Are US employers allowed to unilaterally cut the pay for an employee, specific team or all employees through a one-off measure? Are forced contributions to charity, pay reductions during an economic crisis, fines for not meeting performance goals, and others legally above board?

From my limited understanding of US labor law, an employer is free to reduce pay going forward for any reason that isn't covered by specific anti-discrimination laws. And as a company-wide measure applied to future pay this also doesn't seem like it could be construed as an illegal deduction. But I'm not finding a straight answer.

This question was inspired by this question about an employer reducing pay to buy the CEO's book and this off-site article about an employer fining people for being late.

Can an employer apply what are effectively one-off pay cuts through enforced contributions, fines or other measures?


2 Answers 2


Can an employer apply one-off pay cuts via forced contributions?

No. This type of issues pertains to state law, and many (if not all) jurisdictions in the U.S. have statutes prohibiting forced deductions that are neither ordered by court, nor pursuant to bargaining agreements, nor as required or expressly permitted by law. See, for instance, MCL 408.477 and .478.

The case of the CEO's book sounds in clear violation of MCL 408.477(2) since the user who asked on Workplace SE mentions that the employees did not consent to that deduction.

Even if an employee consents to the deduction, it is important to discern between (1) his altruistic consent, and (2) his concession for the sake of continuation of employment. Unless the consent is altruistic, the clause(s) allowing for the deduction might be rendered null and enforceable by virtue of Restatement (Second) of Contracts at § 178(1) in relation to the aforementioned statutes.

Any form of deductions as a permissible sanction (as fining when the employee gets late to work) would have to be provided in the agreement between employer and employee. Otherwise it is unlawful.

  • 1
    My understanding is that most US employees don't have a contract and are employed at-will. Couldn't they revise salary for the next month (respecting reasonable notice guidelines) to avoid this? Though I suppose the question of whether any particular scenario qualifies as a deduction rather than a salary adjustment would be for legal counsel to decide?
    – Lilienthal
    Apr 24, 2020 at 14:22
  • 4
    @Lilienthal "Couldn't they revise salary for the next month (respecting reasonable notice guidelines) to avoid this?" A deduction of that sort as a condition for continuation of employment is unlawful even if disguised as revisions of salary. Also, statutes like MCL 408.477 and .478 are applicable regardless of whether termination is at-will or for cause. Generally speaking, labels cannot be used to overcome legislation. Apr 24, 2020 at 14:39

When you accept a job offer, it comes with certain terms. Even if there is no written agreement, certain terms are explicitly talked about, such as what and when you do, and how much you get paid for it.

Now, if employer cuts your pay by way of something that has never been agreed — that is a breach of contract. You can, in theory, get what you were deprived of back through the court. Of course, unless you are a valued, important, hard-to-replace employee, you would be fired should you just open your mouth about that breach: what you get through the court would only be worth the pay you were deprived of until the day of firing.

When pay cut takes effect immediately (as opposed to you being advised of it some time in advance), your silence and continued work constitutes acceptance by conduct: you essentially agree to lower the pay by not objecting it. So, basically, the answer boils down to whether you are ready to raise your voice, risk firing and go through the trouble of job search again.

  • 1
    That is not necessarily a breach of contract, since the deduction at issue might be rather foreign to the contract (regardless of its form). The real issue is that it violates state law in many jurisdictions. Even if the employment contract allowed for that sort of deductions, the corresponding clause(s) might be void or unenforceable for contravening legislation. See Restatement (Second) of Contracts at § 178(1). Hence, employee's consent would have to be more from a standpoint of gift than contract. Apr 24, 2020 at 16:46
  • @IñakiViggers Agreed, though, practically, it makes no difference in case of employment at will whether you accuse your boss of a breach of contract or state law violation.
    – Greendrake
    Apr 25, 2020 at 0:00
  • "it makes no difference in case of employment at will whether you accuse your boss of a breach of contract or state law violation". That depends on the jurisdiction. Some statutes explicitly make it mandatory (rather than optional) to exhaust "administrative remedies" prior to filing suit for a state law violation, a phase that is nonexistent in many --or most of-- contracts. In a state law violation, also the labor agency in that jurisdiction might have standing to sue the employer and trigger additional sanctions, whereas only the employee would have standing to sue for breach of contract. Apr 25, 2020 at 10:42

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .