An unnamed business in Austin, Texas, is demanding its employees agree to a pay reduction equal to the stimulus checks they’re about to receive from the federal government, according to a local TV station.
“By signing the agreement, the company’s employees would have their paychecks between April 6 and April 20 cut by 100% of any money received under the stimulus bill” and the company “would also take half of the $500 stipend allotted for dependents under the bill,” KXAN-TV, an NBC affiliate, reported. Read story here.
It’s not necessarily illegal if the pay reductions are prospective. Under laws governing “at-will” employment, an employer can change its pay schedule, and it’s then be up to the employees to either accept the new pay offer, or quit and seek work elsewhere.
Changing pay retroactively, for work already performed, is different. Employment is essentially a contract relationship, and unilaterally changing contract terms after the fact normally violates the other party’s contract rights. In that case, the employee probably could sue for the pay that was promised him/her.
The company’s intent isn’t necessarily evil or greedy. It has already laid off a quarter of its workforce, and reducing pay for the remaining employees might be a way to keep more of them on the payroll for longer.
And rather than unilaterally impose pay reductions, the company did ask the employees to agree to it. One can assume those who don’t won’t remain employed, but it appears the company isn’t doing anything more than changing its pay offer and giving employees an opportunity to decide whether they want to work under the revised pay schedule.
Nor is it necessarily unique. Some distressed companies are cutting pay for employees who are still working, including their CEOs, although so far airlines — among the most severely-impacted companies — aren’t among them. (Read about that here.)
These pay cuts might be a justified and necessary step to keep the business alive and/or prevent more layoffs. But it’s a stupid business decision anyway. The optics are terrible. The PR is terrible. The effect on employee morale will be terrible. The company, if it remains in business, likely will end up with an angry and resentful workforce.
And by, in effect, confiscating its employees’ stimulus checks, the company also Congress’ intent behind the stimulus legislation, which is to keep the economy afloat by giving people extra spending money during these economically perilous times. You could call it unpatriotic.