Could this also constitute constructive dismissal? This would give employees the option of leaving the job and filing for unemployment benefits.

@CharlesE.Grant A 30% pay cut across the board to a company's at will (to still legally permissible rates of pay) is not a constructive dismissal. Constructive dismissal concerns one's working conditions, not one's rate of pay.

I'm not a lawyer, so I'll yield to your expertise, but my reading seemed to indicate that in the US a pay cut was not automatic grounds for a finding of constructive dismissal, it could lend support to such a finding Scott v. Harris Interactive.

@CharlesE.Grant If you have a whole pattern of conduct including both workplace conditions and a pay cut directed at a single individual without good cause you might have grounds for constructive dismissal, but in an across the board pay cut with no changes in workplace conditions, that just isn't a constructive discharge. The employer isn't trying to get everyone getting a pay cut to quit.

"But it is legal to do so" - This feels like it needs further qualification, at a minimum. From a legal standpoint an employment contract is just that; a contract. It establishes the terms of employment, like rate of pay. In general there's no legal right to unilaterally vary a contract. Maybe the contract includes a clause allowing unilateral changes to the rate of pay. Barring that, however, I'd think the options legally available to the employer are 1) pay the contracted rate, 2) ask the employee to agree to a lower rate, or 3) follow whatever termination process the contract requires.

@aroth At will employment contracts are almost always just oral and contain the unspoken clause "Until the moment either does wish to end it." This means the employer can say (audibly to all employees!) "Starting tomorrow, we pay 30% less. Who shows up tomorrow is working, everyone else, clean out your lockers." - the old contract literally ends that evening and a new one is offered to start the next workday. Yes, At Will Employment is illegal in many european countries (e.g. Germany has a law demanding that all employment contracts are on paper)

"starting in the next pay period" let's clarify that this means that if one is paid monthly on the last day of the month, and it's the 25th of the month, they cannot reduce wages for the payment at the end of the current month (or only a little bit, for the days from the 26th to the end of the month), but only at the end of the following month (as wages are usually paid in arrears).

@CharlesE.Grant: At least in my state, if your pay is cut to below the amount that unemployment benefits would pay, then you are eligible to receive benefits to make up the difference, despite still being employed. I can't find a reference right now, but you may be able to find similar rules for your jurisdiction.

Not only will it "cause a substantial share of your employees to quit", but it the resignations will be skewed towards your best most hard to replace employees, unlike what you could do with a selective layoff.

@aroth In pure contract law terms, in a standard at will employment arrangement, the termination process is 'either party may unilaterally terminate the contract at any time with 0 notice'. So from a legal mechanism, the employer doesn't vary the contract they terminate it (per option 3) and offer a new contract for the employee to consider with the new terms. Its just in practice there is no difference in effect from a unilateral modification.

There may be ramifications from an unemployment insurance perspective, as if you refuse to accept the new terms, it is technically the employer laying the employee off, rather than the employee resigning.

Presumably, someone could object to a retrospective pay raise as not according to contract. It's not clear to me why that would happen, but perhaps some fictional scenario would make it happen ("Your uncle's will stipulates that you will inherit Texas, if you work for one year at exactly minimum wage!")

@Trish In the US, explicitly "at will" employment contracts, written and formally signed, with explicit "either party can end this contract at any time with no notice" clauses, are very common.

@fectin "Presumably, someone could object to a retrospective pay raise as not according to contract" Who? You'd need extremely weird facts for this to be the case.

@Trish Not relevant to this question/answer, but Germany does not have a law requiring contracts for work to be on paper. It is only required if the employment is meant to be limited in time. But regardless, there are no „at will“ contracts in Germany. But if it is not written down, it is harder to prove what was the agreement, so it is recommended and usually done in writing.

(...) to the extent that the company is profitable enough to make those payments - is this usually part of a contract, or an ad-hoc bonus? In other words, does the contract says "and there will be a bonus, we do not know how big", or is it an unwritten, volatile agreement?

@WoJ Usually it is unwritten with an implicit understanding that is not legally binding.

If a company falls within its scope, would a reduction in salary like this be considered a mass layoff for the purposes of WARN?

@user1937198 No.

A raise that puts you into a higher tax bracket cannot lower your total after-tax income. The higher rate applies only to the amount of your income that exceeds the lower threshold of the bracket.