Equal Pay: Comparing Federal and Indiana Laws

If a black woman and a white man both start working the same job on January 1, 2017, today (August 7) would be the day that woman would achieve the same collected wage that the white man received by the end of 2017. While women overall achieve a man’s 12-month salary in 16 months (which was recognized on April 10), black women have to work 20 months before hitting the same salary. According to a study from the American Association of University Women, Indiana ranks 46th in gender pay equality.

A person could make a career out of analyzing the think-pieces that discuss the societal and economic reasons that created such a disparity but each employer has a chance to ensure that they are not contributing to this problem. In the U.S., a land where all *ahem* people *ahem* are created equal, we have laws to encourage employers to pay men and women the same or else face legal consequences. Both federal and Indiana state laws protect against sex-based wage discrimination but one may be more applicable than the other, depending on the circumstances. Check out the chart below for more information on the two laws because either or both may apply at your business. Be aware, this discusses the law as of August 2018 and does not take into consideration any local ordinances.

If you have concerns about wage disparities at your business, contact your attorney or Van Gorp Legal Services.

 

Federal

Indiana

Name of Statute Equal Pay Act (EPA)

29 U.S.C. § 206(d)

Indiana Equal Pay Law (IEPL)

Ind. Code § 22-2-2-4(d)

What Statute Addresses Sex discrimination in wages 29 U.S.C. § 206(d) Sex discrimination in wages Ind. Code § 22-2-2-4(d)
Employers Covered Any person acting directly or indirectly in the interest of an employer in relation to an employee. Also any labor organizations when acting as employers. 29 U.S.C. § 203(r) Any person, partnership, LLC, corporation, or business trust during any work week in which they have two (2) or more employees. Does not include any employer subject to FLSA. Ind. Code § 22-2-2-3
Individuals Covered Employees (as defined by 29 USC §§ 203(e)(1) and 206(d)) Employees and contractors Ind. Code § 22-2-2-3
Conduct Prohibited Unequal pay for equal work based on sex (29 U.S.C. § 206(d)(1)) and retaliation (29 U.S.C. § 215(a)(3)) Unequal pay for equal work based on sex (Ind. Code § 22-2-2-4) and retaliation (Ind. Code § 22-2-2-11)
Individual Liability Depends on the court Employer agent can be subject to criminal liability from discrimination or retaliation. Ind. Code § 22-2-2-11
Available Remedies Back pay, Liquidated damages, or equitable relief for retaliation claims. 29 U.S.C. § 216(b) Unpaid wages or liquidated damages. Ind. Code § 22-2-2-9
Statute of Limitations Generally must be brought within two (2) years but often extended to three (3) years when violation is willful. 29 U.S.C. § 255(a) Claim must be brought within three (3) years after cause of action. Ind. Code § 22-2-2-9
Posting Requirements None Employer must post in conspicuous place a single page poster with notice of: 1) Current Indiana minimum wage, 2) employee’s basic rights under minimum wage law, and 3) contact information for Indiana Department of Labor. Ind. Code § 22-2-2-8

FAQ: Trade Secrets in Indiana

Not every workplace is going to be like a hospital or law firm with federal or industry related regulations on keeping business-related information secret but protections still exist to make sure your business’ private information stays that way. Just like non-compete agreements, when it comes to trade secrets, Indiana has statutory and case law protections to maintain what makes your business unique.

 

Q: Does Indiana have any laws that govern how to deal with trade secrets?

A: Yes, one. We do protect trade secrets in the Hoosier state primarily through the Indiana Uniform Trade Secrets Act (Ind. Code §§ 24-2-3-1 to 24-2-3-8). Indiana criminal law also defines trade secrets as property, so any crime involving property would also qualify, like conversion.

 

Q: Is Indiana’s trade secret law particularly unique?

A: Not very. Indiana’s trade secret law is based off the model Uniform Trade Secrets Act, which was created by the National Conference of Commissioners on Uniform State Laws. Every state has enacted this model into their state laws except New York and Massachusetts. The one main difference with Indiana’s version is that the language involving preemption is stronger. In the legal world, preemption means that in situations where multiple laws may discuss the same topic, then the preempting law would apply. This effectively means common law protections of trade secrets would not apply and instead Indiana would look to the statute.

 

Q: What is a trade secret?

A: A trade secret is

  1. One of the following
    1. Formula
    2. Pattern
    3. Compilation
    4. Program
    5. Device
    6. Method
    7. Technique
    8. Process
  2. That derives actual or potential independent economic value because it is
    1. Not generally known; AND
    2. Not readily accessible by proper means by others who can obtain economic value from its disclosure
  3. And is the subject of reasonable efforts under the circumstances to maintain its secrecy

 

Q: Have Indiana courts tried to elaborate any further on this definition?

A: A little. The state’s supreme court identifies “not being readily ascertainable” as being ambiguous, which means each case can be different on how to apply. To determine if the information is not readily accessible, courts should look at whether acquiring that information would involve a substantial investment of time, expense, or effort (Amoco Prod., 622 N.E.2d at 919). For compilations of information, the collection as a whole can still count as a trade secret even if parts of the compilation are public or readily ascertainable, especially if effort is exerted to compile the information. Id. This basically means a customer list can count as a trade secret even if it includes public information because the business went through the effort to put that information together.

 

Q: What are some examples of what Indiana would or would not count as trade secrets?

A: What is a trade secret:

  • Customer lists with public and private information
  • A new process that combines elements of other known processes
  • Chemical formulae and their instructions for mixing

What is not a trade secret:

  • Customer lists with only readily available information
  • Marketing and sales materials regularly provided to third parties like consultants or customers.
  • Domain names and information contained on a business website.

There is not categorical group of information definitively excluded from being a trade secret, so each situation would involve its own analysis.

 

Q: Hold up, customer lists seem to be all over the map, so do they count as a trade secret or not?

A: It depends. (I know, ugh lawyers). A court is going to go back to those three factors of how much time, effort, or expense went into creating the customer list and what kind of information is included in the list. Some public information may only be accessible if you put a considerable amount of work into finding but if all the information is googleable, then that’s probably not going to count.

 

Q: Is there information that counts as trade secrets just because of what it is?

A: No. In particular, a business has to demonstrate reasonable efforts to maintain the information as secret. Some reasonable secrecy protections approved by Indiana courts include:

  • Requiring employees to sign a confidentiality agreement
  • Marking documents as confidential
  • Shielding the information or processes from visitors or restricting access
  • Locking up the information

Each case is going to be different of what counts as reasonable but a business does have to put forth some effort. It does not matter if it’s your employee files, secret formula, or business plan, if you leave the information out for anyone to see or find, then a court is not going to protect the information under trade secret.

Q: When can using a trade secret cross the line into misuse?

A: There’s three main scenarios where someone would be liable for misappropriating a trade secret:

  1. When someone uses improper means to acquire the trade secret. “Improper means” includes:
    1. Theft
    2. Bribery
    3. Misrepresentation
    4. Breach of a duty to maintain secrecy, or
    5. Espionage (electronic or otherwise)
  2. When someone knows (or should know) that knowledge of the trade secret was derived from someone who
    1. Used improper means to acquire it
    2. Acquired it under circumstances where they have a duty to maintain secrecy, or
    3. Owed a duty to maintain its secrecy or limit use
  3. Before a material change of position, they know or should know the trade secret was acquired by accident or mistake.

 

Q: What if, rather than stealing or some other improper means, the employee happens to memorize a trade secret?

A: IDK. Indiana has not yet dealt with this kind of case yet but this may implicate an employee’s duty of loyalty to their employer.

 

Q: What happens if a business, rather than an individual person, misuses a trade secret?

A: Then sue the business. Indiana recognizes different kinds of businesses as “people” and so they can be identified as a party in this type of case. This applies to any legal or commercial entities along with governments or agencies.

 

Q: Does that mean I can sue an individual and the company for misuse?

A: Not usually. Employees, managers, or officers cannot be held liable unless you can prove they knew or should have known the information was misappropriated.

 

Q: What should I say if someone claims I, or my business, misused a trade secret?

A: Demonstrate that they cannot satisfy all the required elements that makes a trade secret protected. For instance, you can show:

  • They did not take reasonable steps to maintain secrecy
  • The information does not derive independent economic value from not being generally known.
  • The information is readily ascertainable by proper means
  • You did not know or have reason to know about the misuse
  • The statute of limitations has expired

 

Q: Hold up, that last one. What’s the statute of limitations?

A: Three years. That is the length of time someone has to make a claim or else the case cannot move forward. The timer starts from when the misappropriation is discovered or should have been discovered.

 

Q: Besides misappropriation, are there any other types of cases that can be made?

A: A few. Some related options include:

  • Breach of contract (if the employee signed a nondisclosure agreement)
  • Breach of fiduciary duty (which applies to some managers or employees that have a duty to do what is best for the company)
  • Fraud
  • Unjust enrichment
  • Wrongful interference with business relationships
  • Conspiracy
  • Conversion

 

Q: What can courts do to resolve an issue related to trade secrets?

A: Indiana allows for five types of remedies:

  1. Injunctive relief, which is an order from the court they have to do something (like return stolen information) or not do something (like disclose or use the information)
  2. Actual damages, which is the provable and specific monetary loss as a result of the misappropriation. This can also include any unjust enrichment the defendant acquired to the extent it does not overlap the actual damages.
  3. Reasonable royalty, which is useful when damages are difficult or impossible to prove.
  4. Exemplary damages, also known as punitive damages, are ordered by the court as an extra level of punishment to deter the defendant or others from trying to do the same thing in the future. This is utilized only in cases where a plaintiff can prove the defendant’s actions were willful and malicious and courts may only amount to twice the amount of actual damages.
  5. Reasonable attorneys’ fees are available when someone makes a claim or motion in bad faith or when willful or malicious misappropriation occurs.

How To Deal with Non-Compete Agreement Violations

In our last article, we discussed common questions related to non-compete agreements. The most important question not addressed is “What do I do if I think someone is violating a non-compete?” This requires a considerably more expansive answer, so here we are with a separate discussion on how to respond.

 

INVESTIGATE

  • Review documents
    • Gather any papers that discuss your business policies. This includes employment contracts, standalone non-compete agreements, employee handbooks, separation agreements, or release of claims agreements.
    • Determine whether any establish a promise like a non-compete. If you do have such an agreement, identify the parameters of the agreement (i.e., the length in time, geographic region, and type of conduct restricted)
    • Assess the enforceability of the agreement. Check if laws have changed in what is appropriate in a non-compete. Factors worth considering include the parameters of the agreement, the consideration given, or the circumstances that necessitate such an agreement.
  • Scrutinize the employee’s activities
    • Immediately examine the nature and extent of the employee’s activities. Some activities that may be relevant include:
      • Contacting customers to solicit their business or recruiting other employees to join the new employer
      • Misuse of company documents like: taking documents home, emailing documents to a personal address or a competitor, destroying documents
    • Determine whether the employee has taken or shared any confidential information or trade secrets. There’s an entire discussion to separately have about trade secrets (which will probably arrive in an upcoming article) but the violation of trade secrets can be relevant to a non-compete investigation.
    • Analyze electronic evidence. Computers have a wealth of metadata that can shed light on an employee’s activities. Depending on the complexity and resourcefulness of the employee, some of this investigation may require forensic analysis by IT professionals. PRO TIP: Don’t move, copy, or alter any folders or documents until they can be analyzed or risk losing valuable metadata.
    • Conduct strategic interviews. Hearing from people involved can be valuable, whether the suspected employee or others they may have interacted with, such as other employees or customers. If considering interviewing, be strategic about who, when, and in what order would be most effective. Alerting the employee may encourage them to hide their activities while discussing with others may allow for word to spread to the original employee.

 

CONSIDER INFORMAL LEGAL ACTION

  • Formulate a strategy. Sometimes legal action other than a formal lawsuit can be the most effective or appropriate response to a violation. Some factors that would influence such a decision include:
    • Likelihood a court will enforce the non-compete
    • Egregiousness of the conduct
    • Level of harm already caused
    • Level of potential harm in the future
    • Whether the harm is irreparable
    • Sending a message to other employees
  • Send a cease and desist letter to the employee. These letters typically outline the employee’s conduct, how that violates the agreement, and demands the employee stop from engaging in such conduct. Such a letter is not a formal legal action but essentially amounts to a lawyer’s equivalent of “cut it out… or else.” Even if the employee continues to violate the agreement after receiving the letter, that can be used in a lawsuit to demonstrate how the employer attempted to be reasonable.
  • Alert the new employer about the employee’s actions. The other employer may want to avoid potential litigation associated with the agreement or just finds an employee that violates employer policy to be an improper fit at their company. However, reaching outside the business to discuss conduct may open a business to potential claims of defamation, libel, or tortious interference with business if any claims turn out to be false.

 

SEEK INJUNCTIVE RELIEF

  • This is where an employer is wading into formal legal action.
  • An injunction is an order from the court that requires a party to do something or stop doing something or face legal consequences.
  • Different types of injunctions may be appropriate, depending on the circumstances:
    • Temporary restraining order is a short-lived, immediate order that a court may grant to prevent harm that would occur even before the court holds a hearing. This involves the highest standard to satisfy before a judge would grant because a justice prefers allowing both sides to make their arguments in a hearing before ruling but sometimes (rarely) that can be too late.
    • Preliminary injunction can be granted after a hearing and applies until a case is resolved.
    • Permanent injunction is issued at the end of a trial as a legal resolution to the case and is final.
  • Assess possible causes for action, which means the legal reason for bringing a lawsuit. The most common actions include:
    • Breach of contract. The is the most common action for this dispute, which basically means someone did not follow through on the promise made in a contract, which here would be the non-compete agreement.
    • Tortious interference with contract. This involves the breach of the common law right prohibiting people from interfering with others’ contracts, like those with vendors, customers, or clients.
    • Breach of duty of loyalty or fiduciary duty. Managers, supervisors, or employees given a certain level of trust often have a requirement to not harm their employer. Each state will have different standards relating to whom this duty applies or to what extent. Sometimes this type of action may help a claim survive even in cases where the non-compete is deemed unenforceable.
    • Unfair competition. Courts don’t like an employee using their employer’s confidential information to compete against that employer
    • Civil conspiracy. If the employee worked with others to violate the non-compete agreement, the others may also be liable for aiding or abetting the employee.
  • Claims against the new employer may also be available. Relating to conspiracy, the new employer may be in trouble if they encouraged the employee to violate the agreement, using proprietary information even if they are unaware the employee is misappropriating. However, this may open up the employer to counterclaims of unfair competition, tortious interference with business, or other actions.

 

 

Non-Compete Agreements in Indiana: FAQ

As Indiana becomes a more prominent state for more specialized and service-based businesses, more employers are looking into protecting their business interests from competitors poaching their employees or customers. Non-compete agreements have served as a common method in making sure each business has a fair shot at maintaining the talent and customer base they spend so many resources to cultivate. However, Indiana also recognizes how restrictive or even professionally debilitating these agreements can be for some professionals. Hopefully, this FAQ can spark some initial thoughts on whether creating or modifying non-competes in your business would be appropriate.

Q: Is there a law or regulation that governs non-competes in Indiana?

A: No, at least for employment generally; however, some specific professions (like lawyers) may have rules related to non-competes.

 

Q: Then how does Indiana deal with non-competes?

A: Indiana uses common law, or reasoning developed by judges through cases over the years, to determine whether a non-compete is enforceable.

 

Q: What did these judges come up with to determine if a non-compete is enforceable?

A: Most cases come down to whether the non-compete is reasonable (super explicit and bright-line, right?). Since that’s not really helpful, Indiana lists some factors that can help determine reasonableness as: 1) whether the restraints are necessary to protect an employer’s legitimate interests, such as good will, trade secrets, and confidential information; 2) the restraint’s effect on the employee; and 3) the public’s interest. Indiana takes those factors into consideration when looking at the: 1) duration, 2) geographic extent, and 3) scope of activities restricted, in order to determine if the non-compete is reasonable.

 

Q: Who gets to decide what counts as reasonable?

A: The judge. In courts, juries determine questions of fact (i.e., what happened) while judges determine questions of law (i.e., how does the law apply). While the factors surrounding a non-compete are often fact-sensitive, the courts see reasonableness as a question of law.

 

Q: Do courts generally like non-competes?

A: Nope. Indiana generally disfavors non-competes since they restrain trade. Because of this disfavor, courts tend to interpret non-competes narrowly and construe any ambiguities against whoever drafted the non-compete.

 

Q: Who has the burden of proof?

A: The employer. Burden of proof means who is responsible for making a judge see the case their way, so an employer is responsible for proving the non-compete is enforceable, rather than the employee needing to prove the non-compete is unenforceable.

 

Q: Do non-competes apply even if the employee is terminated?

A: Yes. Whether the employee quits or the employer terminates them, the non-compete may apply. However, if the employer commits a “material breach” prior to the employee leaving, then the employer forfeits their right to enforce the non-compete. A material breach is a very lawyer-y term that describes when someone fails to follow some part of the contract in such a significant way that the contract becomes irreparably broken.

 

Q: If a court doesn’t like the non-compete is it totally void?

A: Not necessarily. A court can do something called “blue penciling,” where the court modifies the contract in order to make it legally enforceable, which the employer and employee would then be held to follow that modified version. However, Indiana only allows courts to delete language in the contract, not to add or otherwise modify the contract. Some drafters maneuver around this doctrine by having multiple versions of the non-compete and include language to allow for whichever version is allowed by law.

 

Q: Can an employer make an employee agree to a non-compete at any time?

A: No. Contracts become valid when there is consideration, offer, and acceptance. While the latter two elements are usually self-explanatory, “consideration” describes the concept that both sides are promising to either do something they don’t have to or not do something they have the right to do. Obviously the employee is providing consideration by promising not to compete against the employer but the employer has to provide consideration as well. Most often, employers satisfy the consideration requirement by tying the non-compete agreement to 1) an offer of employment, 2) continued employment, and/or 3) monetary consideration.

 

Q: What counts as “reasonable” for the duration of a non-compete?

A: The shorter the better. Each case is going to be different depending on the facts but the courts regularly uphold one- to two-year agreements. Courts can even uphold a five-year agreement but the longer the duration, the more the employer will have to prove that amount of time is necessary to protect their interests.

 

Q: What counts as “reasonable” for the geographic scope of a non-compete?

A: The smaller the better. The courts will likely uphold an agreement that corresponds with the employee’s territory. The further people may travel in order to interact with that employee, the more likely a court will allow for a broader restriction. Courts will also be more likely to allow broader restrictions if the employee’s role involves confidential information, trade secrets, or business sales. Statewide and nationwide restrictions are most likely going to be deemed too broad and unnecessary to an employer’s legitimate business interests.

 

Q: Can the non-compete allow for the geographic scope to change?

A: Yes. Indiana does allow for non-fixed geography, such as customer contacts, which can serve as a proxy for geographic scope. Courts may allow for a restriction other than geography for the restriction as well, such as a clearly defined class of people.

 

Q: What remedies are available to enforce a non-compete?

A: Typical contractual remedies apply. These usually are 1) loss in profits or loss in value of business, 2) liquidated damages, or 3) injunctive relief. The employer will have to be able to prove as specific amount of actual money lost in order to prove option 1. Option 2 is when the contract itself specifies an amount ahead of time that will be the appropriate amount to remedy the breach, which can be useful in situations when quantifying the loss will be difficult or cumbersome to prove. An injunction is an order from the court that someone is required by law to do something or to stop doing something, or else face legal consequences. If the agreement includes liquidated damages, then courts are unlikely to grant an injunction, unless the agreement discusses it or the court determines monetary damages are inadequate.

 

Q: What if I can’t wait for a court to stop someone from breaching a non-compete?

A: Ask the court for a preliminary injunction. In order to be granted such an order from Indiana state courts, the employer has to show by a “preponderance of the evidence” (meaning more evidence supports the claim than not) that: 1) there is no adequate legal remedy and the employer will suffer irreparable harm before the case is resolved, 2) there is at least a reasonable likelihood of success on the merits at trial, 3) injury to the employer outweighs the harm to the employee would suffer as a result of the injunction, and 4) public interest would not be disserved by the injunction. If the court does grant the preliminary injunction, then the employer will have to post a bond to the court that will cover damages to the employee that would result from the injunction, in case the employee is found to be wrongfully enjoined (Indiana Trial Rule 65(C)).

 

Q: What should I do if I want to make a non-compete agreement or check if my agreement is appropriate?

A: Contact your attorney and/or Van Gorp Legal Services. Also, be very wary of form non-competes you find online. Each situation is going to be different in determining how to make an appropriate non-compete, not just between industries or companies but even among the employees of the same company. Ultimately only a judge can decide if the agreement is enforceable but hopefully this FAQ demonstrates the variety of measures you can take to make the court end up on your side.

 

 

 

Indiana 2018 Update on Administrative Dissolution and Reinstatement

As a quick alert of an upcoming deadline (as of blog publication) that business owners who have their business entities administrative dissolved more than five years ago, must file an application for reinstatement by July 31, 2018, in order for the application to be accepted. This deadline is coming up very soon and involves a few steps before you can submit. If you believe this may apply to your business, please contact your business attorney or Van Gorp Legal Services ASAP.

 

Depending on the type of business entity a business owner chooses, Indiana has historically required various basic filings in order to stay active and in good standing with the state. Some of these filings include biennial (every 2 years) reports, maintaining a registered agent, and paying business taxes (Ind. Code 23-18-10-1). If a business owner does not fulfill these requirements, the Secretary of State’s office will send a notice that the business is going to be administratively dissolved if the issues are not resolved within 60 days (Ind. Code 23-18-10-2). What such a designation means is that, as far as the state of Indiana sees it, your business may still exist but can no longer carry on its business (other than to wind up and liquidate assets) or benefit from the protections that come from being a business entity (Ind. Code 23-18-10-3). This means the business (nor its agents) can sign contracts or be protected from legal exposure from anything that goes wrong.

 

However, not all is lost if your business has been administrative dissolved. Indiana does allow for the Secretary of State to reinstate the business and continue on as if nothing went wrong. The owner can file for reinstatement and, if approved, “the reinstatement relates back to and takes effect as of the effective date of the administrative dissolution, and the limited liability company resumes carrying on business as if the administrative dissolution had never occurred” (Ind. Code 23-18-10-4). The bolded part is particularly important since any business actions taken while administratively dissolved would not be valid, but instead become totally fine once reinstated.

 

Back in 2017, Indiana enacted its largest update to the business code in the state’s history by passing the Uniform Business Organizations Act. Most of the law was meant to modernize and simplify Indiana’s business laws that were spread out and fragmented due to over a century of small changes. Some substantive changes primarily focused on making the requirements for businesses to file with the state consistent among the different business entities (looking at you, LPs and LLPs who now have to file biennial reports). The law also established a deadline for reinstatement. While before, a business could request reinstatement anytime after dissolution, the Secretary of State now only extends that opportunity for five years after the effective date of the dissolution. For businesses that are outside of this five-year window, the SOS office is allowing for a grace period until July 31, 2018, to file for reinstatement. After that, once a business passes five years beyond the effective date of the dissolution, the business cannot be reinstated and the owner must create a new business entity.

 

If you are not sure if your business is administratively dissolved, you can check the Indiana Secretary of State’s online portal for businesses, called INBiz. That portal is also where you can send in the application or any relevant documents related to the process. For more details of the specific steps required for reinstatement, check out this page.