Reductions vs. Deductions in Wages under the S.C. Payment of Wages Act

 

The South Carolina Payment of Wages Act provides a remedy to South Carolina employees who are not paid their full wages in a timely manner.  The Act requires employers to notify all employees of the normal hours and wages of the position and any deductions that will be made from the wages, such as payments to insurance programs that are often deducted from an employee’s paycheck.  This notification must be made at the time of hiring and it must be in writing.

The Act sets forth clear and strict guidelines that employers must adhere to if they make any changes to an employee’s wages or deductions.  In regards to decreases in wages, the Act requires employers to give at least seven days written notice to the employee before making any deductions in salary or decreases in benefits not previously noticed to the employee.  In instances where an employer fails to comply with the requirements of the Act, the employee may bring a civil suit against the employer and may recover three times the amount of the unpaid wages, plus attorney’s fees and costs from the employer.

Mathis v. Brown, a  South Carolina Supreme Court case from last August, clarified the difference in reductions in wages and deductions in wages.  The employee in Mathis had an employment contract with the employer providing a set salary for a set period of time.  At some point during the course of the employment arrangement, the employer diminished the employee’s salary to an amount less than agreed upon in the employment contract.  The employer did provide at least seven days of notice of the lesser salary before making the change, but the Court was faced with the issue of whether or not the mere seven days notice would suffice under the Act where the employer was making a reduction in the amount of the employee’s salary, rather than a deduction from the employee’s salary.

The Court placed significant weight on the fact that an employment contract existed between the parties and that the employer had attempted to breach the terms of the contract by lowering the employee’s salary during the term of the contract.  The Court held that the seven days notice requirement of the Act relates to deductions from wages and differentiated deductions from reductions.  The Court clarified that, under the meaning of the Act, a deduction in an employee’s wages involves the employer “taking away from a salary in order to fund some benefit,” such as an employee insurance policy, whereas a reduction in wages is a mere lessening of salary that provides no benefit to the employee.

The Court ruled that, in light of the employment contract between the parties, the employer could not reduce the employee’s pay, while simultaneously breaching the employee’s contract, merely by providing seven days notice of the breach.  The Court went on to rule that while front pay can be awarded to a terminated employee in the context of a breached employment contract, an employee can only recover three times the amount of any unpaid back pay under the Act, as the Act does not apply to “prospective ” or “post-termination” wages.

Another interesting issue in the Mathis case is the fact that the employment contract between the parties was created by e-mail communication.  This holding is a reminder that while e-mail communication is sometimes made in a more casual manner, it can just as easily create obligations and responsibilities between employees and employers as other more formal means of written communication.