APA Helps Stop California Student Loan Garnishment Bill
By Alice P. Jacobsohn, Esq.
In a win for APA, a California bill (S.B. 16) that would have tied student loan garnishment calculations to state and local minimum wage rates was voted down in a state Assembly vote of 38 to 24 in June, although the bill sponsor was given leave to try again later in this session to get the bill passed. APA's lobbying effort began last February when it informed the Legislature that the proposed calculation method was inherently unfair to California residents.
In a letter to lawmakers, APA's Government Relations Task Force (GRTF) Subcommittee on Child Support and Other Garnishments stated, "APA supports fairness in the wage garnishment process that emphasizes a reasonable approach for employees without unduly increasing the administrative burden on employers. As payroll professionals, we appreciate provisions that help the employees we pay, but we also ask lawmakers to recognize that, in the case of a garnishment, employers are third parties to a legal dispute."
Difficulty With Tracking
APA explained, "Changes to the law requiring employers to rely on a local minimum wage for garnishments also require that employers spend time, effort, and resources that are quite unrelated to the application of a local minimum wage to pay workers in their employ. [...] Tracking varying effective dates for local minimum wage changes is difficult for purposes of wage garnishments." This is especially true in California, which has 21 local minimum wage rates each with different thresholds, such as the number of employees and nonprofit status.
For example, in Los Angeles the hourly minimum wage rate is $12.00 for employers with 26 or more employees and $10.50 for 25 or fewer employees. Government workers are subject to a different rate ($10.50 an hour for employers with 26 or more employees and $10.00 an hour for employers with 25 or fewer employees). Emeryville's hourly minimum wage rate is $13.00 for employers of 55 or fewer employees, while for 56 or more employees, the rate is $14.82. This scenario changes with some localities phasing in their increases. For example, Cupertino's hourly minimum wage rate will be adjusted for inflation each year beginning on January 1, 2020. From that date forward the rate will increase based on the cost of living, but not to exceed 5%.
Tracking difficulties also include changes to employees' work locations.
"An employee may transfer to a location where the exemption calculation must either be increased or decreased," APA stated.
More complicated is when an employee works in two different localities during the same pay period, potentially raising varying garnishment calculations.
APA further explained the employee fairness problem with S.B. 16.
"By basing the exemptions on a local minimum wage, California residents working in locations with the highest minimum wages are afforded greater exemptions than those living in other areas."
For example, an employee in San Francisco (minimum wage rate is $14.00 an hour) is provided a greater exemption than one in Cupertino (minimum wage rate is $12.00 an hour), who benefits more than an employee in San Diego (minimum wage rate is $11.50 an hour).
To rely on local minimum wages for student loan garnishments would require updating payroll systems with special coding, technical upgrades, and testing. For some payroll departments, the limits would require manual withholding calculation tables because software vendors are not prepared to add locality-specific determinations to their systems.
"Relying on manual calculations increases the risk of error, which can lead to penalties for the employer and penalties and interest for the employee," APA stated.
APA offered the California Legislature an alternative to S.B. 16. Based on the bill sponsor's comments, the intent of the bill was to increase consumer protections. This can be done through other methods that employers can easily adopt.
"Increasing the amount exempt from garnishment can be accomplished simply, easily, and fairly by adjusting two factors in the limit: (1) lowering the percentage of disposable earnings and/or (2) raising the multiple of the state minimum wage," APA stated.
For example, the state could select the lesser of 10% of disposable earnings or the amount by which the individual's disposable earnings for a workweek exceed 50 times the state minimum wage at the time the earnings are payable, without burdening employers.
In addition to writing the bill sponsor, the GRTF sent emails and letters to leadership in the California Senate and Assembly, including the Judiciary Committees in both chambers. APA GRTF Subcommittee members contacted and spoke with key legislative staff. APA's Government Relations Division also sent a "call to action" request to California chapter leadership asking them to reach out to legislators, and chapter members wrote letters. The combined effort led to APA's success.
Alice P. Jacobsohn, Esq., is Senior Manager of Government Relations for the APA.