“What recourse do we have after our employer has reduced salaries 10% across the board?”

Question: My wife’s employer cut all salaries by 10% across the board in early 2009. Making things worse, salaried workers used to work 40 – 50 hours a week; many are now working 60 – 70 hours, six or seven days a week. The company has told everyone that they will “make up” the 10% reduction when they become “healthy,” but we all have our doubts they ever will. Also, the company has paid my wife – on a sporadic basis – overtime for hours she has worked over 50 hours in a week.

First question: How long should we let the “short pay” continue?

Second question: What recourse do we have on ever getting the 10% “short pay” being held back?

Third question: If there comes a time that the company does become “healthy,” can they count the overtime paid to my wife as a credit against the “short pay?”

This has happened to many employees in the automotive supply manufacturing industry.

Fostoria, Ohio

Answer: To answer your questions, I need to first lay a kind of “foundation”:

How much salary an employee is entitled to is determined by what salary he or she has agreed to with the employer. For example, at the beginning of a job, usually the employer and the employee agree on a weekly salary (or other compensation basis), and then they start to work together on that basis.

It would be unusual for an employer and employee to sign a written contract that says the salary must be kept the same forever. Instead, the employee can walk into the boss’s office any day, and say, “Boss, if I am going to stay, I want $100 more a week.” The boss is free to say, “OK,” or, alternatively, “Go take a hike.”

Same thing goes for the employer: A boss can call an employee into his or her office any day, and say, “Employee, starting tomorrow you make $100 less each week.” The employee is free to say, “OK,” or “No thanks. I am leaving to work elsewhere.”

Somewhere in the middle is what we are hearing about, more and more: employers saying, “Employees, things are pretty rough out there. We have no choice but to temporarily reduce everyone’s salaries 10%, across the board, until our business gets healthy again.” And, of course, while each employee is free to say, “OK,” or “No way; I’m leaving,” most are saying “OK, I have no choice.” This is what seems to have happened (or something close to it) at your wife’s workplace.

Did the company also say, “We promise that the monies you are not getting paid because of the 10% reduction will be added up, and one day it will all be paid to you, no matter what?” Or, did the company say, “We don’t know if we will ever be able to make up those monies to you?” Or, did the company say, “When we raise your pay back up, we won’t owe you a penny for the 10% you lost?” Your letter is not clear, because I don’t think the company was clear. I’m not sure what the company meant when it said it would “make up” the reductions in the future. My bet is that the company did not clearly say any of these things – that is, it was not clear about what will happen in the future because it does not know what will happen. Now, let’s turn back to your questions:

First, you should “let” the “short pay” continue for only as long as you have to. If your wife can find a better job, she should consider taking it. If your wife – and others – can say, “We are leaving if you don’t return our salaries to their former level,” and if they can be successful in getting the company to bring their salaries back up to its earlier level by doing that, by all means she should say that today. My sense is that your wife and her colleagues have little, if any, way to get the “short pay” halted. It’s a very tough situation, there is no doubt. And I have no doubt that others in the automotive manufacturing industry are in the exact same bind, without much of an ability to change it.

Second, whether or not you have “recourse” to get the 10% back depends on what EXACTLY the company said about whether it would ever repay it. From what you wrote, and from what I have read about what many employers are doing, I expect that it is unlikely the company has made a promise to repay the accumulated “reduced” salary. Without a promise, there is no recourse. However, if the company did, in fact, promise to repay all of that salary, your wife’s recourse would be to take proof of that promise to court. As a general rule, oral promises are just as enforceable as are written ones, just a bit harder to prove.

Third, the right to be paid overtime is a matter of law. Overtime and a right to be repaid monies owed for salary reduction are not interchangeable. Said differently, overtime is overtime, and the right to repayment is the right to repayment. One is simply not “counted against” the other.

The saddest thing is that what your wife and her colleagues are facing is more widespread than you might believe. This is the first time that reductions in salary are happening on a widespread basis since the “Great Depression” of the 1930’s. We all are in this economic “squeeze” together, and can do little about it but to help one another. We can hope that this “squeeze” goes away sooner than later, and that people will start to earn, live, save and spend a bit more like they used to. Unfortunately, there is not too much we can do in the meantime, but hope, pray and help one another.

I hope this is helpful. I know it is not, in itself, a source of much hope. But, that being said, one must hope for better times, for that is the only thing that will, in the end, bring about the better times to come.

My very best to you, your wife, and her colleagues.

Al Sklover

© 2010 Alan L. Sklover, All Rights Reserved.

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