Dispelling the 10 Biggest Wage and Hour Myths: Part IX

Wage and Hour Myth #9 

An employer cannot unilaterally reduce an employee’s rate of pay.  Employers often feel powerless to address an employee’s poor performance where performance counseling and discipline have not worked.  Sometimes, the best way to send a message to an employee regarding unsatisfactory work performance is to reduce the employee’s rate of pay (hourly or salary).  Absent an employment agreement or some other contractual limitation, employers can unilaterally reduce an employee’s rate of pay.  There are no federal laws limiting this right.  Under Pennsylvania law, the only requirement is that the employer must give the employee advance notice of the change (and that notice must be at least one full pay period prior to the effective date of the change).  Obviously, a retroactive reduction in an employee’s pay rate is impermissible.  If, however, the employer informs the employee in advance (by at least one pay period), the reduction in pay is completely permissible.  Often after making such a change, the employer’s message is received “loud and clear.”