Can you Sue a Company for not Giving you a Raise?

The landscape of the workplace is an interesting one. The employer-employee relationship is at the center of this discussion and this relationship is a complex one that is governed by lots of rules and regulations that employers need to follow.

It’s sometimes said that the hardest part about running a business is managing people and to some extent, that is true. If the workplace culture doesn’t work, it can have huge consequences on productivity and lead to different toxic issues that can have a devastating effect on the company.

Of course, salary and compensation are important aspects for every employee, and on this topic, an interesting question is whether you can sue a company for not giving you a raise.

A fair and competitive salary is a reward for an individual’s hard work but it is also a reflection of the value placed on their contributions within an organization. Workers often strive to increase their value within the company so that they can be rewarded with a raise. But what if you don’t receive the raise you are expecting?

Can employees who are dissatisfied with their stagnant salaries, seek legal recourse? What role do employment contracts play in this context, and are there specific legal obligations employers must fulfill regarding salary adjustments?

In this article, we will dissect this topic and discuss whether you can sue a company for not giving you a raise.

Employment Contracts

Employment contracts play a central role in the question of whether you can sue a company for not giving you a raise.

The contracts are foundational documents that outline the terms and conditions of the relationship between an employer and an employee. The contracts often specify a wide range of aspects, from job responsibilities to compensation.

When it comes to salary increases, it is therefore important to carefully read through this contract to understand if there are explicit provisions regarding the frequency and criteria for salary reviews.

Clauses related to remuneration within employment contracts often detail how and when salary adjustments are determined. Some contracts may explicitly state that employees are entitled to periodic raises based on performance evaluations, company profitability, or other predefined factors. Some contracts may not, however, mention salary increases. Either way, it’s crucial that you first understand the terms outlined in the employment contract to determine whether an employee has a contractual right to a raise. If this is the case, then you can sue the company for breach of contract if they do not give you the raise that is specified in the employment contract – unless there are any clauses or exceptions.

Contractual Guarantees for Regular Salary Reviews or Raises

All employment contracts do not explicitly guarantee regular salary reviews or raises. And others may include provisions that create an expectation for such reviews. Other contracts may simply explain that salary adjustments will be made in line with the cost of living or industry standards. Since contracts can vary so greatly, the first step is to read them carefully.

With that said, it’s important to point out that the absence of a specific clause guaranteeing regular raises does not necessarily preclude the possibility of seeking a raise. Instead, courts may consider implied terms in employment contracts. industry standards and practices could also influence the interpretation of contractual obligations related to compensation.

Legal Rights and Labor Laws

The law, in particular labor laws, governs the employer-employee relationship in many different areas. For that reason, they play an important role in the employer-employee relationship, particularly concerning compensation.

Both federal and state laws often establish the minimum wage, overtime pay requirements, and regulations governing fair labor practices. The purpose of these laws is to provide a framework for fair compensation. At the same time, they generally do not explicitly mandate regular salary increases or annual raises, instead, they focus on the broader picture.

Either way, the second step is therefore to understand what the labor laws say specifically about salary and potential raises.

Legal Obligations Employers May Have to Provide Raises

In some cases, employers may have legal obligations to provide raises. However, this ultimately comes down to the jurisdiction and industry-specific regulations.

As an example, some industries or professions may have established norms or guidelines that dictate regular salary adjustments. Collective bargaining agreements in unionized settings may also include provisions related to salary increases.

Many jurisdictions also have specific laws that are meant to address pay equity to ensure that employees are not subjected to discriminatory pay practices based on gender, race, or other protected characteristics. This is also something you need to be mindful of, as the denial of a raise for any of these reasons constitutes a violation of such laws. This could ultimately help you strengthen your case.

Performance-Based Raises

Potential salary raises may be regulated by a few different conditions. One of the most common is of course performance-based raises, which are based on the performance of the employee. This makes sense as it encourages employees to work harder. At the same time, it could also mean that if an employee fails to perform or meet certain goals, there may not be a raise.

If raises are performance-based, the terms must be explicitly and clearly explained in detail to avoid any confusion. The performance metrics should be concrete so that there are no misunderstandings about whether or not an employee has earned the right to a raise. If the terms and conditions are unclear, it can cause frustration from the employee, who expects a raise but then doesn’t deserve to get one, in the eyes of the employer.

In performance-based structures, employees usually have explicit targets, goals, or key performance indicators (KPIs).

Being aware of what those targets are will help you understand what is required and can save you a lot of disappointment and frustration. However, if the terms are clearly stated and achieved, and you still don’t get a raise, then you may have grounds for legal action due to breach of contract.

If you believe you consistently met or exceeded performance expectations and yet were denied a raise, you may question the fairness of the evaluation process.

Another challenge relates to potential discrepancies in how performance-based raises are applied across different demographic groups. In this case, it could lead to allegations of discrimination. Therefore, while performance-based systems are a common and accepted practice, organizations need to make sure that they are used fairly and follow applicable employment laws.

Discrimination and Equal Pay

Potential discrimination and equal pay violations can work as grounds for a lawsuit against a company. If there are disparities in salary increases among employees, concerns about this may be raised. Keep in mind, however, that if the raises are performance-based, disparities between salary increases will be completely normal.

If the raises are not performance-based, however, and certain individuals or groups consistently receive lower raises compared to their counterparts with similar qualifications and performance, it may indicate discriminatory practices.

Discrimination can come in many different forms, ranging from gender, race, ethnicity, age, or other protected characteristics.

There are equal pay laws whose purpose is to eliminate wage disparities based on gender or other protected categories. If you can prove that you are receiving lower raises due to discriminatory reasons, you may have grounds for legal action.

In general, employers are required to ensure equal opportunities for advancement and fair compensation.

Gender and Racial Discrimination in Pay and Legal Implications

One of the most commonly discussed forms of discrimination in pay is related to gender. The Equal Pay Acts at both the federal and state levels aim to address these disparities. This regulation requires that employees performing substantially similar work are compensated equally, regardless of gender.

Moreover, racial discrimination in pay is similarly addressed under anti-discrimination laws. If you believe that you are discriminated against due to gender, race, or other protected characteristics, you may be able to pursue legal avenues to rectify these inequities.

To do this successfully, you need to prove disparate treatment which shows that employees in protected groups are being treated less favorably than their counterparts. This can be quite difficult so make sure you collect as much documentation as possible that can work as evidence.

Breach of Contract

One of the most common ways to pursue legal action when denied a raise is by claiming a breach of contract. To do this, you, of course, need to have a contract to begin with. Secondly, the contract needs to clearly define when a raise will be given. There needs to be explicit promises or provisions regarding salary adjustments. If the contract guarantees periodic raises, cost-of-living adjustments, or performance-based increases and the employer fails to provide this, it may constitute a breach of contract.

From a legal standpoint, a contractual breach is when one party fails to fulfill its obligations as outlined in the agreement. With that said, the contract will serve as a key piece of evidence if you choose to pursue legal action.

Employee Remedies

If you find yourself in a situation where you believe you are unjustly denied a raise, it becomes important to explore available remedies. Legal action is one option but this is also a lengthy and tough process that requires a lot of resources. Before you decide to pursue legal action, it can be good to know other, alternative avenues you can pursue to address your concerns before resorting to litigation.

1. Internal Resolution Procedures: Many companies have internal mechanisms to address workplace disputes. If your company has this, you can consider initiating conversations with human resources, supervisors, or relevant managers to express your concerns and seek resolution through internal channels. In some cases, companies may be willing to reevaluate salary decisions or provide explanations for the denial of a raise. Or, the company may be able to explain and give you further details about the situation which may provide a satisfactory explanation as to why you haven’t received a raise.
2. Negotiation: When you stand in front of these complex issues, it’s important to have open and constructive communication with your employer. You should engage in negotiations with your supervisors or human resources to discuss the reasons behind the denial of a raise and explore possibilities for a resolution. The key here is often to highlight the value you bring to the organization, backed by achievements and contributions. This can potentially strengthen your negotiation positions.
3. Alternative Compensation: If you raise your concern, you may be able to discuss alternative forms of compensation together with your employer. This could include things like additional benefits, bonuses, stock options, or other incentives that contribute to overall remuneration.

Legal Processes and Avenues for Resolution

There are several potential ways to go about finding a resolution to the concerns you have. Here are the options you have:

Mediation: Mediation is a voluntary process where a neutral third party assists in facilitating a resolution between the employee and the employer. This third party can help in the discussions and help find a solution that both parties can accept without leading to conflicts.

Arbitration: Arbitration means having both parties present evidence and information to an arbitrator who then makes a binding decision that both parties have to follow. The use of arbitration is included in some employment contracts so if this is the case for you, it may be the only alternative to resolve the issue. The benefit of arbitration is that it minimizes the risk of conflict and is also a faster, less expensive, and less formal process than traditional litigation.

Legal Action: If all else fails, your final alternative may be legal action. This typically involves filing a lawsuit for breach of contract, discrimination, or other relevant claims depending on your specific circumstances. Whether you are successful in your lawsuit, however, ultimately depends on the strength of the case, adherence to applicable laws, and the evidence you can present.

Government Agencies: Another less commonly discussed alternative is turning to government agencies, which is possible in some cases. Depending on your specific circumstances, you may be able to file a complaint with an agency like the U.S. Equal Employment Opportunity Commission (EEOC) or state labor departments that can then investigate claims of discrimination or unfair labor practices.