In many cases, a pay cut is completely legal. An employer does have the right to reduce someone’s pay, just as they have the right to give an employee a raise for exemplary work or for staying with the company for a specific amount of time.
However, there are some ways in which pay cuts can be illegal. It’s important for employers to understand when this can happen and for employees to know what options they have if it does. They also need to know what warning signs to look out for.
Retaliatory or discriminatory
First and foremost, the reason for the pay cut could be important. For instance, if an employee’s pay is cut after they convert to a new religion and tell their boss about it, they may allege that it is religious discrimination. If all employees in a certain category—such as all female employees—have their pay cut at the same time, they could allege that it was sexual discrimination.
Additionally, if an employee takes certain actions and the pay cut is seen as retaliation for those actions, it could be problematic. An example could be an employee reporting safety violations in the workplace and then immediately having their pay reduced.
Applying to hours they already worked
Next, it depends how the pay cut applies. It’s fine if it just applies to the future, but it may be illegal if it applies to the past. If an employee has already worked a certain number of hours, their pay rate for those hours cannot retroactively be reduced.
Navigating disputes
In some cases, employers and employees will find themselves in dispute. It’s very important for both sides to understand their legal options.