Pay Cuts and Compensation Changes- Your Rights Under the Massachusetts Wage Act

Can an employer cut your pay?  Or reduce your hours?  Generally under the at will employment laws, an employer can make changes to your compensation going forward.  Under the Massachusetts wage and hour laws, however, they cannot keep from you any wages or compensation you have already earned.

Massachusetts Wage Act Retroactive Pay Cuts

Your employer may announce a reduction in your hourly rate.  So long as you are still at or above Massachusetts minimum wage, they can do this.  If they then pay you under the new rate for hours already worked under the old rate, they have violated the Wage Act and will be responsible to pay you the difference.

Another situation that sometimes arises is that the employer does not announce a pay cut, but simply pays you less than the agreed wage.  This too, can be a violation of the Wage Act.

You should pay special attention if part of your compensation involves commissions.  Employers frequently modify their commission policies.  In addition, there is often a lag time between the event that earned the commission (for example, the closing of a sale or issuance of an invoice) and the actual payment to the commissioned employee.  Any change to a commission policy should ensure that you are paid at the old rate for commissions you have already earned as of the date of the change.

If a pay cut violates the Wage Act, the employer could be liable for treble damages, or three times the amount owed, if you bring a claim in court and prove the amount owed.  It is also mandatory in that case that they cover your costs and expenses, including attorneys' fees.

The Massachusetts Wage Act and Agreements to Defer Pay

Employees are sometimes asked to agree to defer a portion of their pay.  This can happen in start up companies, where employees are frequently also founders and the company does not yet have significant revenue.  It has also occurred in times of economic pressure, like at the beginning of the pandemic.

You should know that the Wage Act specifically states that employers cannot escape its provisions by agreement with their employees.  This means even if you agree to defer part of your salary, it is not a legal agreement under Massachusetts law.

As an employer, you should be very careful about this.  You are better protected legally by simply imposing a pay cut if you cannot afford current salaries (again, so long as everyone is paid for amounts already earned).  That is a difficult decision to make, however, and in many situations can cause valued employees to look elsewhere.

As an employee, it is important to understand your rights if your employer asks you to agree to defer compensation.  This is especially true if, as time goes by, the employer does not fulfill its agreement to eventually pay you the deferred amounts.

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Pay Cuts: Other Consequences

Even a "going forward" reduction in compensation can have unintended consequences.  For example, if you have a non compete agreement, you may be able to defend against its enforcement on the grounds that the employer changed the terms of your employment by reducing your compensation.

There may be other agreements you have with your employer that could be similarly put into jeopardy by a unilateral reduction in pay.  These include non-solicitation agreements, work for hire and invention assignment agreements, and other commitments you have made that may be important to your employer.

How We Can Help

If you are facing a pay cut, or being paid less than agreed, we can help you assess the situation and advise you of your rights.  We can also help put a strategy together to recover any compensation you may be owed.  You can use the button below to schedule a call back from a member of our team, or give us a call at  781-784-2322.

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