Q: MY employer is proposing to reduce my hourly pay supposedly because of the bad economy. If our company is really losing money and I have to agree to a pay cut to keep my job, then I will. My problem, however, is that out of the more than the 10 employees who have the same job duties as me, it seems I am the only one being asked to take a pay cut. Is this fair? What are my rights when it comes to taking pay cuts?
A: Employers may routinely change the terms or amount of an employee’s compensation. The change may be favorable (e.g., employees get a pay raise) or unfavorable (e.g., employees get a pay cut). The employer’s ability to change an employee’s compensation will partly depend on the employment relationship and the parties’ agreements.
The employment relationship may be based on a written contract or a collective bargaining agreement (CBA) in the case of union members. Or it may be an "at-will" employment.
Contract-based Employment: If the employment is based on a contract, then the terms and conditions, including compensation, is governed by the contract. The terms of a contract may be changed during the term of the contract only if both parties agree to the change. Therefore, employee compensation cannot be changed during the term of the contract unless the employee agrees to the change. If, for example, the contract employee does not agree to the pay cut, but the employer cuts the employee’s pay anyway, the employer has violated the contract and may become liable for damages. Changes in the contract usually have to be in writing and signed by both parties.
At-will Employment: If there is no employment contract or CBA, the employment relationship is considered "at-will." This means that the employment relationship may be terminated by either party without liability. In at-will employment, employers may reduce an employee’s compensation without the employee’s express consent. The employer may notify the employee about the pay cut in as little as a week. An employee may be deemed to have accepted the pay cut if the employee continues to work for the employer after receiving notice of the pay cut. If the employee does not like the pay cut, the employee may quit and look for a job elsewhere and the employer will not be liable for damages.
However, an at-will employment relationship does not give employers permission to discriminate or retaliate against employees by way of compensation. A decrease in compensation must not have an unlawful reason behind it. Employers may not decrease employee compensation based on the employee’s gender, age, religion, race/ethnicity, disability, marital status, or pregnancy. Employers may also not decrease employee compensation in order to retaliate against employees who have asserted their legal rights, or against "whistleblowers."
When employers ask their employees to take a pay cut, employees will necessarily ask why. Some reasons will appear obvious and reasonable. For example, the company may be unable to stay afloat in this bad economy. It may start to lay off people or ask some employees to take a pay cut instead.
Some reasons may not be so obvious. An employee who just turned 65 might be asked to take a pay cut. The same thing may happen to a pregnant employee or one who wanted to collect unpaid overtime. In these scenarios, where only specific employees are targeted but other employees are not affected, the implementation of a pay cut should be investigated to determine if the employer is engaged in unlawful discrimination or retaliation. Under these circumstances, it might be wise for the employee to consult with an experienced employment attorney to discuss how he or she may protect his or her rights.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant results, including several million dollar recoveries for consumers against insurance companies and big business. He is a member of the Million Dollar-Advocates Forum—a prestigious group of trial lawyers whose membership is limited to those who have demonstrated exceptional skill, experience and excellence in advocacy. He has been featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements for his professional accomplishments and recipient of numerous awards from community and media organizations. His litigation practice concentrates in the following areas: serious personal injuries, wrongful death, insurance claims, unfair business practices, wage and hour (overtime) litigation. You can visit his website at www.joesayaslaw.com or contact his office by telephone at (818) 291-0088.
( Published October 17, 2009 in Asian Journal Los Angeles p. C3 )
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