Retroactive pay, or “retro pay” refers to money that is owed to an employee for work already performed at a lower wage rate. For instance, if your employer said they would give you an increased pay rate for a past project, but failed to do so, you may be entitled to retro pay. However, some jurisdictions will only enforce retro pay is the employer intentionally deprived an employee of promised wages.
Retro pay differs from back wages, or “back pay” in that the latter refers to unpaid wages that an employee is owed because they were never paid in the first place. So, retro pay usually refers to a difference in wage rates, and back pay means the employee is still owed wages they never received. For instance, if you were wrongfully terminated and missed out on two months worth of salary, you would be owed those wages if you won your wrongful termination case.
Retroactive pay is calculated by finding the difference between what the employee was paid in the past and what they should have been paid. In order to find the discrepancy, the court will usually look at the employment contracts between both parties, and consider both the old and new agreements.
State laws vary, but usually, the following violations could give an employee the right to retro pay:
- Unlawful Conduct: For instance, if your employer acted unlawfully by giving retroactive wage hikes to only a select group of individuals (discrimination).
- Breach of Contract: If the withholding of wage rates is a breach of the employment contract, then the employee may be able to recover.
- Retaliation: An employer may not “get back” at an employee for being a whistleblower by withholding retroactive pay.
- Overtime Violations: Failure to pay out overtime wages, which is the most common of violations.
Most states cover overtime violation disputes, but laws vary. Be sure to speak with an attorney if you have a dispute, as you may be entitled to retro pay.
As mentioned, some states only award retroactive pay if the employer intentionally withheld wages. Other states completely prohibit retroactive pay awards regardless of an administrative mistake or otherwise.
If you have an issue with retroactive pay, you may wish to consult an attorney. An employment lawyer who is well-versed in your state’s retroactive pay laws can help you determine how much you are owed, review your employment contract, and represent your best interests in court.