Labor & Employment – Wages in Controversy – Earnable Compensation

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Wages in Controversy are “earnable compensation” as contemplated by the SCRS Act and are subject to mandatory employer deductions under § 9-1-1020.

We answered the certified question.

We accepted a certified question from the district court, asking whether certain shift-differential and other pay received by an employee participating in the South Carolina Retirement System (SCRS) constitutes “earnable compensation,” making the pay subject to mandatory employee contributions to the SCRS.

Plaintiff Luce is a Certified Registered Nurse Anesthetist who worked for Lexington County Medical Center (LMC). LMC paid Luce and similarly situated salaried healthcare workers more per hour for certain undesirable shifts and for working beyond their scheduled hours. The parties refer to the holiday, weekend, shift-differential, on-call, call-back, and premium pay received by Luce and similarly situated salaried healthcare workers as the “Wages in Controversy.”

Luce brought this class action lawsuit against LMC and others, alleging LMC’s withholding of a percentage of his and other “Putative Class” members’ Wages in Controversy and remitting this percentage to SCRS violates the Takings Clause of both the federal and state constitutions, as well as the South Carolina Payment of Wages Act. Because the merits of Luce’s lawsuit may turn on whether the Wages in Controversy are subject to mandatory employee contributions under the SCRS Act, the district court certified the following question to us: Are the Wages in Controversy that Luce and other Putative Class Members earned during employment with LMC “earnable compensation” subject to employer deductions under S.C. Code Ann. § 9-1-1020 [(2019)]?

The term “earnable compensation” is central to many aspects of how benefits are accrued, funded and paid under the SCRS. The retirement benefits due to an SCRS member are based upon a member’s “average final compensation,” a figure that is based on the member’s earnable compensation. Likewise, the amount of a member’s earnable compensation directly affects the percentage contributions the employer and the member must make to the SCRS. Luce’s position is unusual. He had already retired and was receiving monthly SCRS benefits when he resumed working at LMC in 2019. Although working further for an SCRS member would not increase his monthly SCRS retirement benefits, he and LMC were still required to contribute a percentage of his earnable compensation to SCRS. Pointing to his paycheck that states his “Regular Base Pay” is calculated on 80 hours, Luce insisted that any time worked beyond 80 hours is consequently not “earnable compensation” because that time exceeds his “full normal working time.” He contended this conclusion is reinforced by § 9-1-1020, which excludes “other payments not considered a part of the regular salary base” from earnable compensation. He further argued the Wages in Controversy are “incentive type-payments” contemplated by section 9-1-1020 because LMC offered him the incentive of extra pay to work these hours.

The best way to decide what is “earnable compensation” is by considering what it is not. Section 9-1-1020 tells us that earnable compensation does not include payments “for unused sick leave, single special payments at retirement, bonus and incentive-type payments, or any other payments not considered a part of the regular salary base.” This phrase describes atypical payments that are irregular. It describes compensation above and beyond the “full rate of the compensation” due to an employee for working his “full normal working time.” The repeated use of the word “full” in § 9-1-10(8)(a) is significant, for it tells us that the statute is concerned with defining the pay an employee has earned for all the hours he works.

We concluded the types of pay excludable from “earnable compensation” are those singular, often one-time payments given to employees on top of the regular salary they are paid for the hours they normally work. We do not interpret the phrase “regular salary base” as the pay for the minimum number of hours an employee normally works, but as the wages the employee receives for his “full normal working time.” The bonus and other payments described earlier in § 9-1-1020 have little to do with the quantity of an employee’s work. In § 9-1-1020, the Legislature is acknowledging that public employees have a base salary for the hours they work and also may receive bonuses and similar payments according to their achievements. In the paragraph of § 9-1-1020, all of the payments referenced deal with payments akin to bonuses, incentive pay, and accrued benefits.

What is earnable compensation does not depend upon the label the employer puts on different types of work shifts or on a line of a paycheck. Hundreds of employers participate in the SCRS, and many use unique terminology and pay structures. Although Wages in Controversy carry various labels stuck on them by LMC, they are all pay for hours worked. Therefore, they constitute “earnable compensation” within the meaning of § 9-1-10(8).

Certified question answered.

Luce v. Lexington County Health Services District Inc. (Lawyers’ Weekly No. 010-043-25, 7 pp.) (D. Garrison Hill, J.) On certification from the U.S. District Court for the District of South Carolina (Mary Geiger Lewis, J.) John Hagood Tighe, Matthew Robert Korn, and Shahin Vafai, all of Fisher & Phillips, LLP, of Columbia, for Defendants. Bryan D. Caskey, of Law Offices of Bryan Caskey, LLC; Jenkins McMillan Mann and Shaun C. Blake, both of Mann Blake & Jackson, all of Columbia, for Plaintiff. Tina Cundari and Austin Tyler Reed, both of Smith Robinson Holler DuBose Morgan, LLC; Justin Richard Werner and Amber B. Carter, both of the South Carolina Public Employee Benefit Authority, all of Columbia, for Amicus Curiae, South Carolina Public Employee Benefit Authority. South Carolina Supreme Court