What to Do When You Need to Reduce an Employee's Hours
Business slows down, budgets tighten, or operational needs change, and reducing an employee's hours becomes necessary. This is a legitimate business decision, but one that carries legal considerations and relational consequences that need to be handled carefully.
Legal Considerations Before You Reduce Hours
Check your employment agreement and offer letter
If the employee's offer letter or any written agreement specifies a number of hours or a full-time status, reducing hours below that threshold without having a disclaimer may constitute a breach of that agreement. Review what was promised in writing before making the change.
Benefits implications
Reducing hours below the threshold that qualifies an employee for benefits (typically 30 hours per week under the ACA) triggers specific obligations. If the reduction causes the employee to lose health insurance eligibility, COBRA notice requirements apply. Check whether the reduction affects any other benefits the employee currently receives.
Constructive dismissal risk
A significant reduction in hours, particularly one that substantially reduces income, can be characterized as constructive dismissal in some states, meaning the employee was effectively forced out. This risk is highest when the reduction is large, sudden, and affects only one employee rather than being a broad operational change.
Retaliation timing
If the employee recently filed a complaint, requested leave, or engaged in other protected activity, the timing of a hours reduction will be scrutinized. Document the legitimate business reason clearly and independently of any recent protected activity.
Have the Conversation Directly
Do not bury the change in an updated schedule without a conversation. Meet with the employee privately, explain the business reason honestly, and give them as much advance notice as possible.
'I need to let you know about a change to your schedule. Due to [specific business reason], we are reducing your hours from [current] to [new] starting [date]. I want to give you as much notice as possible and answer any questions you have.'
Be Prepared for the Employee's Response
A significant hours reduction affects the employee's income, benefits, and financial security. They may be upset, ask for alternatives, or tell you they cannot accept the reduction. Listen to the response and consider whether any flexibility is possible. Some options could include a phased reduction, a temporary arrangement, or a return to full hours within a defined timeline.
If the employee cannot accept the reduced hours and chooses to resign, that resignation may qualify them for unemployment in some states as a voluntary quit for good cause. Be prepared for that outcome.
Document the Business Reason
Put the reduction in writing. All it needs to be is a brief letter or email confirming the new schedule, effective date, and business reason. This creates a record that the change was driven by operational need, not by any issue with the employee personally.
Get a Complete Employee Handbook Template
Reducing employee hours can create confusion around classifications, scheduling expectations, benefits eligibility, and employment policies, especially for small businesses without formal HR documentation.
Our Small Business Employee Handbook Template includes professionally written policies covering:
full-time vs. part-time classifications
work schedules and hours expectations
benefits eligibility
attendance and scheduling policies
employment status disclaimers
Clear policies help protect your business and create consistency when staffing changes become necessary.
Questions about this or other HR topics? Visit pragmatichrgroup.com for more resources.
