“Can my employer simply reduce compensation promised in my offer letter?”

Question: My company recently decided to stop paying employees an $80 per month cell phone allowance, and instead decided to provide company cell phones.

On the “Letter of Intent” offer that I signed it clearly says under “compensation” that I get the cell phone allowance of $80 per month.

Is it legal for the company to stop paying me the allowance, or do I have a case? 

Rock Hill, South Carolina

Answer: Dear Jim,       

1. Unless your have an employment contract that guarantees you a certain period of time as an employee, both you and your employer are free to end the employment relation at any time. Very few employees have an employment contract and “letters of intent” and “offer letters” rarely, if ever, contain a commitment to employ someone for any set period of time. As you may know, this is referred to as “at will” employment, and nearly all employees are in this circumstance. In fact, most letters of intent and offer letters use that very phrase: “at will.” 

2. For that reason, both the employee and the employer are equally free to say to the other: “I want to change the terms of our employment relation.” So, for example, an employee can say, “Boss, if you want me to come back next week, I want double my present pay.” And, for a different example, an employer can say, “Employee, if you want your job to continue next week, you must accept that you will only get half the pay.” Sometimes it is the employee who wants to change the terms of the relation; sometimes it is the employer. If the employee and the employer do not agree on new terms of the relation, they can simply go their separate ways.

3. So, it is entirely legal for an employer to change the terms of compensation or benefits at any time, as your employer has done. During times of economic difficulty, many employers are doing what your employer has done. Remember, though, that in times of economic prosperity, many employees insisted on raises, better benefits, and the like, and that such times may come back again and, of course, hopefully that will be soon.

4. One thing employers cannot do is to change terms of employment retroactively. In other words, an employer cannot say on a Friday, “Starting last Monday, your pay is reduced.” That would be entirely unfair to the employee, who worked all week expecting his or her full pay. Instead, an employer can only say, “Starting next Monday your pay is reduced. That may not prove much consolation for you, but at least it does limit the harm that can be done.
Jim, I hope this is now clear to you. And I hope, too, that you understand the fact that such “freedom” to alter relations really is a two-way street, even though it may seem to you like “Unfair Avenue” at the time.

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Al Sklover

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© 2011 Alan L. Sklover, All Rights Reserved.   

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