STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

July 9, 1973

Honorable James Kesling
South Dakota State Representative
Timber Lake, South Dakota 57656

OFFICIAL OPINION NO. 73-25

"Considerations" allowable to extinguish employer's obligation under minimum wage law.

Dear Mr. Kesling:

You have asked for an opinion on the 1973 amendment to SDCL 60-11-3, "South Dakota Minimum Wage Law." The section in question was amended to read as follows:

60-11-3. Every employer shall pay to each of his employees who has reached the age of eighteen years wages at a rate of not less than one dollar and sixty cents per hour.

Tips or other considerations received by an employee may be credited by the employer toward the stated minimum wage up to a maximum of fifty per cent of the stated minimum wage.

A tipped employee for purpose of this section is one engaged in an occupation in which he customarily and regularly receives more than twenty dollars ($20) a month in tips or other considerations.

The provisions of this section shall not apply to domestic servants and babysitters, whether employed hourly or full time or live-in, or persons employed in the capacity of an outside salesman.

In connection with this statute, you have asked the following, question:

What specifically may constitute "other considerations" as that phrase is set forth in SDCL 60-11-3, as amended?

The law patently requires that at least 50% of an employee's minimum wage be paid to him in legal tender. The other 50% may be paid to him by three different methods. The first is by legal tender.

The second is by tips, which are gratuities furnished to an employee by customers, rather than by an employer. Herbert's Laurel-Ventura v. Laurel Ventura Holding Corp., 50 Cal. App. 2d 684, 138 P 2d 43, 48. Tips may not be deducted from an employee's pay check, unless he customarily and regularly receives more than $20 in tips per month. My predecessor has ruled that tips may not be counted as part of the employer's minimum wage obligation, in the absence of contract between the employer and the employee in which both parties agree that the tips shall so be treated. See 1969-70 AGR 200. I agree with this conclusion.

The third method of fulfilling an employer's obligation is through the use of "other considerations." The word "considerations" is normally a term used in the law of contracts. Since an employee-employer relationship depends upon contract, it is proper to use this body of law to answer your question.

Among the most common considerations, in employer-employee contracts, are board and room, goods commonly sold by the employer, and the extinguishment of a pre-existing debt. In 1969-70 AGR 153, my predecessor, in interpreting the 1969 amendment to the Minimum Wage Law, said that an employer could consider board and room furnished by him as part of the fulfillment of his minimum wage obligation. He added that "these deductions are allowable only when they are reasonable. In determining reasonableness, the employer is expected to furnish these benefits to the employee at cost, and may not make a profit on them." I agree with my predecessor, that the costs of board and room are two of the considerations which may be used in fullfilling an employer's minimum wage obligation. Also, the satisfaction and extinction of a preexisting debt, is, in the common acceptance of the term, a valuable consideration. Brush v. Scribner, 11 Conn. 388, 392-403. Both are subject to the rule that there can be no considerations deducted without mutual consent of the employer and the employee.

While it would be impossible to list all of the things which would or would not constitute consideration under the statute, the following criteria should be taken into account when making the determination of whether or not a specific item qualifies under the statute: In general, nothing can be considered as consideration which is not regarded as such by both parties. Crawford v. Carter, 74 S.D. 316, 52 N.W. 2d 302 (1952). Also, the word "consideration" is synonymous with the word "benefits." In re Worley's Estate, 87 Cal. App. 2d 760, 197 P. 2d 773, 775. To make a thing a "consideration" for a contract, it must have been agreed upon as a consideration, or it must have been offered fly one party and accepted by the other as one element of the contract, and nothing is consideration which the parties do not regard as such when entering into the contract. Hoffer v. Eastland National Bank, 169 S.W. 2d 275, 281 (Tex.).

It should be re-emphasized that considerations, other than legal tender, may not exceed 50% of the employee's minimum wage. If an employee is paid more than the minimum wage, considerations can exceed 50%, so long as the employee receives at least 80¢ in legal tender for every hour that he works.

Respectfully submitted,

Kermit A. Sande
Attorney General