Is It Illegal for Employers to Cut Your Pay or Hours?

While we hope that no one ever finds themselves in a position where they must reduce an employee's compensation, the terrible reality is that business owners are occasionally obliged to do so to stay in business. 

If a firm is experiencing cash flow challenges, it may decide to reduce an employee's pay rather than shutting down the business entirely. 

Of course, most people would be paid less than face layoffs, but the scenario isn't ideal for either the employer or the employee.

In addition to their income, a wage reduction can substantially impact employee morale.  

When it comes to a prospective pay drop, salaried employees are no exception. Full-time employees are nevertheless vulnerable to a compensation reduction, even if they must be paid the agreed-upon salary for work already completed. An employer must notify a salaried employee ahead of time, and the employee must consent to the decreased salary rate.

Unfortunately, an employee cannot just say "No, thanks" to lower compensation, and many employees end up resigning because they cannot agree on a new salary rate. You should not be compelled to work at a wage rate you don't like, and you can't force your employer to pay you at a rate they can't afford.

In rare cases, a compensation clause may be included in an employment contract or a collective bargaining agreement, making it illegal for an employer to reduce wages. The same contract may contain a variation clause allowing your employer to present you with a new employment contract reflecting the lower earnings. When it comes to compensation cuts, union contracts are usually more safeguarded.

Hourly, non-exempt employees are subject to a different set of rules. Depending on their state, these employees may be eligible for partial unemployment benefits following a pay cut.

However, your employer can lawfully reduce your employee hours from full-time to part-time and lower, as well as reduce your compensation, as long as they don't break the Fair Labor Standards Act (FLSA) by paying you less than the minimum wage. You are also entitled to time and a half if you work overtime throughout your pay period.

Another situation when an employer should reduce an employee's pay is when the employee is transferred to a different job or position. While most people equate changing jobs with getting a promotion and a raise in compensation, there are times when the employee may be demoted. A pay cut might be necessary if a demotion occurs and the former pay rate is higher than most persons in the new position.

Employers are prohibited from reducing employee pay in several circumstances. Here are a few examples. 

Reducing Pay Without Notifying the Employee 

It is illegal for an employee to cut wages unexpectedly. Employers must pay employees the agreed-upon wage rate. If an employer wants to adjust that rate, they must first contact the employee and obtain their consent. There is a specific procedure to follow as well as a suitable protocol.

An employer cannot fail to inform an employee that the paycheck they have already worked and earned would be less than anticipated. In addition, they cannot alter a pay rate for hours already worked or pay that has already been earned.

Your boss must give you adequate notice if they reduce your earnings. You can then decide whether you want to continue working for them or resign. They must also treat you decently and provide advance notice so you can determine whether or not you wish to continue working for a lesser wage. You have the right to fair notice; if your employer fails to provide it, you can take legal action against them.

Pay Cut Below Minimum Wage

This occurs when your compensation is reduced to below the minimum wage. Although the federal minimum wage is fixed at a certain amount, many states have better minimum wages. Even if you agree, working for less than the minimum wage is always illegal.

Discrimination

Employers are not allowed to reduce pay based on gender or race. For example, if the employer reduces the working hours of all men except women, this would be an example of discriminatory action. 

Another example would be if everyone over the age of 40 received a pay cut, but those under 40 did not. According to federal laws, each of these situations would be illegal.

When You've Signed an Employment Contract

When an employer contracts with their employees, they are legally obligated to pay them the agreed-upon rate for a specified period. So if you or your loved one has reduced working hours despite having a contract with the employer, you may need to speak with a labor and employment attorney. 

Retaliation

If an employee complains about sexual harassment or other inappropriate behavior in the workplace, the employer cannot reduce the employee's wages as a form of retaliation. In addition, some regulations protect you from reprisal if you report illegal or unethical employment activities.

There are laws in place to protect you from reprisal. Suppose you suspect your company has retaliated against you. In that case, you should consult an employment law attorney who is familiar with these laws and can advise you on how to file a claim against your employer to recover damages.  

If you are still employed and your income has been legitimately reduced, you should first try to resolve the issue with your employer. One of the first things you should do is find out from the payroll department or officials whether the salary drop was done on purpose or by accident. Mistakes happen; if this is the case, the payroll department should correct the problem promptly without any issues. 

If the payroll department confirms that your income is correct, consider communicating with your employer to find out why the sudden change. Remind them that reducing your compensation without advance notice is illegal. If communicating with your employer or supervisor does not resolve the problem, the next best option is to contact the HR department to see if they can help. If you've talked to HR and exhausted all other avenues and still can't come to an agreement, it's time to consult an employment lawyer.

Consult With an Employment Lawyer

If you suspect your employer has reduced your hours or wages illegally, you should consult an employment law attorney to establish the best course of action. 

In such cases, you only have a limited time to file a claim. In most cases, you will only have 180 days to file your claim. You will not be able to receive compensation for your damages if you wait too long to file a lawsuit against your employer.

Morgan & Morgan files the most employment litigation cases in the country, including those involving wrongful termination, discrimination, harassment, wage theft, employee misclassification, defamation, retaliation, denial of leave, executive pay disputes, and more. 
Our lawyers have the knowledge, commitment, and experience to represent workers in various labor conflicts.  

When you contact us for a free, no-obligation case evaluation, we will review your claim and inform you of the next step forward. And if you have a valid claim against your employer, we will walk you through the steps of filing a claim. We will also investigate the incident thoroughly and collect crucial evidence to help you prove your case against your employer.

Remember that we are the largest personal injury law firm in the United States. So choosing us to work on your case sends a clear message to your employer that you know your rights and have a team of attorneys ready to defend them at all costs. 

If you believe you have been treated unfairly or illegally at work, please contact us immediately by filling out our free case evaluation form. Our labor and employment attorneys might be able to help.