On May 5, 2015, Governor Pence signed into law House Bill 1469, amending Indiana’s laws governing wage payments and wage deductions. The amendments, which minimize employer exposure for violations and expand allowable wage deductions, bring welcome changes for Indiana employers.

The first set of changes affects damages available for an employer’s failure to pay wages within the required timeframe. Indiana law requires employers to pay all wages due within 10 business days after the end of the pay period. Until now, the wage law provided for automatic liquidated damages for any unpaid wages. Even a good faith mistake could subject an employer to a steep penalty — an amount equal to 10 percent of the unpaid amount per day, up to twice the unpaid amount. This was in addition to the amount of unpaid wages due, meaning damages for unpaid wages rose to three times the amount due by the 20th day after the wages were originally due (in addition to costs and attorney’s fees). These automatic triple damages (and attorney’s fees) made wage claims attractive to Indiana plaintiffs’ attorneys.

Under the new provisions, effective immediately, liquidated damages are no longer automatic and no longer accrue at a rate of 10 percent per day. Instead, a prevailing plaintiff receives liquidated damages of twice the unpaid amount, but only if the court determines that the employer was “not acting in good faith.” “Good faith” is not explained or defined, so courts are likely to turn to Indiana case law and dictionary definitions. Courts typically interpret “good faith” to mean an action taken honestly — even if it was wrong or negligent. This change offers employers that make honest mistakes or have genuine disputes regarding wages due, including as a result of wage deductions, a defense to sizeable liquidated damage awards.

The changes also affect Indiana’s wage deduction law. The law expands the list of deductions that are legal for Indiana employers to make (under a lawful wage deduction agreement). Now, employers may also make deductions for:

• Purchasing uniforms and equipment necessary for the job (subject to certain caps)
• Reimbursement of education or employee skills training costs (unless provided in whole or in part by a government economic development incentive program)

Before the amendment, employers could lawfully deduct for merchandise sold to employees. The amendment explicitly adds deductions for food, provided merchandise or food is for the employee’s benefit or use. Finally, the law now caps the interest an employer may charge for amounts loaned or advanced to an employee that are repaid through wage deductions at 4 percent above prime.