November 9, 2011
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Question
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Ken
I enjoy having you as a factual and interesting source of information about our industry.
I have a question which deals with the employee- employer relationship. With the tough economic times upon us, it has required some belt tightening. If it becomes necessary to reduce an employee's rate of pay, does this constitute a renegotiation of their contract? More specifically, if the employee refuses further employment at the reduced rate, does this open us up to a successful unemployment insurance claim by the employee? Does it help that all employees would accept a temporary reduction across the board?
In the interest of privacy, please withhold my name.
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Answer
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When you reduce an employee's pay the employee can leave and file for unemployment insurance. [I offer that opinion with the disclaimer that I do not specialize in unemployment insurance law - but I am reasonably comfortable with this answer]. It will not matter if you reduce one or more employees at the same time. Same goes for demotion in position; almost anything that makes working conditions less than they were.
But the question raises another issue because you ask if the reduction constitutes "a renegotiation of their contract." Depends on the contract, which I assume will be in writing. The Standard Form Employment Contract is an "at will" contract, which means either party can terminate at any time unless the contract has other provisions that ensure a termination criteria and process. If an employee has a contract and you decide to reduce the pay then you may be in breach of the contract; depends how it's written.
If your employee accepts the reduction in pay then I think no claim could be made for unemployment insurance on that basis.
Employee relations are very technical and those of you who cannot afford to employ a knowledgeable HR [Human Resource] manager would be wise to acquaint yourself with employee guidelines and laws. There are probably some outside resources you can rely on for assistance, as well as attorneys who specialize in that area.
Regarding compensation, New York has an interesting law for commissioned sales people. If the commission agreement is not in writing then in any dispute with the sales person the Court is required to accept the testimony of the sales person for the terms and details of the commission. Very strong "penalty" to an employer who doesn't bother to reduce a commissioned employee's deal to writing. Other states may have similar laws, I haven't checked.
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Security Industry Association and the gala at ISC East
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On November 3, 2011 Leo Guthart presented SIA's The George R. Lippert Memorial Award, which is presented annually to an individual who has made outstanding contributions to the security industry and SIA. Steve Roth, CEO of Tri-Ed/Northern Video Distribution was presented the 2011 Lippert Award and it was a well deserved honor. Congratulations. It was truly an impressive dinner event. I was delighted to attend.