36 Payment of Wages Act Violation
A. Definition
The South Carolina Payment of Wages Act (SCPWA)1 is not new. An earlier version of the statute is found in the Civil Code of 1912 and its present incarnation was enacted in 1986.2 The SCPWA "is remedial legislation designed to protect working people and assist them [in] collecting compensation wrongfully withheld."3 As one federal judge put it, the Act requires a written agreement about wages and compliance with that agreement.4 It creates a cause of action against an employer by an employee for failure of that employer to pay wages as required by the Act.5 It does not, however, provide a remedy by which an employee can recover damages for wrongful termination.6
A suit for damages for violation of the Act is an action at law.7 It appears it may be brought as a class action.8 Generally, factual disputes under the SCPWA are for the jury to decide.9 The purpose of the Wage Payment Act is to protect employees from unjustified and willful retention of wages by their employer.10 It "prohibits employers from unilaterally withholding an employee's benefits."11 No provision of the Act may be contravened or set aside by private agreement.12
One provision of the SCPWA requires that, in that case of a dispute over wages, an employer must give written notice to the employee of the amount of wages the employer concedes to be due and pay that amount without condition within the time set by the Act.13If the employee accepts that payment, acceptance does not constitute a release as to the balance of his or her claim.
A claim for violation of the SCPWA should be distinguished from one for breach of contract. While plaintiffs often bring claims for both in the same action,14 they remain separate claims.
B. Elements
While a plaintiff may recover unpaid wages in a SCPWA action, a specific provision of the Act allows an employee who brings a civil action against his or her employer for failure to pay wages to recover an amount equal to three times the full amount of the unpaid wages, plus costs and reasonable attorney's fees.15 Plaintiffs seek to bring themselves within that provision to, at a minimum, obtain attorney's fees since the wages alone will often be relatively a small amount. Therefore, the elements below are those required to meet that specific statutory provision. No South Carolina state or federal court has explicitly stated the elements of that action, but following the wording of the Act, there would seem to be three elements:
(1) The plaintiff is, or was, an employee
(2) The defendant is, or was, the plaintiff's employer
(3) The defendant failed to pay wages due16
C. Elements Defined
1. The Plaintiff Is, or Was, an Employee
The issue of employment status is vital to all causes of action under the SCPWA, and for a plaintiff to succeed in a cause of action for payment of wages, a threshold issue is whether the plaintiff is (or was) in fact an employee of the defendant.17
Independent contractors are not subject to employer control or direction and that negates any employer-employee relationship. Thus, the SCPWA does not "embrace the earnings of independent contractors."18 Although generally, even though a contract characterizes the plaintiff as an independent contractor, it is "for the jury to determine whether, under all the evidence, he was an employee."19
2. The Defendant Is, or Was, the Plaintiff's Employer
An "employer" is defined as "... every person, firm, partnership, association, corporation, receiver, or other officer of a court of this State, the State or any political subdivision thereof, and any agent or officer of the above classes employing any person in this State."20 In general, the SCPWA applies to all employers in South Carolina,21 including employers who are not subject to the minimum wage law.22 However, if the defendant is not the entity responsible for paying the plaintiff's wages, the plaintiff cannot maintain an action against the defendant under the Act.23
The definition of employer encompasses agents or officers of a firm, partnership, association, or corporation that employs persons in South Carolina. Thus, agents or officers of a corporation who knowingly allow it to violate the Act are subject to individual liability.24On the other hand a member of a limited liability company who owned a minority share, but was neither an officer nor agent of the company and was not involved in the operation of the company was not personally liable for a violation of the Act.25
Where a temporary employment agency was responsible for paying the plaintiff's wages and notified her of all work-related information, including her status as a temporary employee and the amount of her wages, the corporation that operated the site at which plaintiff was placed was not liable under the SCPWA as the agent of the employment agency.26
Certain employers are exempt from prescribed mandates of the Act. Specifically, the requirements that employers notify employees in writing at the time of hiring of the normal hours and wages agreed on, the time and place of payment, and the deductions that will be made from the wages, that they keep records of names and addresses of all employees and of wages paid each payday and deductions made for three years, and that they furnish each employee with an itemized statement showing gross pay and the deductions made from wages for each pay period.27 These requirements do not apply to employers of domestic labor in private homes28 or to those employing fewer than five employees at all times during the preceding twelve months.29
3. The Defendant Failed to Pay Wages Due
The plaintiff must show the defendant failed to pay wages due to him or her as required by either of two statutes.30 The first of those statutes includes four requirements:
(1) Employers must pay all wages due in lawful United States money, by negotiable warrant, or by check.31
(2) Employers may not withhold or divert any portion of an employee's wages unless the employer is required or permitted to do so by law or has given written notification to the employee of the amount and terms of any deductions.32
(3) Employers must pay all wages due at the time and place designated.33
(4) If the employer deposits wages to the employee's credit at a financial institution, the employee has to be furnished a statement of earnings and withholdings.34
The second statute concerns discharged employees and provides that when an employer "separates an employee from the payroll for any reason," the employer must pay all wages due to the employee within 48 hours of the time of separation or the next regular payday which may not exceed 30 days.35
Thus the first part of the third element requires the plaintiff to show a violation of one of these requirements. Under the second part of the element, the plaintiff must show the dispute concerns "wages." That term is 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 and includes vacation, holiday, and sick leave payments which are due to an employee under any employer policy or employment contract.36
The definition does not include prospective wages.37 Under a prior, but similar, version of the definition, "bonuses" fell within the statutory meaning of wages.38 However, the term does not include funds placed in pension or profit sharing plans.39 It also does not include severance pay,40 statutorily required paid military leave,41 or pay for forms of leave other that those specified in the definition.42 It is unclear whether a promised equity share in a business would come within the definition of wages.43
In Baugh v. Columbia Heart Clinic, P.A.,44 the court held defined shares of accounts receivable, unpaid draws, or director's fees were not due to the plaintiffs under their employment agreements and, therefore, were not "wages."
If an employer breaches the employment contract by withholding agreed upon compensation — a violation of the SCPWA prohibition on withholding or diverting wages — the employer cannot claim to have complied with the SCPWA by providing seven days notice of that breach.45
D. Defenses
The SCPWA does not prohibit employers from asserting valid defenses or disputing payment in good faith.46
The Act includes its own suit limitation.An action to recover wages has to be commenced within three years after the wages become due.47 The discovery rule apparently applies.48
The Act prohibits its provisions from being "contravened or set aside" by private agreement,49 and, therefore, an employer cannot defend an action by claiming the employee has waived his or her rights under the Act.50 However, a departure policy, under which a departing employee was entitled to commissions only for advertisements sold and actually broadcast prior to his leaving the employment did not constitute a private agreement regarding what wages were due in contravention of the SCPWA.51
That the defendant relied on advice of counsel in withholding the wages may serve as a defense.52 Estoppel may also be a defense. For example, if the employer makes unilateral changes in prospective payments of wages or benefits and the employee accepts the proposed changes in the employment by continuing to work without objecting to the changes, the employee may be estopped from recovering any lost money.53
The South Carolina Supreme Court has rejected the proposition that a disloyal employee forfeits all compensation.54 Instead, it has adopt a balancing approach under which, in general, an employee is not entitled to any compensation for services performed during a period in which he or she has engaged in activities constituting a breach of the duty of loyalty, but even if the employee breaches the duty during some periods, he or she may recover compensation for services properly rendered during periods in which no breach occurred and...
