider hiring The Payroll Department. As an experienced payroll services provider, we can handle your payroll and payroll taxes for you, so you can get back to managing your business.

-Ariane of The Payroll Department blog team