Employment Law: Is an employer allowed to reduce an employee's rate of pay?

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Attorney licensed in Indiana
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Times are tough. Clients have gotten laid off or have had their rate of pay reduced. Leading clients to ask whether their employers can reduce an employee's rate of pay. Generally, yes. An employer can reduce an employee's rate of pay unless the employee is covered by a collective bargaining agreement or other form of pay guarantee. The other limitation preventing an employer from reducing an employee's rate of pay is the applicable federal or state minimum wage.
When an employer opts to reduce an employer's rate of pay, the employer must notify the affected employee prior to his/her working at the reduced rate. The employee has the right to accept the lower wage rate or quit.

If the employee has already performed work without first being notified of the reduction, the employee shoud file a claim for wages for the difference in wages for work performed prior to the notification. This can be accomplished by contacting the Indiana Department of Labor's Wage and Hour Division.


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