is it lawful for an employer to decrease an employee's wages without
notifying the employee? what section of the state code should be
consulted? I need to cite the law.

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Request for Question Clarification by darrel-ga on 16 Nov 2002 17:12 PST

Are you salaried or paid hourly? Do you have a contract with this company?

The short answer is that under California law -- unless the employer
and employee have a contract to the contrary -- an employer can reduce
the pay of an employee without any advance notice.  In fact,
California is an "at-will employment" state, which means the employer
is free to fire an employee without advance notice for any reason
whatsoever (unless the firing violates public policy or other laws,
such as antidiscrimination provisions).

The only restriction is that an employer can't reduce the person's pay
"after the fact."  In other words, an employer is required to pay what
it promised until a new promise is made.  And, of course, the employer
can't cut pay to below the minimum wage.

Again, the employer can't act so arbitrarily if there's a contract
with the employee that prevents it.  Such a contract can be in the
form of a union agreement or a contract with the individual employee. 
In such a case, the terms of the contract rule.  Also, if the company
has a written policy that requires it to give notice, that company
policy could be determinative.

You can find the California Labor Code by going to the following page
and marking the box that says "Labor Code":

California Law
http://www.leginfo.ca.gov/calaw.html

As you can see if you read through the code, there is nothing in there
that restricts an employer from setting the salary at will.  If an
employer offers a lower salary and the employee doesn't want it, the
employee is free to quit immediately or the employer is free to fire
immediately.  The section that states employment is "at will" is
Section 2922.

You can read that section on the following page:

Labor Code Section 2920-2929
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=lab&group=02001-03000&file=2920-2929

As I indicated above, the doctrine of employment "at will" implies the
right to change pay rates "at will" as well, since an employer would
be free to fire any employee who doesn't agree to the new pay scale. 
(Similarly, an employee can demand higher pay, then quit at will if he
or she is turned down.)

Of course, this is one reason why many employees demand collective
bargaining and/or a written contract that limits the right of the
employer.  It is extremely common (in fact, it's the norm) in
collective bargaining agreements to establish the pay scales for the
length of the contract, so the employer can't arbitrarily reduce pay.

All that said, a person who finds him- or herself in such a situation
who wants to challenge an arbitrary pay cut should contact a labor
attorney.  Under some circumstances, there can be what is known as an
"implied covenant of good faith and dealing" between the employer and
the employee.  Such a covenant might be implied, for example, if
supervisors repeatedly assure employees that their pay wouldn't be
cut, even if they didn't obligate the company in a formal contract. 
However, it appears that winning a lawsuit using this legal theory
would be a challenge for employees unless company supervisors made
quite explicit assurances.

This area of implied covenants is an evolving one, and it has been
tested in higher courts only in the case of dismissal, not in the case
of a reduction in pay.  You can read about the issue in the following
document, which also provides the citations of the original court
decisions:

The California Supreme Court Clarifies The Confusion Surrounding
Employment At-Will
http://www.kringandchung.com/artkdk2.html

You can find out more about the legal concepts of at-will employment
and fair dealing in the following document:'

The Employment-At-Will Doctrine: Three Major Exceptions
http://www.bls.gov/opub/mlr/2001/01/art1full.pdf

I don't know whether your an upset employee or an employer who is
defending a probably-difficult-to-make decision, so I'm not sure if
this was the answer you were looking for.  But it is the law of the
land, at least in California.

Best wishes,

mvguy



Search strategy: I found the law by searching through the menus at
http://www.findlaw.com.  I was aware of the issues involving at-will
employment through personal knowledge and research for an earlier
question: https://answers.google.com/answers/main?cmd=threadview&id=57898.
I used the search term "good faith and dealing" to find information on
how California has applied that principle.

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Clarification of Answer by mvguy-ga on 18 Nov 2002 08:18 PST

Sorry about the typo.  The last paragraph should read as follows:

"I don't know whether you're an upset employee or an employer who is
defending a probably-difficult-to-make decision, so I'm not sure if
this was the answer you were looking for.  But it is the law of the
land, at least in California."

good answer and good use of legal cites for reference