The Indiana FAIRNESS Act took effect on July 1, 2026. While the law is directed at employers that hire unauthorized workers, many contractors are asking what it means for their relationship with subcontractors and whether their subcontract forms should be updated. Below are answers to some of the most common questions we are receiving from contractors and developers.
What is the Indiana FAIRNESS Act?
The Indiana FAIRNESS Act (the “Act”) creates new state-level enforcement mechanisms aimed at employers that knowingly recruit, hire, or employ unauthorized workers in Indiana. The law gives the Indiana Attorney General authority to investigate alleged violations and seek court-ordered remedies against employers.
What penalties can be imposed?
Violations can result in suspension of operating authorizations, probationary reporting requirements, and, in extreme cases, permanent revocation of licenses and permits. For construction companies, even temporary interruptions could create significant project and operational challenges.
Who does the Act apply to?
The Act broadly applies to employers operating in Indiana. The statutory definitions are expansive and reach businesses across different industries. However, Attorney General Todd Rokita has publicly indicated that enforcement efforts will focus on the construction industry.
Does the Act apply to conduct before July 1, 2026?
No. The statute expressly applies only to hiring, recruitment, and employment activities occurring on or after July 1, 2026.
Does the Act make contractors liable for a subcontractor’s employees?
Not specifically. The statute is directed at the employer of the worker. It does not expressly impose automatic vicarious liability on a general contractor simply because a subcontractor employs an unauthorized worker. However, that does not mean contractors can ignore the issue. The Act defines “employ” as “to engage the services or labor of an individual for wages or other remuneration, including to suffer or permit to work.” The expansive definition may extend to subcontract relationships.
What is the “reasonable diligence” defense?
The statute provides a defense for employers that exercise “reasonable diligence” when confirming an individual’s work eligibility. Reasonable diligence includes either using the federal E-Verify system or engaging in verification efforts consistent with industry-standard best practices.
Although E-Verify is specifically identified in the statute, it is not the exclusive method of establishing compliance. Employers may also satisfy the statute through verification procedures that are consistent with industry standard best practices. However, the phrase “industry standard best practices” is unclear, not defined, and there is currently no Indiana case law interpreting it. As a result, there is uncertainty regarding exactly what procedures constitute industry standard best practices. Whether any particular procedure will satisfy the statute will likely depend on future guidance, enforcement activity, or court decisions.
What should contractors do to better protect themselves?
Update subcontracts. Even if the statute does not impose direct upstream liability, contractors can better protect themselves by updating their subcontract forms to expressly shift responsibility for workforce verification to the subcontractor. Subcontracts can be modified to require compliance with the Act, exercise of reasonable diligence, certification that workers are legally authorized, broad indemnification and default for violations, and/or the ability for a contractor to remove individuals from the project.
For active projects, contractors may want to obtain written certifications from subcontractors confirming that they are exercising reasonable diligence to verify work eligibility and that they have imposed similar requirements on lower-tier subcontractors. This will provide meaningful protection without reopening subcontract negotiations.
Bottom Line
The Indiana FAIRNESS Act is new, and many important questions remain unanswered. What we do know is that the Act creates significant consequences for employment eligibility violations and that construction projects are expected to receive substantial scrutiny. The construction lawyers at Easter & Cavosie can help contractors evaluate their subcontracts to ensure proper risk allocation and preserve practical remedies if employment eligibility issues arise.