Employers should always strictly follow a wage garnishment court order, even when the person is not employed or appears not to earn enough money.
The consequences for ignoring a garnishment can be extreme. In the majority of states, an offending garnishee (i.e., an employer) is liable for up to the full amount of the debtor’s (whether this person turns out to be an employee or not) outstanding debt. In the few states that require a disclosure at the end of the garnishment (rather than at the beginning), the non-answering garnishee is usually liable for the amount that would have been withheld from the employees’ wages. Two states, Georgia and Wisconsin, provide employers with an affirmative defense to this nearly unfettered liability.
In Georgia, a default will automatically be entered against an employer that fails to answer a garnishment order. The employer then has 15 days to open the default by filing a belated answer and payment of costs. If the employer does not take these actions, the court may enter a judgment by default against the employer for the full amount of the debtor’s outstanding debt—regardless of whether the debtor is still, or ever was, an employee. The employer is allowed an additional 60 days after notice of the judgment to file a motion to modify the judgment. When the employer pays the court costs the judgment will be reduced to the greater of $50 or $50 plus what would have been withheld under the garnishment order. Thus, if the employer acts quickly, it can reduce or nearly eliminate the award against it for failing to answer. The only other state that gives employers an affirmative defense for failing to answer a garnishment order—Wisconsin—has a similar garnishee-friendly process.
Cases keep piling up in which courts are holding employers liable for large sums of money for simply missing answer deadlines or for filing defective answers. Courts are even holding employers liable in Georgia when they miss deadlines to automatically obtain modifications of judgments as discussed above. For instance, in Oxmoor Portfolio, LLC v. Flooring & Tile Superstore of Conyers Inc., the Georgia Court of Appeals ruled that the employer’s answer was defective and that the employer/garnishee did not timely seek to modify the judgment. Instead, the employer unsuccessfully sought to have the default judgment set aside utilizing the court rules to set aside a default judgment in a civil action. Ultimately, the employer/garnishee was liable for the entire debt for a minor administrative error: filing a timely but defective answer.
Another example in which the employer was liable for the entire debt comes from the Court of Civil Appeals of Oklahoma, which decided Discover Property and Casualty Ins. Co. v. Collins. The employer had been obligated to answer a second-filed garnishment immediately and to provide subsequent answers after each pay period. Since the employer’s original answer was defective (but timely) and since it did not file subsequent answers and ultimately failed to implement the second garnishment when the first expired, the court ordered the employer to pay the full amount of the outstanding debt for a total of $10,630.15.
These are only two examples from the past few months demonstrating the importance of properly and timely filing answers. As an employer, it is critical to
know wage garnishment law or else become liable for the full amount of the employee’s debt.
State Law Variations: A Light at the End of the Tunnel? Creditor wage garnishments are challenging and costly for employers because they must strictly comply with countless variations in the requirements imposed by states laws. Debt collectors may benefit from this complexity as multifarious rules often result in noncompliance with garnishment orders—but employers most certainly do not. This is because any administrative error exposes the employer to the risk of a default judgment against it for the full amount of the debtor’s unpaid debt—even if the debtor is not an employee of the employer. The variations in state laws impact each step of the garnishment process, from the requirement of an employer’s disclosure, the timing of the disclosure, the form of the disclosure, and the rules affecting the recipient of the disclosure, to the duration of the garnishment, the definition of earnings and disposable earnings, and the necessity of a disclosure at the end of the garnishment. Further, each state’s requirement must be followed to the letter. As a result of these onerous variations and the requirements to strictly comply with the law, employers are prevented from implementing common cost and risk control measures, such as adopting the most stringent requirements as a standard process across all states. One possible solution to the costly and burdensome problem created by the variations on state garnishment requirements may come from the Uniform Law Commission (ULC). This organization’s purpose is to identify and eliminate legal issues that prevent or hinder interstate commerce by drafting uniform or model laws for state legislatures to consider adopting. The Uniform Commercial Code and the Uniform Trade Secrets Act are two very successful examples of the ULC’s efforts. The ULC reviewed a request from the American Payroll Association (APA) to draft a uniform wage garnishment law and chose to appoint a committee to study the variations to be found in state creditor garnishment laws so that it could decide whether it could offer an effective solution to the problem. After 18 months of study, the committee recommended the appointment of a drafting committee. The full ULC accepted this recommendation and in July of 2013 appointed a committee to draft a uniform wage garnishment law. The first meeting of this committee will be in March of 2014 and the expected project completion date is July 2016. Completion of a uniform wage garnishment law in July 2016 is not the end; it’s really just the beginning of the hard work. That is when interested parties must contact their state legislatures and urge the adoption of a uniform process.
-- Martin C. Brook |
Martin C. Brook is a shareholder in the Detroit Metro office of Ogletree Deakins. This article was
originally posted on Ogletree Deakins' Wage & Hour blog (with the tintbox content
posted separately). © 2014 Ogletree Deakins. All rights reserved. Republished with permission.
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