Can an Employer Legally Reduce Your Pay?

An employer in California can legally reduce an employee’s pay, but there are specific conditions that must be met. 

If you have experienced unlawful pay from your employers, contact our Orange County wage & hour lawyers at Aegis Law Firm today. Call (949) 379-6250.

When an Employer Can Reduce Your Pay in California?

Most employees in California work under “at-will” employment, meaning employers can change the terms of employment, including pay, as long as the reason is lawful and not discriminatory or retaliatory.

Advance Notice

Employers must inform employees of a pay reduction before it takes effect. Wage changes cannot be retroactive; an employee must know their new pay rate before performing any work under the reduced wage.

Minimum Wage Compliance

Pay reductions cannot bring an employee’s wages below the California minimum wage, which is $16.50 per hour. Local jurisdictions with higher minimum wage rates must also be observed.

Exempt Employees

For exempt employees, whose compensation is based on salary rather than hourly pay, reductions are only legal if their new salary still meets the state-mandated minimum threshold for exemption. For example, in 2025, exempt employees must earn at least $35,568 annually ($684 a week) to maintain exempt status.

When Is a Pay Reduction Illegal in California?

Pay reductions are unlawful in the following situations:

Discrimination

If a pay cut targets an employee or group of employees based on a protected characteristic, such as race, gender, or national origin, it is illegal under the California Fair Employment and Housing Act (FEHA).

Retaliation

Employers cannot reduce pay to retaliate against employees for filing complaints, reporting workplace violations, or exercising their rights under labor laws, such as taking family or medical leave.

Breach of Contract

If an employee works under a written or implied contract guaranteeing a specific wage, the employer cannot unilaterally reduce pay without violating the agreement.

Failure to Provide Notice

Reducing pay without prior notice is unlawful. For instance, if an employee works hours believing they will be paid at their current rate, but the employer retroactively applies a lower rate, this goes against wage laws.

What Should You Do if Your Pay Is Reduced?

If your employer reduces your pay, take these steps to protect your rights:

1. Request an Explanation: Ask your employer for written confirmation of the new pay rate and the reasons behind the reduction. Clear communication can help determine if the pay cut complies with the law.
2. Review Employment Agreements: Check your employment contract or offer letter to see if the pay reduction violates any written or implied agreements.
3. Document the Change: Keep records of your previous and current pay rates, including pay stubs, emails, or memos related to the reduction.
4. Report the Issue: If you suspect the pay reduction is illegal, you can file a complaint with the California Labor Commissioner’s Office and consult an employment attorney.

Legal Remedies for Unlawful Pay Reductions

If a pay reduction violates California labor laws, employees may be entitled to compensation and other remedies, including:

Back Pay

Reimbursement for unpaid wages due to unlawful reductions.

Penalties

Employers may face fines for wage violations, especially if they acted in bad faith.

Attorney’s Fees

Employees can recover legal costs if they win a wage claim.

Reinstatement

In cases of retaliation, employees may be reinstated to their prior position and pay rate.