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What are some of the issues to consider when reducing wages in lieu of layoffs?

The first consideration is whether you have made any verbal or written commitments regarding compensation and benefits. Review employment contracts, commission agreements, offer letters, employee handbooks and collective bargaining agreements. If any apply, consult legal counsel before taking action.

An employer may reduce wages across the board or for specific groups (for example, managers), but must avoid discrimination against any protected class, including employees age 40 or older.

No advance notice is required, but reductions cannot be applied retroactively to hours already worked. Employers must provide a timely updated Wage Theft Act Notice to Employees.

For example, you may announce on April 9 that wages will be reduced effective May 1 but cannot reduce pay for work already performed.

Employers must ensure nonexempt employees do not fall below state or local minimum wage and that exempt employees continue to meet minimum salary requirements to maintain exempt status.

Employers may not reduce or eliminate accrued vacation or paid time off (PTO), but may change accrual rates prospectively. Provide advance notice of the new accrual rate and effective date.

Employers must also comply with California paid sick leave accrual requirements.

Consult legal counsel before reducing benefits.

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If the minimum wage rate changes mid-pay period or mid-workweek, do we pay the new higher rate for the entire pay period or workweek?
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