VOLUME I Chapter 9 Wage Payment Act and Related Laws
| Jurisdiction | South Carolina |
An understanding of the principal rules for the payment of wages is essential to both employers and employees. This chapter addresses four of the areas in which disputes arise: (1) the South Carolina Payment of Wages Act; (2) the Payment of Post-Termination Claims to Sales Representatives Act; (3) South Carolina Sunday closing laws or "Blue Laws"; and (4) South Carolina garnishment law.
I. Payment of Wages Act
A. Background
In 1986, the General Assembly made significant changes to the Payment of Wages Act (the "Act" or "SCPWA").1 Several minor modifications to the Act were made in 1990. There have been numerous lawsuits involving this Act, with a significant number reaching the appellate courts.
B. Coverage
The Act's coverage is quite broad. It is not limited to hourly employees. Coverage includes executives, outside salespersons, and anyone who is an employee. The law also addresses all forms of compensation except pension type benefits, including executive bonus plans and other compensation plans for highly paid employees and sales persons.
Independent contractors are not covered. In Adamson v. Marianne Fabrics, Inc.,2the plaintiff was a salesman whose contract characterized him as an independent contractor; however, the court held it was for the jury to determine whether, under all of the evidence, he was an employee and covered by the Act.
"Employer" is defined to include all persons and entities, both public and private and any agent or officer of these entities.3 All employers in the state are covered by the Act with the exception that employers of domestic labor in private homes and employers employing fewer than five employees at all times during the preceding 12 months do not have to comply with Section 41-10-30.4 All other employers are required to provide written notification of (1) wages and hours agreed upon, (2) time and place of payment, (3) deductions from wages, and (4) seven days' notification of changes. Further, they must comply with the specific record-keeping requirements of Section 41-10-30, and give employees itemized statements of deductions from wages.
C. Limitations of Actions
A civil action for the recovery of wages must be filed within three years.5 The Act does not apply retroactively.6
D. Definition of Wages
Wages are defined as: "all amounts at which labor rendered is recompensed, whether the amount is fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the amount . . . ." Vacation, holiday and sick leave payments "which are due to an employee under any employer policy or employment contract" are included in the definition of wages. Courts have held that earned tips meet the definition of wages under the Act.7 Funds placed in pension or profit-sharing plans are excluded. Severance payments were initially included. However, due to possible preemption by the Employee Retirement Income Security Act,8 severance pay was removed from the Act in 1990.9
E. Notices to Employees
1. New Employees
Employers must "notify each employee in writing at the time of hiring of the normal hours and wages agreed upon, the time and place of payment, and the deductions which will be made from wages, including payments to insurance programs."10 The employer has the option of giving this "written notification by posting the terms conspicuously at or near the place of work." Any changes, other than wage increases, must be in writing and given to employee seven days before they become effective.
Few employers will have any difficulty in giving new hires written notice of the starting pay rate. Written notice of vacation, holiday and sick leave policies presents more difficult problems. Most large employers have formal written policies which can be given to employees at the time of hire. Many small employers, however, have no formal policies for one or more of these benefits. Some employers handle sick leave on a case-by-case basis. Observation of paid holidays may also vary, depending on such factors as business conditions and on what day of the week Christmas and New Year's Day fall.
The law requires written notification of those benefits "which are due to an employee under any employer policy or employment contract." The Act does not require employers to provide any benefits. "[A]ny employer policy" most probably covers informal practices or policies as well as formal written policies. Therefore, employers with informal policies could be violating the Act if they fail to give new hires written notice of a policy or practice, even though it may be a flexible policy or practice. If a policy is handled on a case-by-case basis or varies according to business or other conditions, this fact should be stated in the written notification. A notification so vague as to be meaningless may violate the statute.
The law requires employees to be notified in writing of the "normal hours . . . agreed upon." What must an employer do to comply with this provision? Is it sufficient to notify employees that their customary work week is 40 hours? Or must employers give notice of work schedules? The Terms of Employment Notice published by the S.C. Department of Labor Licensing and Regulation has a blank space on which to list the "normal hours of work." The form suggests listing the number or range of hours per week, day or other time period. The recommended practice is to give the normal office or shift hours and days to be worked. For many jobs, it would be appropriate to state that extra hours of work are often required. Occasional or sporadic need for overtime work will probably not trigger the seven days' written notice requirement. In situations where the hours of work are uncertain and flexible, an employer may give notice of the hours routinely worked but include language regarding the uncertain and flexible schedules which are necessarily a part of the job.
2. Current Employees
Seven days' advance written notice must be given employees prior to any change in (1) wages, (2) normal hours of work, (3) time and place of payment, or (4) deductions from wages. Changes in deductions specifically include insurance programs. Wage increases do not require notice.
The 1990 amendment inserting "normal" before "hours" was intended to remove the necessity for seven days' written notice for occasional overtime or extra hours. If the overtime or extra hours are routine, they would be "normal hours" and require written notice at the time of hire. The reason for this amendment was the Labor Department's concern about numerous complaints from employees whose shifts or schedules were suddenly changed, resulting in hardships to employees with ride-sharing arrangements or small children whose care requires prior arrangements.
F. Record-Keeping Requirements
Employers must keep records for three years of employees' names, addresses, and deductions made each payday.11 Employees must receive a statement showing gross pay and any deductions for each pay period.
G. Payment to Separated Employees
Employers must pay separated employees within 48 hours of the time of separation or by the next regular payday, which may not exceed 30 days.12 The broad definition of wages (including, for example, vacation pay) is the cause of most disputes under this portion of the Act. The reference to 48 hours is a meaningless remnant from the former statute. The next regular payday is the time when payment is due and this must not exceed 30 days. Most paydays are within 30 days.
Questions may arise about bonuses or commissions which, by agreement or practice, are not paid until some time in the future, after the employee leaves his employment. Often, the bonus or commission cannot be determined until the end of the year or when the customer pays. The Act appears to cover this problem by requiring payment of all wages due. It is reasonable to assume the court would hold wages are not payable until they are due, pursuant to the policies and practices of the employer.
Many employers have policies providing that benefits, such as accrued vacation, will be forfeited under certain conditions when an employee is separated. There are no prohibitions against such policies, and no general law requires paid vacations, sick leave, or holiday pay. Therefore, the policies of the employer will control. However, these policies should be communicated to employees to avoid difficulties. A vacation policy should state when the entitlement accrues.
Disputes over small amounts of wages can put an employer at risk for substantially more than the contested amount. If the employer loses, the cost could include the employee's attorneys' fees, attorneys' fees of the employer, legal costs, and up to three times the disputed wages. Consider a $50,000 disputed bonus, and the dollars begin to add up. The potential for paying thousands of dollars not only in wages but also in the costs of litigation, including appeals, should cause an employer to carefully comply with the statute so as to avoid such expensive controversies.
A case in point is Temple v. Tec-Fab, Inc.13 in which the trial court awarded treble damages, costs and attorneys' fees to Temple for unpaid wages even though he had been sued by the employer for conversion for improperly withholding some of the employer's funds. The Court of Appeals reversed the treble damages award, finding the trial court committed an error of law in concluding the statute mandated trebling. The Court of Appeals also found a bona fide dispute over the wages in question and modified the award to eliminate the treble damages on that basis.
On appeal, the South Carolina Supreme Court sent the case back to the trial court to determine whether there was a bona fide dispute such that treble damages were not warranted. It said that the Court of Appeals' scope of review extends merely to the correction of errors of law. The Court of Appeals had...
To continue reading
Request your trial