If it walks like a duck, swims like a duck, and quacks like a duck—then you’d better have a pretty good argument if you don’t want the Indiana Supreme Court to call it a “duck.”

The Indiana Supreme Court recently applied the so-called “Duck Test” to clarify what it means for an employee to be separated from the payroll for purposes of Indiana’s Wage Claims Act. Walczak v. Labor Works – Fort Wayne LLC, No. 02S04-1208-PL-497 (March 13, 2013). The decision is important because the Wage Claims Act requires individuals to meet certain administrative prerequisites before filing a lawsuit. In contrast, the Indiana Wage Payment Act does not have the same administrative requirements.

In Indiana, the above two statutes can potentially provide relief for employees who believe they have not been paid their full wages. If the employee is a current employee, or someone who “voluntarily” left his or her employment, then the Wage Payment Act applies. However, if the employee was “separate[d] from the pay-roll,” the employee must proceed under Indiana’s Wage Claims Act, which requires the employee to first file a claim with the Indiana Department of Labor. Under that statute, the employee must obtain an assignment from the Department of Labor before moving forward with a lawsuit. Before March 13, 2013, neither the Indiana legislature nor the Indiana courts had expressly defined the phrase “separate[d] from the pay-roll.”

In Walczak, the state supreme court rejected Labor Works’ argument that a day laborer was separated from the payroll at the end of each day. The court unanimously held that the laborer, Ms. Walczak, could pursue a claim that she filed in court under the Wage Payment Act because she had an immediate expectation of future employment with Labor Works on the day she filed her lawsuit.

According to the court, Ms. Walczak accepted periodic job assignments with Labor Works from December 20, 2009 through early March 2010. She received job assignments on a day-to-day basis by coming into the office and signing up for work. She was not required to report to work on any regular schedule, and assignments were not guaranteed. If there was not enough available work, Ms. Walczak might not have received an assignment even if she signed up for work that day. At the end of each day’s work, Labor Works provided Ms. Walczak her wages for the day. Ms. Walczak filed suit on February 1, 2010, a date that she neither sought nor obtained a work assignment. However, she had worked on January 28, signed up for but did not receive a job assignment on January 29, and signed up for and did receive a job assignment on February 2.

The supreme court first determined that the trial court had jurisdiction to hear Ms. Walczak’s claim. In so doing, it rejected an argument by Labor Works that the Indiana Department of Labor held sole jurisdiction to hear the matter since there was a dispute as to whether Ms. Walczak voluntarily left employment, or was separated from the payroll at the end of each day. The supreme court held that, in this context, the question of whether an agency has jurisdiction over a matter is a question of law for the courts, not the agency itself. According to the supreme court, if the Indiana Department of Labor is required to resolve disputes as to whether the Wage Payment Act or the Wage Claims Act applies before an employee can proceed to court, then the Wage Payment Act would effectively have its own administrative exhaustion requirement—a requirement that was never intended by the Indiana legislature.

The court then went on to clarify that the statutory phrase, “separate[d] from the pay-roll,” should be given a commonsense meaning. Citing to the Duck Test—whose origination is widely credited to Indiana poet James Whitcomb Riley (1849-1916)—the court decided that the language used in the employer’s paperwork and the facts related to Ms. Walczak’s employment history with Labor Works demonstrated that she had not been separated from the payroll when she filed her lawsuit on February 1, 2010. In reaching this conclusion, the court noted that other federal and state courts have frequently assumed—without deciding—that this phrase means the person was “fired.” The state high court in Walczak agreed with the reasoning of these courts. It noted that an employee who does not leave a job on her own terms may be motivated by animus, and the administrative exhaustion requirement under the Wage Claims Act was intended to help protect the employer against animus-based claims by creating a barrier to going to court. On the other hand, current employees and employees who leave on their own terms are less likely to have animus towards the employer, so the employer does not need that same level of protection. The court thus held that a day laborer is not “separate[d] from the pay-roll” unless the employee has no immediate expectation of possible future employment with the same employer.

Although the Walczak case specifically involved a day laborer, it should provide a valuable reminder to all Indiana employers of the importance of documenting the specific facts surrounding the termination of an individual’s employment, including whether the termination was solely the choice of the employee, as well as the exact date of the termination.



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