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Is it legal to Cut an Employee’s Pay and Hours Because of COVID-19?

Empty piggy bank

Throughout the past few weeks the coronavirus has left the world empty and desolate. With lockdown measures and social distancing orders in place, people refrain from going to restaurants, communicating in-person, and going to work. As the nation adjusts to this austere new lifestyle, consumerism has slowed down immensely. Consumers are only buying the essentials, which means they aren’t spending like they used to. Of course, when people aren’t spending money, businesses don’t make money. Therefore, many business owners have had to make tough decisions to stay afloat.

To protect their businesses from the coronavirus, many business owners have adjusted employee hours and pay to save costs. In addition to that, some employers recently laid off and terminated employees. This is the unfortunate new reality that both employees and employers must face.

Many impacted employees feel lost regarding what they can do about these drastic changes. With sudden adjustments, they might think “this isn’t right” or “this isn’t fair,” and rightfully so. Sudden changes in income can be a huge stressor for anyone, especially when they have payments due. The best thing an employer can do is provide employees with patience, sympathy, and resources during this confusing time.

Can an Employer Reduce the Number of Hours an Employee Works?

If an employee is a non-exempt hourly employee, an employer can reduce their hours. In fact, according to the FLSA, as long as an employer doesn’t let the employee’s wages drop below minimum wage and overtime is properly calculated, it’s legal. An employer can also technically decrease an exempt salaried employee’s hours, however, that’s not common. Salaried employees obtain the same wages every pay period no matter how many hours they work, so reducing their hours will not save an employer costs.

It’s also important to note that each state may have its own regulations concerning hour and pay cuts. Some states may require employers to give employees advanced notice before cutting their hours, so it’s wise to check with a local labor board. Furthermore, an employer cannot cut anyone’s hours because of discriminatory reasons. Therefore, if an employer cuts someone’s hours, they must provide a valid reason why those hours were reduced.

Work hour reductions can put hourly employees in a tough spot, which is why most employers avoid it when they can. Most employees end up disgruntled, upset, and confused about hour reductions. However, during a time of crisis, it’s incredibly common for an employer to reduce the number of hours that employees work. It’s even normal to reduce the number of operating hours. This method can save the business money while simultaneously decreasing employee termination.

Can an Employer Give an Employee a Pay Cut?

Yes, an employer can reduce an employee’s pay. An employer can cut an employee’s pay as long as an employer follows FLSA minimum wage and overtime regulations and salary basis requirements. Most employees are “at-will”, so an employer can terminate an employee or reduce an employee’s pay at any time. It’s crucial that employers check with their state labor boards to ensure they are compliant with state laws.

Pay cut notifications are very important. Some states require employers to notify employees about pay cuts via email or letter, while other states believe that verbal announcements are binding. Each state has its own requirements, so it’s best that employers avoid legal issues and check with their labor boards before taking action.

When a Pay Cut Isn’t Legal

  • Surprise: When an employer doesn’t tell the employee about the pay cut. Employers cannot tell employees that their paycheck they already worked for is going to be smaller than expected.
  • Retroactive: An employer cannot change an employee’s rate before notifying them. The new pay rate is only implemented after notifying the employee.
  • Discrimination: Employers must not reduce pay based on race, color, religion, sex, national origin, age, or disability.
  • Breach of contract: If the pay cut does not cooperate with the agreed-upon contractual pay rate.
  • Retaliation: When an employer reduces an employee’s pay in response to inappropriate behavior.

For more information about pay cuts, read this handy article.

Unemployment Benefits

This is a confusing time for a lot of people, but luckily there are resources for employees. Unemployment benefits and partial unemployment benefits are extremely valuable for employees who were laid off, terminated, or for those who’ve seen drastic pay cuts. With the rise of the coronavirus, employees have more unemployment assistance:

COVID-19 (coronavirus) update: The federal government is allowing new options for states to amend their laws to provide unemployment insurance benefits related to COVID-19. For example, federal law allows states to pay benefits where:

An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work;

An individual is quarantined with the expectation of returning to work after the quarantine is over; and

An individual leaves employment due to a risk of exposure or infection or to care for a family member.

Additionally, new federal law allows states to extend benefits to self-employed and gig workers, and to provide an extra $600 per week as well as an additional 13 weeks of benefits. Read more at COVID-19 Information.

Careeronestop.org

Each state operates under its own unemployment insurance program, so you’ll want to check with your state’s unemployment offices. Depending on which state an employee resides, they may have to apply for benefits online or over the phone.

Don’t let the virus take hold of your well-being. Help your fellow colleagues and employees find resources to help them through the coronavirus challenges. We can get through this together.

16 Comments

  1. Urika Taufa
    Urika Taufa June 22, 2020

    My job cut our pay with 4% since March to December. Am i qualify for unemployment?

    • Lindsay Sommers
      Lindsay Sommers June 22, 2020

      Hi Urika. You’re going to have to speak with your state’s unemployment office to get an answer to your question. Each state has its own unemployment insurance office with its own rules, regulations, and requirements. You can try to reach them via the phone or email; or you can apply and they will review your past employment information and will let you know if you’ll receive any sort of benefit package.

    • Rosanna
      Rosanna July 26, 2020

      I was a full time employee receiving health benefits and 401k I’ve been asked to return to work at a reduced pay of 15% and part time. If I refuse do I lose unemployment benefits?

      • Lindsay Sommers
        Lindsay Sommers July 30, 2020

        Hi Rosanna, you can typically only receive unemployment if you’re unemployed at no fault of your own; however, that decision is ultimately up to your state’s unemployment insurance representatives. I suggest speaking with them if you’re concerned about losing your benefits.

  2. Chris Dekota
    Chris Dekota July 15, 2020

    So being on salary and working from home and getting pay cut by 20 percent legal? even though I’m working 40 plus hours a week?

    • Lindsay Sommers
      Lindsay Sommers July 16, 2020

      Hi Chris, if you’re an at-will employee and it doesn’t breach your contract, your employer can cut your pay if you’re salaried. As a salaried employee, it’s expected that you get paid the same amount every pay period no matter how much or how little you work, and this works the same when you receive a paycut. If you’re worried about the legality of your situation, you might want to talk to your HR representative.

  3. MaKr
    MaKr July 27, 2020

    What if it does breach your contract? My company is holding back 10% of all pay indefinitely, but most of us are independent contractors with contracts stipulating our pay rate

    • Lindsay Sommers
      Lindsay Sommers July 30, 2020

      Hi. If that’s the case, you may want to speak with an HR representative immediately to get this handled. Your workplace most-likely has an HR team that’s supposed to help with these kinds of cases.

  4. John B
    John B August 7, 2020

    If i get a big pay cut in my hourly pay , can I get partial unemployment ? It is getting cut by a one third. . nc here.

  5. Tom M.
    Tom M. August 20, 2020

    I recently was notified that my teaching salary would be cut by 20% starting in Sept. and those effected by the cut would have thier current salery reinstated by the end of the school year. This was stated over the phone and I still nothing in writing from HR. Is this legal if I have a writtern contract from my emploryer? They require same 40 hours week week at a 20% reduced pay. Need advice.

    • Lindsay Sommers
      Lindsay Sommers August 31, 2020

      Hi Tom, the legality of your situation is entirely dependent on your state’s specific guidelines. Some states allow verbal interactions, while some require notices in writing. I suggest that you speak with someone in your area, like an HR consultant, to figure out if it’s legal.

  6. Jessica
    Jessica September 14, 2020

    I went on disability leave 05/2020 and then went onto maternity leave 07/2020-10/19/2020 my boss now is saying she has to cut my pay and also my hours have been cut after I return, she is saying it’s due to Covid yet they hired 3 new people… is this legal?

    • Lindsay Sommers
      Lindsay Sommers September 24, 2020

      This is a question you would want to ask a legal professional.

  7. Manuel Ribado
    Manuel Ribado September 24, 2020

    I am a Federal employee for the last 5 years. The last 4-1/2 moths they send me to home (High Risk under Covid19) with Administrative Leave Time paid . Our department was eliminated by a BBA 6 weeks ago with write notification. They offered me a job different with reduction of almost 60% less of my regular hour salary and I accepted it . Might I claim unemployment reduction salary benefice?. Thanks

    • Lindsay Sommers
      Lindsay Sommers September 30, 2020

      Hi Manuel, your unemployment eligibility will be up to your state’s unemployment office. I suggest trying to contact them directly to see if you qualify. Or, another option you have is to just file for unemployment; however, that’s up to you.

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