It's that time of the year, and you're hoping for a salary raise. But instead, your employer reduces your working hours. When that happens, you'll be asking yourself, "Is it lawful for my employer to cut my hours?"
This has become more common in recent years. In many circumstances, it is permissible for companies to reduce employees' working hours or remuneration.
Employees who work at will are usually not guaranteed a set number of hours per week or a fixed pay rate. Your employer can reduce your hours and compensation unless you are covered by a collective bargaining agreement or an employment contract.
It's important to understand that while there are times when it's lawful for an employer to cut your working wage rate, there are other times when it's not. In this article, we'll go over the legalities behind an employer reducing your working hours.
When is it permissible to do it, and when is it not? Let's dive right in.
What Exactly Is a Pay Cut?
A pay cut is when an employee's remuneration is reduced. Pay cutbacks are frequently implemented to minimize layoffs and save money for the organization during bad economic times. A pay cut could be temporary or permanent, and it could or might not be accompanied by a reduction in responsibility. Raises, bonuses, and benefits are all affected by some wage decreases.
Pay Going Forward, Not Backward
This is the most crucial thing to remember regarding wage decreases. Your employer must pay you the agreed-upon salary for work you've previously completed. They have complete control over salary reductions as well as salary increases. However, they can't reduce your pay without informing you beforehand, and you (the employee) must agree to it.
However, this does not necessarily mean that if your employer says, "I'm going to lower your compensation," you can simply respond, "No thanks, I'll keep my higher rate of pay." That's not how it works. Instead, you can resign before doing any work at a reduced rate.
Wage reduction laws are determined by:
Legal contracts and agreements, such as employment agreements for high-profile executives and labor union contracts for union employees, bind the employer to pay the stated compensation and usually do not allow the employer to reduce the mutually agreed-upon wage. Contract law, not labor and employment regulations, determines whether an employer violates the terms of the agreement when they offer to reduce an employee's compensation.
If a company is a signatory to a labor union contract, lowering employees' salaries would clearly breach the agreement.
Federal Level Legislation
Even though the Fair Labor Standards Act of 1938 specifies wages, overtime compensation, working hours, and child labor, it does not include measures for lowering employees' pay. Rather, the federal government only states that an hourly employee's pay cannot be reduced below the hourly minimum wage and that a salaried employee's salary cannot be reduced below the threshold for qualifying for the salaried employee exemption.
Although federal law does not prohibit employers from reducing employee pay, several state laws require employers to follow specific steps before lowering payment. The laws in each state differ. The Nevada Revised Statutes, for example, demand at least seven days of written notice before an employee undertakes work that is susceptible to a salary cut.
In some states, employers are not required to provide notice. But companies considering pay cuts in other states must give written notice, and if the pay cut is 20% or more, the employer might reasonably expect to lose workers who leave for good reasons due to the pay cut.