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'Reasonable Notice' May Be Required for Pay Reductions

March 09, 1997

Q: I received my last paycheck and my pay was decreased. When I asked my supervisor, he said cuts were being made to increase profits and that there was no other option if I wanted my job.

Doesn't my employer have to discuss pay cuts with me first? Is it illegal for them to do this?

--T.S., Fullerton

A: It is illegal for an employer to cut your pay for work that you have already performed. If you complain about it, it is also illegal for an employer to retaliate by disciplining, demoting or firing you.

There is usually nothing to prevent an employer from reducing your pay in the future. Pay cuts are sometimes the only way to decrease expenses and prevent layoffs.

If an employer has made promises regarding the duration of any pay amount, however, it is improper to change that commitment. Did your boss promise you that your former pay would last any set duration of time? Do you have a written employment agreement?

An employer also may have an obligation to give "reasonable notice" of anticipated pay cuts. This is especially true if employees have worked for an extended period of time and have made financial commitments based upon assurances that they would continue to receive certain compensation.

It would certainly have been more diplomatic for your employer to have given you a reasonable amount of notice about this change. However, from the employer's point of view, too much notice might encourage employees to depart prematurely.

--Don D. Sessions

Employee rights attorney

Mission Viejo

Ousted Before Getting Vested

Q: I was laid off one month before I would become vested at my company. Is there any way I can claim that money?

--V.L., Beverly Hills

A: It is a violation of the Employee Retirement Income Security Act of 1974 to discharge someone to prevent them from becoming vested.

Unfortunately, it is difficult to prove that you were laid off to prevent you from becoming eligible for pension benefits. For example, you must prove that your employer acted with the specific intent of preventing you from becoming vested. However, you do not have to prove that it was the only reason you were laid off--merely that it was a motivating factor.

But the fact that you were close to vesting does not necessarily prove your case. Nor does the fact that your former employer may have saved some costs as a result.

The easiest way of proving your case would be to show that your employer had a practice of discharging employees shortly before they would have become vested.

--Kirk F. Maldonado

Employee benefits attorney

Riordan & McKinzie

New Employment Conditions

Q: I am an airport employee. Before I was hired, my employer completed a 10-year background check on me. Now the employer is requesting another 10-year check for me and the others in my department, and is asking us to sign new employment agreements that include binding arbitration.

Do I have to agree to these conditions since I'm already employed? Can I be terminated if I don't?

--G.T., Los Angeles

A: You pose some fairly complicated questions. Whether you are required to agree to such an investigation probably would involve balancing your right to privacy against the strong public interest in airport safety and security.

Although there is no case law on point, a court might well determine that an airport employer has a stronger interest than other employers in ensuring that its employees do not constitute a threat to the public safety. Much of the information examined during a background check is already a matter of public record, however, so your express permission may not even be required. Moreover, if you gave express permission for a background check when you were hired, such permission might still be applicable.

Arbitration agreements are becoming increasingly common in the workplace today. Most courts enforce these agreements if they do not provide for a clearly unfair procedure or deprive the employee of substantive rights guaranteed by the various state and federal employment laws. Whether an employer may require current employees to sign arbitration agreements is currently unsettled. If you are employed at will and the arbitration agreement is otherwise fair, your employer could probably require you to sign the agreement as a condition of your continued employment.

If you are not employed at will, your employer's ability to force you to agree to arbitration might be more limited. (Public employees typically have "due process" rights that take them out of the at-will category.) Your employer could, however, decide that if you don't agree to arbitration, you would not be eligible for a discretionary pay raise or some other discretionary future employment benefit.

Arbitration is not necessarily a bad thing for employees. It often provides a remedy in a fraction of the time and at a fraction of the cost of a prolonged lawsuit in court. An arbitration agreement may be written, for example, to require that the arbitrator be a retired Superior Court judge and that all laws, evidence rules and court procedures will apply. In this manner, both parties are assured of a hearing by an experienced judge.

--James J. McDonald Jr.

Attorney, Fisher & Phillips

Labor law instructor, UC Irvine

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