Thomas B. Blackwell

Can an employer change the terms of compensation for an employee after the employee has completed his or her labors?

It would seem obvious that this would be unfair, but there is no Indiana case on the issue. Other states have held that an employer cannot change the terms of compensation after an employee has performed labors on the employer’s behalf, and that any changes in compensation must be made only prospectively. Under this theory, the employee then has the right to decide whether or not to continue to work for the employer and continue to provide services under the new proposed terms. Changing terms of compensation retroactively, after the services have already been provided takes away the choice of the employee, and of course, the employee cannot take back their labor after it has been performed. We just obtained a summary judgment on this issue as it relates to customer accounts on which a salesman was paid commissions. The court ruled that for all accounts which existed at the time of the announced change, and for which the employee had completed all of his sales work, that the commission rates in existence at the time the work was performed must continue to be paid and could not be reduced after the salesman had completed his work.