When finances get tight, employers may cut benefits as well as salaries and staff. Generally, a company is free to cut benefits without informing or consulting with employees. Some of your benefits may be protected by an employment agreement or by state or federal law, however. Even if your benefits aren't protected, taking them away without warning may be a poor business decision by the employer.
Employers cannot take away any benefits you're entitled to under the law. For example, if you qualify for unpaid family-care leave, your employer cannot legally cancel it or fire you for taking it. If the company offers a 401k plan but refuses to pay out money when it's due, the company may be liable for fraud. On the other hand, if your company wishes to stop granting vacation time, there's no law requiring it to keep the policy in place -- though it may not be able to revoke time you've already received.
Your company can change policies for sick leave, vacation and health benefits that aren't mandated by the law. Hawaii is the only state that requires employers to offer health benefits. However, the company cannot revoke benefits in an arbitrary or discriminatory fashion. Taking away benefits only from minorities, women or disabled employees would be illegal. More generally, while a company may discriminate between classes of employees -- full-time and part-time, management and subordinates -- it cannot apply different benefit rules to some employees in the class and not others.
If you have an employee agreement or your union negotiated a contract guaranteeing your benefits, your employer must live up to the agreement and deliver the promised benefits. If the agreement gives him the authority to change or cancel the benefits at any time, however, he's free to do so. Even without a written agreement, your employer may be bound by past practice: If other employees get to cash out their vacation time when they leave the company, you may be able to demand the same.
Even when employers are clearly on solid legal ground, that doesn't mean cutting benefits is a productive move. Revoking benefits employees believe they're entitled to can lead to resentment, a drop in morale and distrust of management, particularly if it's done without warning. The more important the benefit, the bigger the risk. Cutting vacations or free day-care will generate more resentment than cutting snacks in the break room. On the other hand, employees may assume a company that cuts out coffee and snacks is in dire financial straits.
- Lawyers: Employers -- Workplace Benefit FAQs
- U.S. Department of Labor: 10 Warning Signs Your 401(k) Contributions Are Being Misused
- U.S. Department of Labor: Can the Retiree Health Benefits Provided by Your Employer Be Cut?
- Nolo: Collecting Fringe Benefits
- "U.S. News and World Report"; Employee Benefits in Today's Economy; Jan. 2009