Employer's plan for retroactive pay cut is illegal

Waitstaff can hold onto their tips, since it's Waitstaff can hold onto their tips, since it's blatantly illegal for restaurant owners to take them. Photo Credit: iStock

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Carrie Mason-Draffen Newsday columnist Carrie Mason Draffen

Mason-Draffen, a business reporter, writes a column about workplace issues.

DEAR CARRIE: I am a part-time hourly employee at a small church. I am paid bi-weekly and received two checks in January. My employer has just decided to institute a 5 percent pay cut. And I heard that the pay cut would be retroactive to Jan 1. So my next paycheck is supposed to reflect not only my 5 percent pay cut, but the cuts retroactive to January. Is this legal? - Overzealous Cutting?

DEAR OVERZEALOUS: Unless the reductions violate a union or other contract, employers can cut employees' pay, but New York State labor laws would prohibit the retroactive cuts.

"That employer cannot reduce pay retroactively," said a Labor Department spokeswoman. "It has to be done with the advance notice to the workers."

If your employer goes through with its plan, file a complaint with the Labor Department at 516-794-8195 or 212-775-3880. And consider slipping copies of this column into the interoffice mail to the office manager.

Your employer's aggressive plan to save labor costs could also run afoul of federal labor laws.

"They can't take that additional deduction for past hours worked if that deduction brings their current wage to below the minimum [wage] for the workweek," said Irv Miljoner, who heads the Long Island office of the U.S. Department of Labor.

If you were working a full schedule, increasing your chances for overtime, your company's plan might have violated those provisions also. Overtime, by law, kicks in after 40 hours in a workweek. At that point hourly workers have to be paid time and half based on their regular hourly wage.

Your question isn't an unusual one, given the economic downturn and companies' eagerness to cut labor costs.

"It is one of the most common questions we get these days," Miljoner said.

Still, employers must be careful not to break the law while looking for ways to keep their companies' financial health intact.

DEAR CARRIE: I am the financial officer and non-owner of a company in serious distress. Because of my position, I know that I can be held personally liable for certain taxes such as employee tax withholdings and sales taxes, if they are not paid. Right now we are current with all these obligations, but I am concerned about the future. If the financial situation becomes so perilous that I feel the need to resign from my position to avoid being held liable for these taxes, would I qualify for unemployment benefits? Would this be considered a "constructive discharge," that is a resignation with good cause? Since I am not an owner, I do not feel I should put my personal assets at risk. - High Anxiety

DEAR HIGH ANXIETY: This is an unusual question and not easy to answer. The Labor Department said it would have to examine a number of issues regarding your case before deciding whether you qualify for benefits. For example, the department would look at such things as decisions you had control over and the terms of your employment.

The department would look at your terms of employment, for example, to see if your resignation would automatically disqualify you from unemployment, a spokeswoman said.

"His case would be an interesting one, no doubt," she said.

For more information call the department's telephone claims center at 888-209-8124.

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Looking for additional information?

For more on the legality of wage deductions go to http://www.labor.state.ny.us/workerprotection/laborstandards/faq.shtm

For more on unemployment benefits criteria go to http://www.labor.state.ny.us/ui/faq.shtm

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