BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1775 (Wieckowski)
As Amended April 17, 2012
Hearing Date: June 19, 2012
Fiscal: No
Urgency: No
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SUBJECT
Wage Garnishment: Exempt Earnings
DESCRIPTION
This bill would raise the minimum floor of a judgment debtor's
wages that are exempt from garnishment from 30 times the federal
minimum hourly wage to 40 times the California minimum hourly
wage.
This bill would become operative on July 1, 2013.
BACKGROUND
In 1978, the Legislature enacted the Employee's Earnings
Protection Law, which was subsequently renamed the Wage
Garnishment Law in 1983 when the wage garnishment provisions
were revised and recast. Under the Wage Garnishment Law, a
judgment creditor can seek garnishment of a judgment debtor's
wages to satisfy a court judgment.
The Wage Garnishment Law conforms to the federal wage
garnishment law and provides that a wage garnishment may not
exceed 25 percent of a judgment debtor's earnings for that week
or the amount by which the disposable earnings for that week
exceed 30 times the federal minimum hourly wage, as specified.
(Code Civ. Proc. Sec. 706.050.) This provision has not been
modified since it was enacted in 1983.
This bill, sponsored by the Western Center on Law & Poverty,
would raise the minimum floor of wages exempt from garnishment
from 30 times the federal minimum hourly wage to 40 times the
(more)
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California minimum hourly wage.
CHANGES TO EXISTING LAW
Existing law , the Wage Garnishment Law, establishes procedures
regarding the garnishment of a judgment debtor's wages. (Code
Civ. Proc. Sec. 706.010 et seq.)
Existing law provides an exemption of the amount of earnings of
a judgment debtor that may be garnished to the amount provided
under federal law. (Code Civ. Proc. Sec. 706.050.)
Existing law provides that "earnings" means compensation payable
by an employer to an employee for personal services performed by
such employee, whether denominated as wages, salary, commission,
bonus, or otherwise. (Code Civ. Proc. Sec. 706.011(a).)
Existing law does not define "disposable earnings."
Existing federal law provides that "earnings" means compensation
paid or payable for personal services, whether denominated as
wages, salary, commission, bonus, or otherwise, and includes
periodic payments pursuant to a pension or retirement program.
(15 U.S.C.S. Sec. 1672(a).)
Existing federal law provides that "disposable earnings" means
that part of an employee's earnings remaining after the
deduction from those earnings of any amounts required by law to
be withheld. (15 U.S.C.S. Sec. 1672(b).)
Existing federal law restricts the amount of disposable earnings
of a judgment debtor that may be garnished for any workweek to
25 percent of the judgment debtor's disposable earnings for that
week or the amount by which the judgment debtor's disposable
earnings for that week exceeds 30 times the federal minimum
hourly wage, as prescribed by the Fair Labor Standards Act of
1938, in effect at the time the earnings are payable, whichever
is less. (15 U.S.C.S. Sec. 1673.)
Existing law exempts from garnishment the portion of the
judgment debtor's wages proven to be necessary for the support
of the judgment debtor or the judgment debtor's family supported
in whole or in part by the judgment debtor. Existing law
provides that this exemption is not available for debt incurred
relating to the payment of attorney's fees under the Family
Code, as specified, for debt incurred for personal services
rendered by an employee or former employee of the judgment
debtor, for debt relating to a child support order, as
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specified, or for debt relating to a state tax order. (Code
Civ. Proc. Sec. 706.051.)
This bill would provide that "disposable earnings" means the
portion of an individual's earnings that remains after deducting
all amounts required to be withheld by law.
This bill would restrict the amount of garnishment of a judgment
debtor's disposable earnings for any workweek to the lesser of
25 percent of the individual's disposable earnings for that week
or the amount by which the individual's disposable earnings for
that week exceed 40 times the state minimum hourly wage in
effect at the time the earnings are payable.
This bill would provide multipliers to determine the maximum
amount of disposable earnings subject to garnishment for daily,
biweekly, semimonthly, and monthly pay periods.
This bill would provide a delayed operative date of July 1,
2013, so that the Judicial Council of California can revise the
methods of computation provided in wage garnishment instructions
to employers.
COMMENT
1. Stated need for the bill
The author writes:
When someone falls behind on a consumer debt, the judgment
creditor may, and nearly always will, garnish the wages of a
worker until the debt (plus accruing interest) is satisfied.
But existing California law only protects $217.50 per week
from wage garnishment. The working poor, who live
paycheck-to-paycheck, simply cannot make ends meet on this
miniscule amount. When their wages are garnished, other
essentials - rent, food, medicine - become unaffordable. They
lose their homes, their children go hungry, and they and their
families fall ill, or else they fall into further debt to
credit card companies or predatory lenders. All of these
problems have been exacerbated by the financial crisis, which
has stripped families of their meager assets and decimated the
safety net. The alternatives - bankruptcy or a claim of
exemption - are problematic. Bankruptcy may ensure that no
creditor is repaid. Obtaining a Claim of Exemption can take
months.
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The Western Center on Law & Poverty, the sponsor of this bill,
writes:
Wage garnishments have enormous impacts on low income
families. In one case from a Central Valley legal service
program, a cannery worker had his wages garnished due to
unpaid medical bills. Once his wages were garnished, he
couldn't pay his auto loan. So his car was repossessed. And
without a car, he couldn't get to work and lost his job. This
should not happen.
We also know that there is serious concern about the practices
of debt collection companies, particularly third party debt
collectors. One legal service program found that the statute
of limitations had expired in half of the debt cases of its
clients. We also know that many cases filed have inaccurate
payment histories, incorrect social security numbers and
misidentifications. Lastly, most wage garnishments are
derived from default judgments in which the defendant did not
appear or did not have adequate notice.
Under current law debt collectors can garnish the wage of
families who have disposable incomes above $217 a week or $942
a month. A salary at this level represents just 49 Ýpercent]
of the federal poverty level for a family of four. In most
communities in California this income level is insufficient to
pay the Fair Market Rent for a two bedroom apartment. When
food, utilities, insurance, clothing and other necessities are
added in it is obvious that families at this income level do
not have any disposable income to be garnished.
2. Increasing amount of disposable earnings exempt from
garnishment
This bill would increase the amount of a judgment debtor's
disposable earnings that is exempt from garnishment to 40 times
the state minimum wage rate. Existing law restricts the amount
of a judgment debtor's earnings that may be garnished to the
amount provided under federal law. (Code Civ. Proc. Sec.
706.050.) Existing federal law restricts the amount of
disposable earnings of a judgment debtor that may be garnished
for any workweek to 25 percent of the judgment debtor's
disposable earnings for that week or the amount by which the
judgment debtor's disposable earnings for that week exceed 30
times the federal minimum hourly wage, whichever is less. (15
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U.S.C.S. Sec. 1673.)
The author argues that, under existing law, judgment debtors
only have garnishment protection of $217.50 (currently 30 x
$7.25) per week, which is not enough for the judgment debtor to
pay for rent, food, and medicine. This bill would provide
greater consumer protection from a judgment creditor by raising
the wage garnishment protection to $320 per week. This amount
is based on California's minimum wage of $8.00 per hour instead
of the lower federal minimum wage of $7.25 per hour. This bill
would not change garnishment laws for unpaid spousal or child
support.
Case law has held that, if the federal garnishment exemption
percentage differs from the state garnishment exemption
percentage, "whichever is more restrictive and results in
smaller garnishment is one which must be applied in any given
situation. (Willhite v. Willhite (1976, Okla.) 546 P.2d 612,
616.) Federal law provides for a garnishment exemption of 30
times the federal minimum hourly wage. This bill, by providing
for a garnishment exemption of 40 times the California minimum
hourly wage, would provide more restriction on garnished wages
and would result in a smaller amount of disposable earnings that
may be garnished.
The author points out that many other states have greater
protection for judgment debtors and provide varying exemptions
from garnishment so that the judgment debtors do not go into
greater debt trying to sustain themselves and their families
while paying for the judgment. Pennsylvania, Texas, North
Carolina, and South Carolina do not allow wage garnishment for
consumer debts. The following states permit varying levels of
garnishment, which are lower than California: New York permits
only 10 percent garnishment; Delaware, 15 percent; and Illinois,
15 percent. Illinois protects earnings up to 45 times the
federal minimum wage, which amounts to $326.00 per week
protected from garnishment. Given the number of states which
protect higher levels of income from garnishment, the
protections provided in this bill would not be unprecedented.
Although California currently is not the leader in providing
disposable earnings exemptions from wage garnishment, California
is the fifth most expensive state in which to live and is the
location of four of the top ten most expensive cities in the
United States. The Public Law Center, a supporter of this bill,
states that a family of four living on the existing exempted
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wages of $217.50 per week would find living in Orange County "a
nearly impossible feat, considering the average rent for a
family of four in Orange County is about $1,600 per month;
almost twice what a wage earner with a garnishment order would
be receiving. In Orange County, the living wage for a single
adult without children is $553.60 per week - again more than
twice what a wage earner with a garnishment order would bring
home.
Legal Services of Northern California, a supporter of this bill,
reports that "the living wage for a single adult without
children in some of our service areas is $412.40 for Yolo
County, $417.20 in Sacramento County, and $450 in Solano County.
The current protected amount Ýfrom wage garnishment] covers
only 50 Ýpercent] of the wages necessary for our clients to
support the very basic needs of themselves and their families."
As such, it is not difficult to comprehend that judgment debtors
who are subject to the existing wage garnishment exemption
provision are finding it exceedingly difficult to provide for
themselves and their families.
The California Advocates for Nursing Home Reform, in support of
this bill, state that the modest raise of wage garnishment
exemption provided in this bill, "families could prevent much
unnecessary suffering, including hunger, evictions,
repossessions, and bankruptcies - very important considerations
under today's economic climate." The California Labor
Federation, also in support of this bill, argues that "Ýt]he
severe recession has pushed many families into financial crisis
and they are unable to pay off debt accrued in better economic
times. . . . Basic necessities like rent, food and medicine
become unaffordable and people turn to predatory lenders to
survive. Wage garnishment without a cushion creates a vicious
cycle of debt eventually pushing families into poverty,
homelessness, and illness." This bill, by raising the amount of
disposable income that would be exempt from garnishment, would
provide judgment debtors a better chance at sustaining
themselves and their families while paying on a judgment.
3. Opposition
A coalition of opponents to this bill argue that it is premature
to further modify wage garnishment exemptions until the impacts
of AB 1388 (Wieckowski, Ch. 694, Stats. 2011) are understood.
AB 1388 deleted the exception from the wage garnishment
exemption for common necessaries of life and instead provided an
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exception for wages necessary for the support of the judgment
debtor and his or her family. AB 1388 also added the exception
for debt incurred pursuant to an order or award for the payment
of attorney's fees under specified sections of the Family Code.
CAC argues that AB 1388 "added undue restrictions on the ability
to collect on judgments based on necessaries, thus limiting a
creditor's ability to be reimbursed for ? those services
extended to consumers on credit terms that were previously a
priority over non-necessaries." Opponents argue that this bill
would further exempt even more of a debtor's income from
garnishment and will make it more difficult for creditors to
collect on lawfully owed debts. As with AB 1388, it should be
noted that raising the minimum floor of exempt earnings would
not make debts unenforceable through wage garnishment, or even
stop the garnishment of the portion of wages not exempt from
garnishment.
Opponents of this bill argue that, among other things, "if a
debtor chooses to take goods or services, their obligation
should be to pay for what they have taken. If they truly cannot
because there is a disastrous change in financial circumstances
they can file for bankruptcy." Supporters of this bill argue
that the better public policy is to provide the judgment debtor
with sufficient access to his or her own earnings so that the
judgment debtor is able to support themselves and their
families, rather than increasing debts owed, and so that the
judgment debtor will continue to pay on the judgment with
non-exempt wages, instead of erasing the debt through
bankruptcy. Further, the Consumer Law Project argues that this
bill would help reduce burdens on the court because raising the
amount of wages exempt from garnishment will result in fewer
unlawful detainer actions, automobile repossessions, and
instances of domestic violence related to financial stress.
4. Author's amendments
To maintain consistency throughout the wage garnishment
exemption section revised by this bill, the following author's
amendment would strike "garnishment" and instead provide for
"levy under an earnings withholding order."
Author's Amendments :
1. On page 3, in line 27, delete and replace "garnishment"
with "levy under an earnings withholding order"
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2. On page 3, in line 38, delete and replace "garnishment"
with "levy under an earnings withholding order"
Support : American Federation of State, County and Municipal
Employees; California Advocates for California Labor Federation,
AFL-CIO; Central California Legal Services, Inc.; Inland Empire
Latino Lawyers Association, Inc.; Legal Services of Northern
California; Public Counsel; Public Law Center; Yuba Sutter Legal
Center for Seniors; one individual
Opposition : California Association of Collectors; California
Bankers Association; California Chamber of Commerce; California
Retailers Association; USCB, Inc.
HISTORY
Source : Western Center on Law & Poverty
Related Pending Legislation : SB 890 (Leno, 2011) would enact
the Fair Debt Buyers Practices Act and, among other things,
require certain documents to be provided to a judgment debtor
regarding wage garnishment. This bill is currently at the
Assembly Desk pending referral.
Prior Legislation :
AB 1388 (Wieckowski, Ch. 694, Stats. 2011) See Comment 3.
AB 1321 (Wieckowski, 2011), among other things, would have
required an employer to cease wage withholding of a judgment
debtor to the extent the judgment debtor claimed an exemption
from garnishment. This bill died in the Assembly Appropriations
Committee.
Prior Vote :
Assembly Floor (Ayes 46, Noes 25)
Assembly Committee on Judiciary (Ayes 7, Noes 3)
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