Employers Notice: The Uniform Wage Garnishment Act

Why was a uniform law needed?

Currently, every state has a different wage garnishment law and process. This means that employers who do business across multiple states must know and abide by a different, and often complex, law for each jurisdiction. If employers make processing errors calculating garnishments, they may face civil penalties.

That’s why the Uniform Law Commission (ULC), now in its 125^th year, comprising more than 350 practicing lawyers, governmental lawyers, judges, law professors, and lawyer-legislators from every state, took on the challenge of drafting and now promulgating enactment of a uniform law to simplify wage garnishment.

The Uniform Wage Garnishment Act, which was approved by the ULC in 2016 with six other acts, seeks to simplify and clarify wage garnishments for employers, creditors, and consumers by standardizing how the wage garnishment process works and offering plain-language notice and garnishment calculation forms.

What does the Uniform Wage Garnishment Act accomplish?

• It streamlines the wage-garnishment process and limits, to the extent possible, the involvement of the courts. This will reduce costs and obviate the need for an employer to retain counsel except in unusual circumstances. If an issue arises, an affected party may petition the court for relief at any time.

• It requires that a summons provide an employer with sufficient information to permit it to determine quickly whether the individual named in the summons is, in fact, an employee.

• It resolves choice-of-law issues.

• It extends protection to a cadre of individuals who are classified as independent contractors but who are, to a significant extent, indistinguishable from employees. The cadre, which is included within the definition of “employee,” is limited to individuals who perform personal services in exchange for periodic payments.

•  It permits states to vary the level of protection provided to employees (as long as it is not below the level mandated by the federal Consumer Credit Protection Act) within a framework of uniform definitions and procedures.

• It requires that employees be given a plain-language notification that explains garnishment and provides helpful information regarding the responsive steps available to the employee. It also gives employees time to act – garnishment cannot begin until the first regular payday occurring more than days after the notification is sent.

• It requires employers, upon request, to provide creditors and employees with an explanation of how the amount deducted from earnings was calculated.

•  It permits a creditor and employer to agree on the method by which payments will be transmitted to the creditor, and it authorizes an employer with several employees being garnished by the same creditor to make a single payment that lumps together sums deducted from the employees’ earnings.

• It resolves priority issues related to multiple garnishments.

•  It extends the protections provided at the employer level to funds in a bank account by providing a procedure that allows an account holder to claim as exempt from bank garnishment earnings that have been subjected to garnishment and then deposited.

• It imposes sanctions on an employer that fails to carry out its responsibilities under the act after receiving a notification of default.

•  It imposes sanctions on a creditor that acts in bad faith. It also provides an incentive for a creditor whose garnishment is wrongful to stop the garnishment 7 quickly.

See the entirety of the act here.

What is next?