Your manager calls you in and says that starting next month, your hourly rate drops from $22 to $19. Business is slow. Can they actually do that?

The honest answer surprises most people: usually, yes — going forward. Most American jobs are at-will, which means the deal can be changed for the future, including the pay. But “usually” is carrying a lot of weight in that sentence. Federal law draws hard floors under how low pay can go, the timing rules are strict about the paychecks you’ve already earned, several states require advance written notice, and some pay cuts are illegal because of why they happened. Here’s the map.

The general rule: forward yes, backward never

The U.S. Department of Labor addresses this directly in its fact sheet on pay reductions: the Fair Labor Standards Act generally allows an employer to reduce an employee’s wage or salary prospectively — for hours you haven’t worked yet — as long as pay stays at or above the legal minimums. What an employer cannot do is reach backward. Hours you already worked must be paid at the rate that was in effect when you worked them. A “pay cut” that shows up on the check for last week’s hours isn’t a pay cut; it’s unpaid wages, and you can file a complaint with the department’s Wage and Hour Division to recover them.

The floors: minimum wage and overtime

No cut can take you below the applicable minimum wage. The federal floor is $7.25 per hour, and when your state or city sets a higher minimum, the higher number is the one that binds — and in most big states, the local minimum, not the federal one, is the real floor. Overtime survives a pay cut too: hours over 40 in a week still pay time-and-a-half, just calculated on the new, lower regular rate.

One more federal rule guards against sneaky cuts: deductions for things like uniforms, register shortages, or tools can’t drive your effective pay below the minimum wage or eat into required overtime. A “we’re charging you for the equipment” memo has the same legal limits as a rate cut.

Salaried? The cut can cost your employer your exemption

If you’re salaried and exempt from overtime — the classic office arrangement — the employer’s room to maneuver is narrower. To keep you exempt, the company must pay a true fixed salary of at least the federal threshold, currently $684 per week ($35,568 a year), and the salary can’t bounce up and down with the quality of the week.

The department’s salary-basis rules allow a genuine, prospective salary reduction that reflects a long-term business downturn. What they don’t allow is docking the salary week to week based on how much work was available — do that, and the employee stops being exempt, and suddenly every hour past 40 is owed at overtime rates. If your salary was cut below $684 a week, or your “salary” now varies with the workload, you may be legally entitled to overtime pay going forward regardless of what your title says.

States add the notice rules

Federal law doesn’t require advance notice of a pay cut — but a number of states do, and this is where many employers slip. New York, for example, requires employers to notify workers in writing before reducing a wage rate under its Wage Theft Prevention Act. Other states require notice at least one pay period ahead or before any work is performed at the new rate. The common thread everywhere: the new rate can only apply to work performed after you were told about it.

Your state labor department’s website will say what applies where you live; the federal DOL keeps a directory of state labor offices. If you were told about a cut after the fact, the gap between the old rate and the new one, for the notice period, is typically recoverable.

When a legal-looking cut is illegal anyway

Even a properly noticed, above-minimum cut is unlawful if the reason behind it is prohibited. A pay cut aimed at you because of age, race, sex, disability, religion, or national origin is discrimination. A cut that lands right after you filed a wage complaint, reported safety violations, took protected family leave, or discussed pay with coworkers looks like retaliation, which is separately illegal even when the underlying complaint doesn’t succeed. And if you have an employment contract or are covered by a union agreement, your pay is whatever the contract says — at-will rules don’t apply until the agreement allows a change.

Timing and selectivity are the tells. An across-the-board 10 percent cut in a bad quarter reads very differently from a cut that touched one person the week after she complained.

What to do the day it happens

Get it in writing — the new rate, the effective date, who approved it. Check the effective date against your timesheets; any hours worked before you were notified belong at the old rate. Look up your state’s notice requirement. If you’re salaried, compare the new number to $684 a week and watch whether the “salary” starts flexing with the workload. And decide the bigger question on your own schedule: a lawful pay cut is also a signal about the company’s health, and it resets your market comparison. The law controls what your employer can do to your rate. It has nothing to say about whether you keep working for it.

This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.