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Temporary Wage Reduction California

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  • Temporary Wage Reduction California

    Located in California

    Our company is having financial problems due to the state not paying its bills. Rather than lay off people, we are going to reduce everyone's salary by 5% for a short period of time.

    I understand that a company has a right to reduce salaries for a number of reasons such as disciplinary actions, etc. Can someone confirm my understanding? Can we reduce all employees salaries rather than lay off a few?

    Thanks

  • #2
    Short of an enforceable employment contract or CBA that prohibits it, yes you can. You just have to give notice before the hours are worked at the decreased rate.

    I'm sure the people who would otherwise be laid off would appreciate it.
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      I understand that a company has a right to reduce salaries for a number of reasons such as disciplinary actions, etc.
      I would be very careful with this one as worded. Exempt Salaried employees only have docking restrictions (29 CFR 541.602). One of the legal reason to dock the salary is MAJOR violations only.

      5) Deductions from pay of exempt employees may be made for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules. Such suspensions must be imposed pursuant to a written policy applicable to all employees. Thus, for example, an employer may suspend an exempt employee without pay for three days for violating a generally applicable written policy prohibiting sexual harassment. Similarly, an employer may suspend an exempt employee without pay for twelve days for violating a generally applicable written policy prohibiting workplace violence.
      ------

      If you are trying to put together a more general policy, not one based on a fairly narrowly worded exception legally directed at Exempt Salaried employees, then I would look at the following"
      - The general rule of thumb is that you cannot violate formal contracts. If you have written company policies, perhaps someone who knows what they are doing should see if the company policies rise to the level of a legally enforceable contract (most do not).
      - Make sure that no labor laws are violated. This means that in CA Exempt Salaried employees must be paid at least $640/week, and that Non-Exempt employees must be paid at least $8/hr.
      - The change in wages must be on a go forward basis only. Legally the employee must have the opportunity to quit and not work for the reduced wages. So you need to notify the employees of the change prior to any work actually being done at the new rate. This is not saying that the change must be done at the start of a pay period (although payroll would likely prefer this). Instead, it would be legal to tell people today that the change is effective Monday even if Monday is in the middle of the pay period.
      "Reality is that which, when you stop believing in it, doesn't go away".
      Philip K. **** (1928-1982)

      Comment


      • #4
        There are only 3 Exempt employees and we have all voluntarily agreed to take a short term cut far greater than the 5%. Notices will go out today for the reduction starting March 30, 2009. The only employees that will not be reduced are those that would receive less than the required minimum wage. They will not be reduced from their current rate.
        Last edited by aswas71788; 03-20-2009, 02:46 PM.

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        • #5
          Thanks, DAW, I just focused on the first paragraph.
          I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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