What employer would not like to reduce its legal risks and administrative costs? The Uniform Law Commission (ULC) presented employers with just that opportunity when on July 13, 2016 it finished three years of studying and drafting work and gave approval to the Uniform Wage Garnishment Act (UWGA). The ULC is a 125-year-old organization comprised of commissioners appointed by the 50 states (plus Puerto Rico and the Virgin Islands) that drafts laws for the states to consider and adopt where uniformity would improve commerce between states. After the ULC approves a uniform law, such as the UWGA, the commissioners of each state will present the statute for consideration to their state legislature.
Why would adoption of the UWGA save administrative costs and reduce legal risk? First, large numbers of wage garnishments are issued each year. Most employers know that these court orders impose high administrative costs and great legal risk. The UWGA is designed to relieve employers of some costs and burdens while also improving the situation for judgment creditors and judgment debtors alike. Indeed, if uniformity is obtained by nationwide adoption of the UWGA, there will be something for everyone to celebrate.
Some of the employer burdens—and the ways in which the UWGA will relieve those burdens—are as follows:
The UWGA will create nationwide consistency in key legal definitions, court procedures, and forms to be used. Currently, each state has unique laws, procedures and forms that make administration of garnishments risky and extremely complex to administer. Note: courts can issue valid and binding garnishments from any state with jurisdiction over an employer. Thus, employers may receive these orders from more states than those in which they actually have employees, and for larger companies, this means payroll must be highly knowledgeable of the garnishment laws in all 50 states.
The UWGA is intended to streamline processes not only by accomplishing uniformity, but also by requiring that some garnishment procedures occur outside of court unless one of the interested parties desires to bring a matter to the attention of the court. These streamlined processes are intended to reduce the occasions when employers must retain counsel.
The UWGA narrows jurisdiction to require that a garnishment action be initiated in the state where the employee works. (Currently, garnishment actions may be initiated in any state where the employer is present regardless of the employee’s location). This way, employers have more certainty as to which states may require it to garnish wages and employees are more able to appear and defend their interests.
Payments to Independent Contractors
The UWGA clarifies a tricky issue: Do garnishments apply to payments made to independent contractors? Under the UWGA, payments to independent contractors for personal services will be subject to garnishments and will be protected by the applicable deduction maximum.
The UWGA will require service on an employer’s registered agent, if the registered agent can be served with reasonable diligence. Currently, judgment creditors send garnishments via mail or by hand to local stores or facilities where these often get delayed or lost. Judgment creditors then seek to hold employers liable for mishandling the garnishment. In practice, fighting improperly served garnishments is more costly to the employer than paying the garnishment itself.
Protections and Penalties
The UWGA will provide process protections so that employers will receive a notice of failure to comply with a garnishment and will have an opportunity to begin compliance before it can be held liable for any oversight. Further, employers’ liability is limited to small per day penalties that are capped at the amount of the garnishment.
The UWGA provides for payment of up-front fees to the employer and allows states to adopt additional per-deduction fees. Currently, not all states provide that judgment creditors must pay employers for this service.
The UWGA changes how the law attaches priority among creditor garnishments. Instead of priority based on time served, UWGA provides that the amount of the maximum deduction (set by state or federal statute) will be shared equally between each judgment creditor who served a garnishment upon an employer.
The act—“as approved” —is posted on the Uniform Law Commission’s website. Planning will soon be underway to inform the states of the new UWGA and encourage its passage. We will cover what employers can do to help the UWGA become law in all 50 states in future articles.
Martin C. Brook (shareholder, Detroit (Metro)) provided assistance to the ULC Study Committee and the ULC Drafting Committee that prepared the UWGA.