The laws and regulations affecting the employment relationship are ever-changing, as evidenced by recent activity at both the state and federal level. It is imperative that employers understand the new laws and regulations, including, perhaps most importantly, the legal and practical implications of the changes.

South Carolina Enacts “At-Will”/Handbook Statute

On March 15, 2004, Governor Sanford signed new legislation affirming the at-will nature of employment relationships in South Carolina. In so doing, South Carolina has responded to recent state court decisions that have diluted South Carolina’s employment at-will doctrine and held employers liable for breach of contract when they failed to follow their own polices and procedures and/or had mandatory language in their employee handbooks.

The new statute only applies to handbooks, manuals, or other documents issued after June 30, 2004. It attempts to minimize liability for employers by outlining clear provisions that employers in South Carolina must follow in order to preserve the at-will nature of employment relationships. Specifically, to avail themselves of the protections afforded by the new statute, employers must ensure the following:

• All handbooks, manuals, and/or policies contain a conspicuous disclaimer on the first page of the document (or following the cover page if the document has a cover page);
• To be conspicuous, the disclaimer must be in all capital letters and underlined;
• The disclaimer must be signed by the employee; and
• For all other policies, procedures or documents, the disclaimer must be in underlined capital letters on the first page of the document.

This new law will have significant practical implications for employers. Although most South Carolina employers have understood, based upon court decisions, that their handbooks must have a disclaimer that is conspicuous and placed on the first page of the document, there has not been a uniform definition of what constitutes a conspicuous disclaimer. Some employers have printed their disclaimers in a different color or italics or bold-type or some other contrasting type. Because of the specific provisions of this law, employers must now review and revise their handbooks to make sure that their disclaimers are in UNDERLINED CAPITAL LETTERS and that the disclaimers are on the first page of the document. Employers must also ensure that each and every employee receives a copy of the revised handbook and signs the disclaimer acknowledging their receipt of the revised handbook and their understanding of and agreement to all policies and procedures contained therein.

Despite the apparent relative clarity of this new law, the “at-will” relationship can still be altered by verbal assurances and subsequent written communications to employees. Employers should become familiar with these other potential means by which the “at-will” relationship can be altered and take all necessary steps, including formal training of all managers and supervisors, to ensure that decision makers are knowledgeable on how to prevent the “at-will” relationship from being altered.

Changes to FLSA Overtime Regulations

On April 20, 2004, the Department of Labor issued final regulations amending the Fair Labor Standard Act’s white collar overtime exemptions. The new regulations reflect the first major overhaul of the FLSA in over 50 years. The final regulations will take effect on August 23 barring a court delay, and will have significant implications for most employers. Between now and August, employers should review their current employee overtime classifications to determine if changes are appropriate.

While similar to the DOL’s proposed regulations, the final overtime exemption rules back away from some of their more controversial provisions. The proposal generated a tremendous political reaction, and the final regulations may be a reflection of election year sensitivities. The major differences between the proposed and final regulations include the following:

• The exemption for highly compensated employee raised the income bar from $65,000 to $100,000, drastically reducing the number of eligible employees;
• The minimum income level for claiming the exemptions rose from $22,100 to $23,600;
• The Administrative exemption retains the traditional “discretion and independent judgment” requirement that was eliminated in the proposed regulations; and
• The proposed “sole charge” exemption for employees running a small branch operation was eliminated.

For employers, the most practical and useful part of the new regulations may be the expanded list of examples of exempt and non-exempt positions provided by the DOL. For example, the agency distinguished between exempt registered nurses and non-exempt licensed professional nurses. The new regulations also classified all firefighters, paramedics, and paralegals as non-exempt positions entitled to payment of overtime.

While retaining much of the prior regulations’ classifications, the final regulations also clarify issues such as deductions from pay for salaried exempt workers. Employers will have more flexibility to make appropriate deductions without threatening the exemption. The regulations address changes to outside sales positions over the past several decades, and clarify exemption rules for route salespersons and computer professionals. Although the new regulations will probably not result in a mass reclassification of non-exempt employees to an exempt status, employers should have more guidance and certainty when choosing an appropriate classification for employees. Additionally, while the new regulations may not eliminate the growing number of class action FLSA claims, they will serve as important guidelines for future employee classifications.

Summary

Employers need to be proactive in their response to both the new statute in South Carolina and to the new FLSA overtime regulations. Employers should ensure that their response is deliberate and well thought out, with particular attention paid to ensure that all company policies and practices are uniform and consistent. Because of timing issues, the responses need to be sooner rather than later.