The question “Can an employer reduce your pay?” seems pretty straight forward. Usually, the answer is, “Yes.” This includes an hourly worker and salaried employee. However, as with most seemingly easy questions, although most employers can cut an employee’s pay rate, there are limitations about when and how the company may do so. Some critical factors that must be considered when reducing wages or salaries are whether the employee has an employment contract with the business or is an at-will employee, is the pay cut in good-faith or based on discrimination or retaliation, and whether the employer has given you proper notice before the pay cut.
Do you have an employment contract or are you at-will?
Can an employer reduce your pay? If you have an employment contract that guarantees a certain rate of pay or salary for a specified period, your employer typically cannot reduce your pay during that time without your consent. Also, some employment agreements will guarantee an agreed-upon salary or minimum wage rate but include a specific clause that allows for a salary or wage reduction under certain limited circumstances.
If an employee does not have an employment agreement with their employer, which includes most hourly workers, they will usually be considered an “at-will” employee. “At-will” means that either the employer or the employee can terminate the employment relationship at any time and for any reason (as long as it’s not discriminatory or otherwise illegal), and at-will employers generally has the right to change the terms of employment at any time with prior notice, including pay rates and an employee’s compensation. Thus, if you are an at-will employee, to presumption will be that your employer can reduce your pay.
Can an employer reduce your pay if you are covered by a collective bargaining agreement?
Typically, union contracts contain provisions that address wage rates for each employee classification covered by the collective bargaining agreement (CBA). Thus, if you are covered by a union contract, any changes to your pay would likely be subject to negotiation between the employer and the union. Also, if a employer attempts to reduce an union members wage rate unilaterally, the employee can file a grievance with their union who can help ensure that any reduction of the agreed-upon rate is made in good faith.
Can an employer reduce your pay if you are only paid minimum wage?
Employers must comply with minimum wage laws set by federal, state, or local governments unless an employee or the employer is exempt from the law. For example, the federal Fair Labor Standards Act (FLSA), which is enforced by the US Department of Labor (DOL), set the minimum wage rate for hourly employees throughout the United States. Moreover, many states have established minimum wage rates that are higher than the federal rate. Thus, employers cannot decrease an hourly rate of a non-exempt employee below the applicable federal or state minimum wage rate.
Also, to qualify as a exempt employee, the FLSA and many state laws set a minimum salary or wage rates that the exempt employee must be paid or they cannot be considered exempt. This means that, if the company under pays an employee to the point they are no longer exempt, the company must pay the employee 1) at least the higher minimum wage rate between the federal and state law and 2) overtime for hours worked over 40 hours in a workweek. A few states also require an non-exempt employee to be paid overtime pay for hours worked beyond 8 hours in a workday and/or on weekends.
Can an employer reduce your pay because of discrimination or retaliation?
Under federal labor law, as enforced by the Equal Employment Opportunity Commission (EEOC), it is illegal for an company with 15 or more employees to reduce a worker’s pay due to discrimination. Discrimination and retaliation based on factors such as race, national origin, sex, gender, age, religion, disability, sexual orientation, or other protected characteristics is prohibited by the federal Title VII of the Civil Rights Act of 1964. This includes actions such as pay discrimination, where an employer pays an employee less solely because of their membership in a protected class. Also, most states also protect employees from discrimination and retaliation based on an employee’s protected class or protected activity and those laws may apply to businesses with fewer than 15 employees.
Is your boss reducing your pay in good faith?
Although it can be frustrating, some times employers issue wage or salary reductions for a good, justifiable reason. Some examples of when employers may reduce employees temporary or permanent layoffs or furloughs, demotion because of the worker’s poor performance or violation of company rules, and a transfer to a new position.
Can an employer reduce your pay without notice?
Under the FLSA and most state wage payment employment laws, your employer cannot cut you pay without providing advance notice. This is a type of wage theft. The length of notice required can vary depending on the labor laws and the magnitude of the pay reduction. The purpose of requiring company to provide employees notice of a wage reduction is 1) to give the employee an the opportunity to decide if they want to work at the lower rate or salary and 2) give the employee time to prepare for the change.
What can you do if your employer reduces your pay illegally?
If you believe your company has reduced you pay in violation of the law or failed to give you prior notice, there are several options available to you.
Gather information
Before making any allegation that your employer has reduced your pay illegally, it is in your best interest to make sure you know as many of the facts for the reduction as possible. At times, when we are caught off guard by a change, like a wage or salary reduction, it is easy to overreact and respond too early. Responding without enough facts may result in misjudgement and embarrassment. Moreover, if the employer’s decision was in good faith, accusation may unnecessary damage an otherwise healthy employer-employee relationship.
Talk to the company
As part of the fact gathering stage, it is recommended to raise the issue with the employer directly either with a supervisor, manager, or human resources. If the company permits it, it is a best practice to have a second person with you when you talk to the company so that they can help minimize potential conflict and serve as a witness.
If the company has provided a written explanation for the wage reduction, talking to them gives them an opportunity to provide further explanation for its decision. If they did not provide a written explanation, this give you an opportunity to get an explanation on the record. Moreover, regardless of whether they gave you a written explanation or not, having your employer restate the reason for the reduction may result in contradictions that you can use if you file a complaint against them.
File a complain
If you are an at-will employee and have gathered enough evidence that your wage or salary reduction was illegal, you can file a complaint with the US Department of Labor (DOL) or state department of labor. The agency will conduct an investigation and, if they determine the evidence supports you claim, it may take actions to help you recoup they money you are owed.
Contact an employment law attorney
If you would like an expert opinion or help with filing a complaint, it may be worth reaching out to a employment attorney who specializes in employee rights. An experience employment attorney should be able to determine, based on the facts you gathered, whether you could have a winning claim. They should also be able to help you calculate the lost wages and potential damages.
It is also worth noting that, if an employer does not believe your claim is worth enough money, they are unlikely to spend much time helping. Also, employee rights attorneys are frequently very busy and, thus, it may be hard to find an attorney able to help.
To find an attorney, you can search for “employee rights attorney near me” in a web browser. Moreover, for a small fee, you ask question to employee right attorney at JustAnswer.com.
Conclusion
When you ask yourself, “can an employer reduce your pay?,” there are additional questions to ask as well. Most importantly, is “why would your employer reduce your pay?” If there is a good faith reason and you don’t have an employee agreement, there is a good chance they can reduce your pay BUT only after they have given you sufficient notice. However, if you believe your boss doesn’t have a good faith reason, they decision to reduce your pay may be illegal, and you may want to seek help and file a complaint.
State employment and labor laws
In this article, we have discussed, “can an employer reduce your pay?” We also discussed several legal topics that may depend on state law. This includes minimum wage, overtime, discrimination, retaliation, and notice of wage change requirements. To find out the specific state laws regarding these and other issues, below are state law links and explanations.
