HB 1086 – Garnishments

Rep. Hamm has introduced HB 1086 concerning garnishment orders. There are two broad categories of tools given to judgment creditors in order to collect debts that have been reduced to judgment: attachment and garnishment. Attachment refers to an order that a judgment debtor turn over property in his or her possession while garnishment refers to an order that a third party in possession of the debtor’s property turn that property over to the judgment creditor instead of to the debtor. Most of the time, if a person is in a situation where the debt has gone all the way to court and a judgment has been entered, it’s because they don’t have the money on hand. And, if they do, they’re more likely to conceal what they have and use it on more immediate needs or wants.

So, the creditor goes looking for third parties. Usually this is an employer who will get an order to withhold a certain amount or percentage of the paycheck and remit it to the Clerk of the court who will, in turn, send it to the creditor.

This bill gives a little to creditors and potentially takes away a lot. If the creditor gets a court order, the creditor  would be permitted to access certain wage information provided to the Department of Workforce Development concerning the judgment debtor. Usually access to this information requires the prior written consent of the judgment debtor/employee.

What the bill takes away from creditors, however, is the fact that – under current law – if a garnishment order is entered, it remains in place even if the debtor/employee leaves his job and then comes back. When he comes back, the garnishment continues on. And, garnishment orders apply even where the judgment debtor is characterized as an “independent contractor” rather than an “employee.” The key is, basically, whether the judgment debtor receives periodic payments from the business.

Under the proposed legislation, if an employee left employment (and the employer notifies the court of that fact), the garnishment stops. If the employee returned to employment (and the judgment creditor is lucky enough to discover that fact), the judgment creditor would be required to go back to court and obtain  a new garnishment order before any wages were withheld and applied to the judgment. Obtaining a garnishment is a somewhat cumbersome process generally requiring that you get a hearing date from the court, serve the judgment debtor and employer with notice, and get an order from the court. It takes some time. This encourages game playing. Garnishments are a hassle for the employer and obviously they’re no picnic for the employee. But, if we’re going to take seriously the idea that judgments should be paid, they are a necessary tool.

Employment these days is often a seasonal or sporadic affair in any case. So, why not have the employee take a couple of weeks off to get the garnishment off the books then have him come back and work for a month or two before a new garnishment can be secured? And, of course, this legislation potentially creates confusion with the independent contractor who is receiving periodic payments. Strictly interpreted, because the legislation uses the terms “employer” and “employee,” it wouldn’t apply to the independent contractor scenario. But, in practice, courts, businesses, and judgment debtors would claim that it does — which creates another level of complexity.