Continued Answers to Corona-Related Questions

Every hour during this crisis, employers are faced with new issues. One question we have been routinely asked by our clients is as follows:

“We want to continue to pay our employees to work from home, but they are not doing as much work. Can we reduce their pay while they work from home?”

The answer to this question is the typical lawyer response: Yes, but.

Yes, you can reduce an employee’s salary, but you must ensure that you do so in a manner which complies with state and federal laws. Under Pennsylvania law, an employer may reduce an employee’s salary with prior notice. As such, an employer cannot retroactively cut an individual’s pay. The employer may inform its employees that due to the circumstances, effective the next payroll period your salary will be reduced by “x”. This notice should be done in writing. Employers must also be mindful that they make any reduction decisions uniformly and with justification to avoid potential claims for discrimination.

An employer must also take the Fair Labor Standards Act (the federal wage and hour law) into consideration. In order to remain an exempt employee (an employee who is not entitled to overtime for hours worked over forty in a workweek) an employee must make at least $684 per week (equivalent to $35,568 per year for a full-year worker). Accordingly, if an employer reduces an employee’s salary below the foregoing threshold, the employee will no longer be exempt and will be entitled to overtime pay (one- and one-half times the normal hourly rate) for all hours worked over forty in a workweek. The employer will also be required to track the employee’s hours during the workweek, which may be difficult if an employee is working remotely.

If you have any questions with regard to this issue, or any other labor and employment related matter, please contact one of the attorneys as Hoffman & Hlavac.