In California, employers may legally cut the pay rate of at-will, also known as at will, employees whenever employers want. This means that an employee does not have a contract with the employer for a specifically stated duration of time. Most employees are at-will. For example, an employee who has an employment contract with a specified duration of two years with a start date of January 1, 2018 and end date of December 31, 2020 would not be an at-will employee. Both the employer and the employee would be entitled to the other honoring the terms of that agreement, such as pay rate, for the entire two-year length of the agreement. The parties must meet each other’s expectations. In the absence of a similar contract, employees in California are presumed at-will because they should have no reason to legally expect employment even though this may seem contrary to reality. The way the law sees it, the parties could have and should have explicitly agreed to a specific duration if that is what they wanted and intended.
As a result, employers have the right to change the terms and conditions of employment, including cut at-will employees’ pay rates at any time, because employers may fire an at-will employees whenever they want for any reason that is not unlawful even without advanced notice. Similarly, at-will employees may quit whenever they want for any reason without giving employers advanced notice.
Illegal reasons for reducing pay rates are doing so because employees belong to a protected class (e.g., race, nationality, gender, sex, sexual orientation, age over 40, disability, military service, religion, etc.) or engaged in protected activity (e.g., complaining about illegal discrimination, disclosing a violation of the law to an employer or government agency, or filing a lawsuit or administrative claim against an employer for unpaid wages, etc.). Additionally, employers cannot reduce pay below California’s applicable minimum wage. Finally, although employers can cut pay at any time, they can only reduce the pay rate for work after employers provide notice to employees of the pay reduction because it gives employees the option to choose to accept continued employment at the lower pay rate or reject the employment.
(See Link(s): Labor Code Section 2922)