APA Continues Work By Alice P. Jacobsohn, Esq.
on Standardized Wage
The American Payroll Association addressed the National Conference of Commissioners on Uniform State Laws, also known as the Uniform Law Commission (ULC), on October 23 and 24 as part of the ULC Wage Garnishment Act Committee. The Committee asked the ULC to develop a standardized wage garnishment act. This act would not apply to child support garnishments because these are managed through a separate system at the federal Office of Child Support Enforcement (OCSE) and state child support enforcement agencies.
In 1833, federal law banned debtors' prisons. This was affirmed by the U.S. Supreme Court in 1983 when it held that these prisons violated the Equal Protection Clause of the 14th Amendment to the Constitution. The United Nations declared these types of prisons a civil rights violation in 1966 under the International Covenant on Civil and Political Rights, which was ratified by the United States. These decisions in no way declare that debtors do not still owe money. Therefore, over the years, states have grappled with how to create a process to allow creditors to collect owed funds in a manner that protects debtors' civil rights. In turn, this has created a variety of approaches and a lack of consistency.
The ULC was established in 1892 to provide states with well-conceived and expertly drafted legislation to create clarity and stability for significant areas of state statutory law. Members must be attorneys qualified to practice law and are appointed by state governments as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. In addition to researching and drafting uniform state laws, these members must be willing to promote enactment by state legislatures.
Six APA members attended the October meeting of the ULC's Wage Garnishment Act Committee as observers, all participants of the APA's Government Relations Task Force (GRTF) Subcommittee on Child Support and Other Garnishments. William Dunn, CPP, APA's Director of Government Relations, and I also attended. APA's subcommittee is working with the Committee to develop a standardized wage garnishment law that could be enacted in every state to create consistency in garnishment procedures and reporting. The APA members in attendance were:
Issues Raised During the Meeting
- Martin Brook, Attorney at Law with Ogletree Deakins Law Firm
- Amorette Bryant, CPP, President of ABryant Consulting
- Corrinne Flores, Agency Liaison Director with ADP LLC (Subcommittee Co-chair)
- Steve Martin, Payroll Garnishment Supervisor for Lowe's Companies, Inc.
- Abbey Moran, CPP, Payroll and Treasury Manager of XO Communications
- Lisa Poole, CPP, Vice President of HR Payroll Operations with SunTrust Bank (Subcommittee Co-chair)
Attendees discussed a number of substantive areas during the meeting. The first was the definition of wage. Based on previous meetings, they considered two proposed alternatives:
- One was more general, referring to compensation owed by an employer to an employee for personal services, including salary, commissions, bonuses, pensions, disability payments, and severance payments.
- The other was more specific, referring to compensation subject to federal income tax owed by an employer to an employee and excluding tax-deferred accounts.
ULC Committee members seemed to prefer the second alternative because it offered greater clarity. Some changes were added, such as an exclusion for imputed income because while in-kind payments to employees are taxable, they are not dollars that can be garnished from wages.
The APA observers stressed how important it is for payroll to receive clear instructions accompanying any wage garnishment. These instructions should include information that identifies the debtor and states the amount owed, where the funds should be sent, proof of the judgment, and instructions on how to remit to the creditor the amount withheld from wages. The draft act used the term "reasonable instructions" to define how to remit the funds. APA stated that this term was too vague and should be delineated better in the next draft. A controversial provision included an administrative fee provided by the creditor to the garnishee (employer). APA prevailed in keeping this in the draft, although the amount was left open to state legislatures.
An entire section of the draft act is devoted to the garnishee's response to creditors. For example, if information is missing from the creditor's notice or if the debtor is not the garnishee's employee, the employer must notify the creditor. If the debtor is an employee, the employer must notify the creditor and state the frequency with which payments will be made. The notice also must include information on whether the debtor employee has other mandatory deductions and the priority of those deductions. The employer must provide a copy of the notice to the debtor employee. The draft act gave employers 15 business days to respond. The APA asked that this be changed to 21 days to avoid any confusion about different workweeks and holidays. The commissioners agreed to this change.
Throughout the draft act, vague terms were used such as "regular payday," "promptly remit," and "as soon as practicable." Participants asked that these terms be removed in favor of clear terms such as a specific number of days. In addition, observers noted that the employer penalty section was too long and convoluted and did not include sufficient time for employers to respond before penalties were assessed. These will be adjusted in the next draft of the act.
An entire section of the draft act is devoted to a description of the notice that must be provided to the debtor. Based on the recent court case in Georgia (Strickland v. Alexander et. al., 1:12-CV-02735-MHS, U.S. Dist. Ct., Northern Dist. of Ga., Atl. Div., Sept. 8, 2015
) that raised due process issues in the notice provided to debtors, the ULC Committee agreed to change the draft act to add information to the notice section on how a debtor can obtain legal counsel and what is exempt from a wage garnishment. A plain language expert hired by the ULC with partial funding from the APA will review the notice.Expand the Scope of the Act
After reviewing all of the current sections of the draft act, the ULC Committee discussed whether to expand the scope of the act to include other garnishments. Discussion included whether a process for bank garnishments should be developed. Without getting into specific procedures, participants raised some questions. The APA discussed the negative impact that bank garnishments have on employers' abilities to encourage employees to have bank accounts for direct depositing of wages. The APA also raised concern that each state would establish its processes differently regardless of the standardized act. Participants also questioned whether the ability of banks to trace the origins of funds to prevent garnishments of exempt funds may not be adequate. Despite these difficulties, the ULC Committee decided to explore adding bank garnishments, but in a separate section so that this type of garnishment would not affect the other provisions if states decide not to go down this path.
The group also explored garnishments of payments to independent contractors. Employers do not pay taxes or benefits for independent contractors. As a result, it is impractical to establish exemptions from garnishments as a percentage of disposable income, as is done for employees. The ULC Committee decided to explore this further but made no determination that an approach would be adopted into the act.
The next meeting of the ULC Wage Garnishment Act Committee will be in either February or March 2016. The APA's Child Support and Other Garnishments Subcommittee plans to continue its role in pushing for a well-designed piece of legislation.