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Public Act 14 of 2015, effective April 20, 2015, changed the rules for Michigan employers charged with deducting payments from employee wages to settle the payment of employee debts. This process, known as garnishment, has come under criticism from Michigan employers because of the administrative burdens and pitfalls throughout the process. Among the changes in the new law are:
Provisions that protect employers from default judgments. Under prior law, for example, if an employer failed to respond to a garnishment order within 14 days, the company could be held responsible for the employee’s whole debt. The new law builds in additional notice requirements that allow employers to avoid default by responding to and correcting errors.
A new processing fee paid to employers. The law raises the fee, intended to compensate employers for their administrative burdens, from $6 to $35.
A new period of temporal duration for garnishment. Until now, a creditor would have to renew a garnishment every six months to keep it in effect, and employers had to bear part of that paperwork burden. Under the new law, a garnishment stays in effect until the debt is paid.
“The main goal of this law reform is to protect small business employers with limited staff that can’t always implement garnishment orders fast enough from being forced by law to pay the employee’s debt,” said bill sponsor Rep. Gary Glenn. “Michigan needs laws that help small business owners succeed financially so they can offer people jobs that contribute to building our economy.
“While creditors definitely need a reliable debt collection system, tying up a company’s resources in a mess of garnishment paperwork forms and subjective deadlines to keep track of, at the risk of being penalized to pay the debt, isn’t reasonable either,” Glenn stated.
Diane Cadrain is an attorney who has been writing about employment law issues for more than 20 years.
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