Indiana Wage Law Explained

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Understanding Indiana Wage and Overtime Laws

While Indiana does have certain state labor laws that differ from the federal Fair Labor Standards Act (FLSA), the state law applies only in instances where it provides greater rights or protections than federal law.  Whichever law (state or federal) is more favorable to the worker will apply.  In most instances, for workers employed in Indiana, this will be the federal wage and hour laws.

Minimum Wage

The current Indiana and federal minimum wage is $7.25 per hour.  In 2011, Indiana passed a law that stops any cities or counties in the state from passing their own laws that would increase the local minimum wage.

Overtime Pay 

Indiana state labor laws on overtime pay generally apply the FLSA and require employers to pay time and a-half for all hours worked over 40 per workweek, unless an employee is properly classified as exempt.

For minimum wage workers in Indiana, the overtime pay rate amounts to $10.88 per hour (1.5 x $7.25).

Employees in Indiana can be required to work overtime (ie “mandatory overtime”) without  violating the overtime laws, as long as they are properly compensated at the premium rate required by law.  Likewise, absent a collective bargaining agreement or contract, an employee is only entitled to his or her regular rate of pay for working a weekend or holiday, unless such weekend or holiday hours cause them to actually work more than 40 hours during the work week, in which case they should be compensated at not less than one and one half times his/her regular rate of pay for all time worked past 40 hours.

Indiana labor laws do not require reporting pay or show-up pay when workers show up for a scheduled shift but are sent home due to no available work. 

When Overtime Doesn’t Apply

Most workers in Indiana are entitled to overtime pay when they work more than 40 hours per week. In certain circumstances, however, there are exceptions. 

Employees engaged in executive, administrative, or professional capacities (and paid at least $455 per week on a salary basis) are exempt from the overtime requirement. Note that new minimum salary requirements for these overtime exemptions take effect in January 2020 and increase the minimum salary threshold to $684 per week (or $35,568 annually). This change in federal law will also apply to most workers in Indiana when making the determination of whether they are classified as exempt or non-exempt from the overtime pay laws.

Misclassification of Independent Contractors

While there are situations in which workers are legitimately running their own business and properly treated as independent contractors who are not entitled to receive overtime, employers are not allowed to mischaracterize employee roles to avoid paying overtime compensation. 

Merely labeling a worker as an independent contractor, or even entering into a written agreement, is not enough to avoid the labor laws on overtime pay.  While there is no single definition of “independent contractor” in Indiana labor laws. There are several factors to be considered in determining if a worker in Indiana is an employee or independent contractor (a/k/a 1099 employee) 

If properly classified as an independent contractor under Indiana law, workers are typically eligible for only the specific compensation bargained for in a contract. 

Meal and Rest Breaks

Indiana state law does not generally require employers to provide rest breaks, meal breaks, or breaks for other purposes to adult employees. Minor employees (under 18 years of age) who work six or more hours in a shift must be given one or two breaks totaling at least 30 minutes. These breaks may be taken at any point during the minor’s shift.

Tipped Employees  

Employers in Indiana may not share in or keep any portion of a gratuity that a patron gives to an employee. An employer may credit the tips received by tipped employees against the minimum wage obligation if the employer pays at least $2.13 per hour to the employee and tips are: 1) Received by the employee 2) Reported to the employer and 3) At least $30.00 per month.

Employers may require that tips/gratuities be pooled and distributed among certain employees. A “gratuity” is defined in the Indiana Labor Code as a tip, gratuity, or money that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due for services rendered or for goods, food, drink, articles sold or served to patrons. Tip pools, whether voluntary or mandatory, are permitted for restaurant employees as long as:

  • Tip pool participants are limited to those employees who contribute to the chain of service bargained for by the patron;
  • No employer or agent of the employer takes or receives any part of the tips intended for employees; and
  • The tips are distributed among the pool participants in a fair and reasonable manner.

Payroll Deductions

Indiana labor laws do not permit employers to deduct any amounts from an employee’s wages unless:

  1. The agreement for the deduction must be in writing, signed by the employee, by its terms revocable at any time by the employee upon written notice, and agreed to in writing by the employer.
  2. A copy of the deduction agreement must be delivered to the employer within ten days of its execution.
  3. Only certain categories of deductions are allowed, including:
    • Premiums on an insurance policy obtained for the employee by the employer
    • Contributions to a charitable organization
    • Purchase price of bonds, securities or stock of the employing company
    • Labor union dues
    • Purchase price of merchandise sold by the employer to the employee
    • Amount of loan made to the employee by the employer
    • Contributions of the employee to a hospital service or medical expense plan
    • Payment to an employee’s direct deposit account
    • Uniform or equipment purchase necessary to fulfill the duties of employment, provided that the total amount of wages assigned may not exceed the lesser of: (A) $2,500 per year ($48.08 weekly); or (B) 5% of the employee’s weekly disposable earnings
    • Reimbursement for education or employee skills training, unless the education or employee skills training was provided through an economic development incentive from a federal, state, or local program
    • An advance for payroll or vacation pay
    • Merchandise, goods, or food offered by the employer, for the employee’s benefit, use, or consumption, at the written request of the employee 

An employer may not otherwise require an employee to rebate, refund, offset, or return part of the employee’s wage, salary, or compensation.

Pay Statements

Indiana labor law requires every employer subject to the Indiana Minimum Wage Law to furnish each employee a statement of the hours worked by the employee, the wages paid to the employee, and a listing of the deductions made. How the statements are provided and in what format is not specified.  

Employers may require payment by direct deposit. Indiana Code states, “Every person, firm, corporation…doing business in Indiana, shall pay each employee at least semimonthly or biweekly, if requested, the amount due the employee. The payment shall be made in lawful money of the United States, by negotiable check, draft, or money order, or by electronic transfer to the financial institution designated by the employee.”

Vacation, Sick, or Holiday Leave

Indiana doesn’t require employers to provide workers with paid or unpaid vacation leave.

Many employers choose to provide vacation leave as part of a benefits packages to attract employees, however. In these situations, employers may set the policies, terms and conditions as to how and when such a benefit is used – including “use it or lose it” policies that state that terminating employees forfeit accrued but unused vacation time.

Statute of Limitations

Indiana’s deadline for filing an overtime claim adheres to the FLSA, which requires those seeking to recover unpaid back overtime wages file a lawsuit within two years from the date of the employer’s wage violation. So a lawsuit filed today would be able to seek recovery of back overtime for only the prior 2 (sometimes 3) years.

As an example, suppose you believe that your employer has failed to pay you proper overtime wages since January 1, 2016. Waiting until June 1, 2019, to file your lawsuit means you are only allowed to seek unpaid wages from June 1, 2017, to June 1, 2019.

The statute of limitations may be extended to three years if an employer’s violation of the FLSA was willful. An FLSA violation is deemed willful if the employer knew that its conduct was prohibited by the FLSA or showed reckless disregard.

Penalties for Violations

Under federal law, employers who fail to pay proper overtime wages may be liable for up to double the amount of unpaid back wages plus costs and attorney’s fees incurred by employees. These cases can be brought overtime pay lawyers on a class or collective basis on behalf of all workers who were subjected to the same illegal pay practices.

Lore Law Firm is On Your Side

At the Lore Law Firm, we represent salaried, hourly, and day-rate workers in an array of employment litigation matters, including unpaid overtime compensation claims in Indiana. Our attorneys, and the Indiana overtime law attorneys we associate with, are passionate about protecting the rights of workers and have helped recover millions of dollars in unpaid overtime wages for our clients.

Contact us for a free and confidential review of your situation.