can an employer change your rate of pay retroactively and make you pay back the difference?

A reader writes:

My boyfriend and I are really concerned at this moment. Three months ago, his company told him they were giving him a raise of $1.50/hour. This also came with the burden of working two locations a week. However, just today, they “realized they made a mistake” and that at his position, he’s not supposed to be paid that much. He doesn’t have this in writing; it was jut a verbal agreement.

Now they’re talking of the possibility of the company cutting their losses at my boyfriend’s expense. This means that he will personally have to pay all the extra money back, by them taking it out of his paycheck.

Mind you, we recently moved in somewhere we can only afford with his current income. Also, I’m pregnant and due in 4 weeks! Is his company allowed to do this? If not, is there someone we can speak to ? If they decide to do this, can we take legal action? Why should we suffer from their mistake after months, and also why should they have the audacity to make him pay it back?

They can absolutely change his pay at any time going forward. But they cannot change it retroactively. After all, if I hire you for $10/hour and then in six months I change my mind and want to pay you less, I can’t require you to pay back the part I wish I didn’t pay you.

(However, if I told you I was going to pay you $10/hour and accidentally paid you $12/hour, that’s a payroll error and I can collect the difference.)

The key thing here is that they promised him a certain rate of pay. He did the work on that understanding. They cannot go back and renege on it after the work has already been done. Maybe he would never have agreed to do the work at that rate — who knows. In any case, nope, can’t do it.

So… how should your boyfriend handle this?

Well, he could go straight to a lawyer or file a wage complaint with your state labor board. And that might indeed work … but it would also probably sour the relationship with the employer in all sorts of ways. If he plans to leave his job soon anyway, that might be fine with him.

But if he’d like to stay and remain on good terms, I’d start with a softer approach, one that gives them the benefit of the doubt that they just haven’t fully thought this through yet (and that they don’t realize what the law is). He should talk to his manager and say, “I’m disappointed that my pay rate is changing, although I understand that you’ve realized that it’s outside the range for this position. However, I’ve made decisions based on this pay rate, including moving into an apartment that I otherwise couldn’t have afforded. Since I’ve been doing an excellent job and have made plans based on what I understood in good faith to be our new pay agreement, I’m hoping we can keep it where it is.”

(I don’t normally advocate mentioning life circumstances like rent when talking about pay, since they’re usually irrelevant. But in this case, it’s worth pointing out to the company that he made major decisions based on their word. You can’t push that too far, because ultimately everyone is responsible for managing their own finances and accounting for the fact that their jobs aren’t permanently guaranteed, but I think it’s reasonable to mention in this context and could end up being helpful.)

From there, see what happens. If they don’t budge and also make moves to deduct the “extra money” from his paycheck retroactively, then he should say, “It’s my understanding that we can’t deduct pay retroactively like that. I understand that the pay will be different going forward, but I don’t think we’re allowed to make retroactive deductions.”

Note the use of “we” there. That’s key, because that’s positioning your boyfriend on the same side as the company. Yes, the subtext might be “You can’t do this,” but it’s much, much less adversarial language.

At that point, if it still looks like they’re going to make the retroactive deductions, he can come back with more to-the-point wording: “I looked into this, and it’s actually prohibited by law to do that.” And then, if they’re still proceeding, he can decide if he wants to go the legal route. But he has a much better chance of solving this and keeping good relations with them if he tries the approach above first.

Good luck.

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