Pay cuts are not illegal in and of themselves. There are certainly times when an employer needs to reduce the amount of money being paid to an employee, but doesn’t want to fire them outright.
That said, there are some factors that could make a pay cut illegal, and it’s important for both employers and employees to know how this works. Below are three potential examples.
1. It is below minimum wage
First of all, pay can only go so far. All workers do need to be paid at least minimum wage at the state or federal level. Pay cuts cannot reduce the worker’s hourly rate below this threshold for any reason.
2. It’s being done as retaliation or discrimination
Additionally, the reasons for the pay cut itself could make it illegal. If an employer discriminates against workers of a certain religion or ethnic background, that’s a violation of their rights. If a worker reports illegal activity in the workplace and has their pay cut in response, that could be an illegal retaliation.
3. It applies to the past
Finally, employers must only cut pay for future hours—not any hours in the past that have already been worked. Even if the business is having financial trouble, the employees are due the wages they earned at the rate they were promised at the time. An employer can then come to that employee and say that their pay will be reduced moving forward, but they can never reduce the pay for the hours the employee has already logged.
Resolving a dispute
Disputes about payment and compensation are fairly common. Those involved need to know what legal steps they can take as they navigate them.
