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Employee wins triple damages in Wages Act case
By David E. Dubberly
Nexsen Pruet
In Ross v. Ligand Pharmaceuticals, Inc., filed Dec. 21, 2006, the S.C. Court of Appeals ruled that an employer’s incentive compensation plan violated the S.C. Payment of Wages Act because the plan did not provide a certain date when incentive payments would be made.
Richard Ross was, at the time of his resignation, a regional business manager for Ligand Pharmaceuticals. He participated in a Ligand plan that paid incentive compensation three times per year. The 2003 plan stated that incentive payments would be made as follows:
“The Incentive Plan payout will be paid following the conclusion of each trimester period according to the following estimated schedule: Trimester 1 Payout—June 30, 2003; Trimester 2 Payout—October 31, 2003; Trimester 3 Payout—February 28, 2004.”
Ligand personnel referred to the dates on the estimated schedule as “target dates;” the record showed that Ligand frequently distributed incentive payout checks after the dates listed in the estimated schedule.
The plan also provided that “to be eligible for the trimester incentive compensation payout, (an employee) must be employed at the time the ... payouts are distributed.”
Ross resigned from Ligand on Oct. 15, 2003, 45 days after the end of the second trimester of that year, which closed on Aug. 31. Ligand, however, did not distribute the payouts for the second trimester until after Nov. 15, 2003. Even though Ross earned a second trimester incentive payment of $12,000, Ligand did not pay him because he was not employed by the company when the checks were distributed.
The Payment of Wages Act requires that “(e)very employer ... 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,” according to S.C. Code Ann. §41-10-30(A). It also requires, in Section 41-10-40(D), that “(e)very employer in the State ... pay all wages due at the time and place designated.”
If an employer fails to pay wages as required, the employee “may recover in a civil action an amount equal to three times the full amount of the unpaid wages, plus costs and reasonable attorney’s fees,” as outlined in Section 41-10-80(C).
Ross sued Ligand, asserting a violation of the Payment of Wages Act. The trial court found violations of Sections 41-10-30(A) and 41-10-40(C) and awarded Ross treble damages of $36,000, attorney’s fees of $18,000 and costs of $837, all pursuant to Section 41-10-80(C).
On appeal, the Court of Appeals affirmed, holding that establishing “target dates” in the incentive compensation plan did not sufficiently comply with the requirement to notify employees of the time and place of payment or to pay wages due at that time and place. The court stated:
“We agree ... that Ligand fails to satisfy the statutory requirements of Section 40-10-30 because Ligand provided employees with no time certain for when payment would occur. Providing estimated payment dates that … are dependent upon employees being employed at the time payouts are distributed, whenever that may be, clearly does not provide notice of ‘time and date of payment.’”
The Court of Appeals went on to hold that “the failure to provide the time and place of payment prevented Ligand from being able to pay wages due to Ross at the time and place designated as mandated by Section 41-10-40.”
Finally, the Court of Appeals decided that the trial court had not abused its discretion in trebling Ross’ damages and awarding attorney’s fees and costs because Ligand’s failure to pay Ross “was based on its unilateral, arbitrary decision on when to issue compensation and ... no good faith dispute existed.”
In addition, the act requires that employers not deduct “any portion of an employee’s wages unless the employer is required or permitted to do so by … law or the employer has given” prior written notice it will make the deduction, according to Section 41-10-40(C).
When an employee is terminated for any reason, “all wages due” must be paid to the employee “within 48 hours of the time of separation or (on) the next regular payday which may not exceed 30 days,” according to Section 41-10-50. Section 41-10-60 follows that if the employer and employee disagree on the wages due, the employer must give written notice of its position and pay the amount it concedes to be due “without condition.”
Employers have long used incentive compensation plans for a number of purposes, including to attract and retain quality employees and to encourage increased sales. The Ross decision serves as a reminder to employers of the importance of reviewing pay plans and practices and complying with the requirements of state payment of wages laws, especially when employees are separated from employment.
David E. Dubberly is an attorney in Nexsen Pruet Adams Kleemeier’s Columbia office. He is chair of the firm’s Employment and Labor Law Practice Group. Contact him at ddubberly@nexsenpruet.com.
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