Can an employer give you a pay raise and then take it back later?

I was given a pay raise about a month ago. Then yesterday, I was told it was mistake and I will go down to my prior pay rate. I have a voicemail and my co workers have emails where it was stated it is NOT a mistake, but now they are saying it was a mistake. It wasn’t just me either, it was everyone that I work with. Is this legal?

Asked on April 26, 2017 under Employment Labor Law, Indiana


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Unless you have an employment contract or union agreement that protects you against such an action, taking back a raise is legal. The fact is that in "at will" employment, a company can set the conditions of the workplace much as it sees fit (absent some form of legally actionable discrimination). However, just for all work going forward. Such a salary reduction cannot be retroactive. In other words, it cannot apply to hours that have already been worked.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Yes, it is legal, unless the raise was guaranteed in an actual written employment contract. Otherwise, without a contract, as part of "employment at will," an employer has complete freedom to set or change employee compensation at any time, for any reason: they can give you a raise, then take it back. (It you did have a contract, you can enforce it in court, by a lawsuit, if necessary.)

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