Can employers reduce future earnings or your salary for work already completed but not yet paid?
UPDATED: February 20, 2013
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The employer-employee relationship is essentially a contractual one, even when there is no explicit or written contract. That is, the employee agrees to perform certain work, during the hours, at the location, etc. specified by the employer, in exchange for receiving an agreed-upon salary, wages, commission, etc.
When there is no written contract (including a union contract) to the contrary, an employer is free to alter an employee’s salary or wages going forward, at will. The employment relationship, when there is no contract, is known as “employment at will,” and employment at will means exactly what it sounds like: an employer can hire, fire, transfer, promote, demote, gives raises to, reduce pay, etc. employees at will.
However, that is only on a forward-looking basis. Work that has already been completed MUST be paid at the rate which was in force and in place at that time. If the company does not pay employees at the rate, wage, salary, etc. which they had, at a minimum, the employees could sue the company for the balance owed. (And if several or many employees were affected, they might want to bring a suit jointly, in order to share costs.) At a minimum, this would represent a contractual violation.
In addition, there might be a claim under one or another of the employment laws, such as under the Fair Labor Standards Act (FLSA), which is enforced by the federal Department of Labor. Note that if an employment law is implicated, it’s possible that the employees may be able to win additional or multiple damages, so it’s always worth exploring whether such laws apply.
There are some circumstances under which an employer may not have to pay employees for work done at previous rates, but they are special cases and will be obvious. For example, if a company is in financial distress, employees could agree to take less to help the company out. Also, if there was an employment contract specifying that the employee’s pay could be altered under certain circumstances and those circumstances happen, that term will be enforceable.
As a general matter, though, if employees did work at a certain wage or salary, they need to be paid that wage or salary.