Everyone expects to be appropriately compensated for the work they do. There are situations, though, when employees don’t get paid as much as they should.
This could result from various factors, including an accounting error, a change in classification, or an employer’s oversight. Whatever the circumstances, if an employer violates an employee’s right to a fair wage, they are entitled to compensation.
Back pay refers to any money owed to an employee for services rendered in the past. This article will discuss what back pay is in more detail and explain how it works.
What is back pay?
Back pay is defined as the difference between what an employee is owed and what they actually received.
In general, back pay refers to any wages owed to an employee for work performed in the past, which the employer, for whatever reason, has withheld from the employee’s paycheck.
There are a variety of reasons why an employee may be entitled to back pay. Common causes for awarding back pay may include:
- Classification errors
- Minimum wage violations
- Payment errors
- Unpaid overtime
- Wrongful dismissal
To comply with the law, any employer who receives a legitimate complaint from an employee must compensate them for any wrongfully withheld wages.
How does back pay work?
If an employer, either purposely or mistakenly, withholds an employee’s wages, they may be entitled to back pay. This means that the employee will have the right to compel the employer to pay them back the wages they are owed.
If an employee has a valid claim to back pay, their employer will have to pay the wages to which an employee is entitled.
The U.S. Department of Labor (DOL) investigates and resolves wage violations and issues with back pay. The Department of Labor is the governmental entity ultimately responsible for ensuring that employers treat employees properly.
Furthermore, the Department of Labor is responsible for upholding the Fair Labor Standards Act (FLSA), a law established to protect workers. The FLSA, among other things, establishes the federal government’s minimum wage, overtime regulations, and recordkeeping standards for companies.
What are the reasons an employer might owe back pay?
There are several reasons why an employer might owe back pay to a certain employee. Wage violations might sometimes be the result of misclassification or a simple accounting error.
In other circumstances, employers may try to exploit their employees and cheat them of wages through unethical employment practices.
Here are some of the most prevalent reasons why an employer may owe back pay:
Sometimes a simple accounting error can be the reason for employees receiving back pay. The company’s accountant may have mistakenly calculated an employee’s pay or added up their hours worked. In any case, the employer would still be responsible for back pay regardless of whether or not the error was deliberate.
An employer’s misclassification or change in classification might result in back pay.
If, for example, an employee switches from hourly to salaried status at their company, or vice versa, this can potentially be the grounds for back pay. A pay raise may also be the reason for back pay.
Minimum wage violations
Employers must comply with both federal and state minimum wage laws, as well as regulations like the Davis-Bacon Act and Service Contract Act.
The federal minimum wage is the absolute lowest hourly rate that can be paid to an employee in the United States. As a result, state minimum wages are frequently higher. If an employer fails to pay an employee the state minimum wage, they may be entitled to back pay.
In accordance with the Fair Labor Standards Act, eligible nonexempt employees are entitled to overtime pay after working 40 hours in a workweek. Overtime pay must be equal to or greater than one and a half times their regular rate of pay.
If an employer requires an employee to work overtime, they must compensate the employee accordingly. If they fail to do so, an employee may be entitled to back pay for any overtime hours worked.
If an employer fires an employee in violation of an employment contract or the law, the employee may sue for wrongful termination.
If the claim is successful, the employee who was unlawfully fired may be entitled to back pay for the time they would have spent working. In most cases, an employee who has been wrongfully dismissed can expect to get back pay from when they were terminated until the lawsuit is resolved.
Are employers required to pay back wages?
If an employer violates wage laws, they must compensate their employees for lost wages. It makes no difference whether the violation was deliberate or not – if an employee is owed money, the employer must pay it. This means an employer must pay the employee all back wages in full.
If an employer fails to pay back wages after a ruling has been made, they may be subject to legal action. State laws determine the severity of penalties for late payment of back wages.
Do employers ever have the right to withhold back pay?
Back wages are subject to a statute of limitations, which means that employees have a finite amount of time to file a claim for unpaid wages. Employees can usually get up to two years of back pay for unintentional wage violations. In cases of intentional underpayment, this period is extended to three years.
After the statute of limitations for a particular wage violation has expired, employees cannot sue for back pay. This means that the employer is under no legal obligation to pay the employee back wages even if they have committed a wage violation.
Is retroactive pay the same as back pay?
Retroactive pay is similar to back pay in the sense that it is the money an employer owes an employee for work that was already performed. However, the difference lies in the fact that back pay is for unpaid work, while retroactive pay is for underpayment.
For instance, if an employee were paid for all hours they worked but paid an incorrect salary, the discrepancy would be considered retroactive pay.
On the other hand, if an employee has received no pay for some hours or no overtime for hours worked that qualify as overtime, that discrepancy would be back pay.
It’s also worth noting that some people don’t distinguish between back pay and retroactive pay, therefore, this isn’t a strictly defined or regulated term.
If an employer doesn’t pay their employees their full wages, the employees may be entitled to back pay – an additional payment that makes up the difference between what they were paid and what they should have been paid.
If an employer refuses to pay what they owe to their employees, they are breaking the law and are subject to penalties. Employees also have the right to file a claim against their employer for unpaid back wages.
To find out whether you have a back pay case worth pursuing, feel free to contact Cilenti & Cooper today. We treat every case with the attention and care it deserves and can fight for your civil rights from beginning to end. We offer a free consultation to all of our prospective clients, so you have nothing to lose.