Help Wanted: Pay cut may not be fair, but likely legal

A company can legally lower its employees? wages A company can legally lower its employees’ wages as long as the new hourly rate doesn’t fall below the state and federal minimum wage of $7.25 and the pay cut doesn’t violate a union contract. (March 1, 2010) Photo Credit: Doug Young

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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: Is it legal for a company to cut salaries? I work as a host for a restaurant chain. After 10 years I was making $11.50 an hour but was recently cut back to $9.50. Is this legal?

-- Salary Cut

DEAR SALARY: It's legal as long as the cut doesn't violate a union contract or employment agreement and as long as the reduction doesn't take you below the state and federal $7.25-an-hour minimum wage. Your wage cut doesn't violate minimum wage. So it is legal on that score.

I'm sure the reduction doesn't seem fair to you because in this age of lean staffing, employees are asked to do more, while in many cases earning less. But labor laws are concerned with what is "legal," and that doesn't always translate into what is "fair."

 

DEAR CARRIE: My secretarial position was eliminated. As part of a separation package, my former employer will continue paying my salary for six months. To receive that money I had to sign a release form that prevents me from making any claims against the company. I'm wondering if that means I can never file an unemployment-benefits claim. I am an older worker and expect a long job search. If I don't have a job by the time the company benefit ends, I would like to be able to apply for unemployment benefits.

-- Separation Anxiety

DEAR SEPARATION: Without seeing your separation agreement, it's hard to know what the term "claims" encompasses. Generally in a severance agreement "claims" refers to lawsuits, not unemployment insurance claims. The aim of severance agreements is to discourage lawsuits for such things as unlawful termination or age discrimination. Besides, whether you eventually receive unemployment benefits depends on your eligibility, which the state Labor Department determines.

While you plan to wait to file for benefits, the Labor Department requires laid-off workers to file a claim the first week they're unemployed, said Howard M. Wexler, an employment attorney at Seyfarth Shaw in Manhattan who represents employers. Otherwise, they could lose benefits.

You may not qualify for the benefits now because of your severance package. But at least you would have filed.

Here's why you might be ineligible now.

"Individuals who receive severance pay from their former employer are ineligible for unemployment insurance benefits," Wexler said, "if they continue to receive their full salary and exactly the same benefits they received during their employment and if receipt of such benefits will cease if they find work elsewhere," Wexler said.

That's because the state Labor Department takes the position that an individual is not "ready, willing, and able to work -- a condition of receiving unemployment insurance benefits -- if they are receiving severance benefits that cease if the individual finds new employment," Wexler said.

He noted that payments for paid-time off such as unused vacation, sick and personal days generally don't affect a worker's eligibility for unemployment benefits.

It's worth mentioning that a worker would be ineligible for unemployment benefits if the person signed a severance agreement acknowledging that he or she left a job on his or her own or was terminated "without good cause," Wexler said.

"Then it is possible that you could be deemed to have abandoned your job, and thus, are ineligible for unemployment insurance benefits," he said.

That doesn't seem to be the case here, since your job was eliminated.

For more on when to file for unemployment benefits and what the eligibility criteria are, go to http://bit.ly/ZM39Wd

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