Whenever an employee becomes separated from work, whether it is the result of a firing or an injury, there can be a significant lag time between the filing of a claim and a final determination. In fact, it could be years before a decision is reached on a disputed firing or a job-related injury. During that time, a worker's regular wages are often withheld, pending the outcome. The money earned between the original filing of a claim and the final judgment is known as back pay.
Back pay can remain a theoretical number for years, generally calculated as the amount of straight salary or hourly wages that a discharged worker would have received during the time between the initial claim and a successful outcome. Not all employees who file claims against a company are automatically awarded this money, however. Entitlement to it can be determined at the discretion of the arbitrator or judge who actually reviewed the circumstances of the claim. An employee who was fired from his or her position for a justifiable cause may not receive any back pay at all, while another claimant who proved discriminatory action could receive a substantial amount from his or her former employers.
People who become separated from the jobs because of legal, humanitarian or military reasons may also be entitled to some form of back pay upon their return to regular employment. This would most likely be at the discretion of the company, which may have other types of wage compensation to offer as well. A worker suspended "with pay" pending the outcome of a legal investigation would not be eligible for back pay, but another worker suspended "without pay" could petition for it if the outcome is positive. This happens frequently when an employee is suspended from work as a precaution, but later reinstated after his or her name has been cleared.
For an employer, the issue can be a major financial concern. This is one reason why many employers are very reluctant to fire employees until they have a cause strong enough to survive legal scrutiny. Once an employee or former employee files a claim against the company, the meter starts ticking. If the case takes three years to be settled, a major employer could be forced to provide a significant amount of money to a wronged or disabled employee, whether or not that person has found gainful employment in the interim. If the action leading to an employee's dismissal is found to be unlawful, the employer can be compelled to compensate for the wages the employee would have received had he or she been remained employed.
