There may come a time when, as an employer, you need to reduce the pay of one of your employees. For example, you may have hired them at $25 an hour, but now your company needs to cut costs. You believe reducing their pay to $20 per hour is a better alternative to letting them go, as their current wage is unsustainable.
While you expect the employee won’t be happy about the pay cut, you’re more concerned about the legal implications. Can you legally reduce their pay, or do you risk facing a lawsuit for wage theft or a similar claim?
Reducing pay correctly
There are several key points to keep in mind to ensure a pay reduction is handled legally:
- Minimum wage requirements: In Idaho, the minimum wage is set at $7.25 per hour, the same as the federal minimum wage. You cannot reduce an employee’s pay below this level.
- Hours already worked: You must pay the employee their full wage for any hours they’ve already worked. A pay reduction can only apply to future hours. Reducing pay for hours already worked could be considered wage theft, which is illegal.
- Avoiding discrimination: Ensure the pay cut does not result in allegations of discrimination. For instance, you cannot cut an employee’s pay in retaliation for filing a sexual harassment complaint or target specific employees based on their religion, race, ethnicity or other protected characteristics.
Even if you believe you have followed the law and implemented the pay cut correctly, it’s a sensitive issue that could still lead to a dispute. If you find yourself in this situation, make sure you’re prepared to take the necessary legal steps to resolve it.
