BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1775
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 1775 (Wieckowski)
          As Amended June 21, 2012
          Majority vote 
           
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          |ASSEMBLY:  |46-25|(April 23,      |SENATE: |22-16|(August 20,    |
          |           |     |2012)           |        |     |2012)          |
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           Original Committee Reference:    JUD.  

           SUMMARY  :  Increases the amount of a judgment debtor's weekly 
          earnings that are exempt from levy under an earnings withholding 
          order from 30 times the federal minimum wage to 40 times the 
          California minimum wage.  Specifically,  this bill  :

          1)Provides that the maximum amount of disposable earnings of a 
            judgment debtor for any work week that is subject to levy 
            under an earnings withholding order shall not exceed the 
            lesser of the following amounts:

             a)   Twenty-five percent of the individual's disposable 
               earnings for that week; or,

             b)   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.

          2)Defines "disposable earnings" as the portion of an 
            individual's earnings that remains after deducting all amounts 
            required to be withheld by law.

          3)Specifies the multipliers to be used to determine the maximum 
            amounts of disposable earnings subject to garnishment that are 
            proportionally equivalent for pay periods of different 
            intervals, other than a weekly pay period, and requires the 
            Judicial Council to provide instructions on how to compute 
            these amounts in the Employer's Instructions document required 
            under existing law.

           The Senate amendments  replace the term "garnishment" with the 
          equivalent term "levy under an earnings withholding order" in 
          order to maintain consistency in terminology used throughout the 
          section of law amended by this bill.








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          EXISTING LAW  :  

          1)Provides that the amount of earnings of a judgment debtor 
            exempt from the levy of an earnings withholding order, except 
            as specified, shall be that amount that may not be withheld 
            from the judgment debtor's earnings under federal law in 
            Section 1673(a) of Title 15 of the United States Code 
            (U.S.C.).



          2)Provides that the maximum part of the aggregate disposable 
            earnings of an individual for any work week which is subject 
            to garnishment may not exceed 25% of his or her disposable 
            earnings for that week, or the amount by which his or her 
            disposable earnings for that week exceed 30 times the federal 
            minimum hourly wage in effect at the time the earnings are 
            payable, whichever is less.  

           AS PASSED BY THE ASSEMBLY  , this bill was substantially similar 
          to the version approved by the Senate.
           
          FISCAL EFFECT  :  None
           
          COMMENTS  :  This bill, sponsored by the Western Center on Law and 
          Poverty, seeks to increase the so-called "garnishment floor" in 
          California-that is, to increase the minimum amount of a judgment 
          debtor's weekly earnings that are exempt from wage garnishment 
          as a matter of law.  Currently, California law conforms with 
          federal law, 15 U.S.C. Section 1673(a), in establishing this 
          amount at 30 times the federal minimum wage.  This bill seeks to 
          break lockstep with federal law and increase this amount in 
          California law to 40 times the California minimum wage.  Because 
          the current federal minimum wage is $7.25/hour and the current 
          California minimum wage is $8.00/hour, this bill would 
          effectively increase the garnishment floor in California from 
          $217.50 (i.e., 30 x $7.25) to $320 (i.e., 40 x $8.00).

          According to the author, the working poor in California simply 
          cannot make ends meet if their wages are garnished to satisfy a 
          consumer debt because existing law only protects $217.50 per 
          week from wage garnishment.  The author states, "In nearly every 
          county in California, $217.50 a week is not even considered a 
          living wage for a single adult without children.  AB 1775 








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          modestly raises the garnishment floor with the result being that 
          the first $320 of a person's weekly wages is exempt from 
          garnishment.  This reasonable increase is still below what is 
          considered a living wage for a single Californian, but for a 
          family trying to survive on a minimum wage salary, it could mean 
          the ability to cover both groceries and medicine, or both rent 
          and clothing."

          Under existing law, the first 30 hours of a person's federal 
          minimum wage earnings (currently at $7.25/hour) are exempt from 
          garnishment.  Instead, this bill applies the California minimum 
          wage instead (currently $8.00/hour) and exempts the first 40 
          hours of wage earnings.  Under existing law, the creditor may 
          garnish either the entire amount of weekly earnings between the 
          floor ($217.50) and 40 times the federal minimum wage ($290), or 
          a maximum of 25% of the earnings if they exceed the $290 
          figure-whichever amount is less.  Although this bill would raise 
          the garnishment floor, the bill preserves the proportionately 
          equivalent formula for determining the amount to be withheld-all 
          arising from using the new garnishment floor of $320 in the 
          appropriate calculations.

          The existing "Employer Instructions" form (Judicial Council form 
          WG-002) contains a table that is intended to help employers 
          determine the correct amount of earnings to withhold based on 
          the amount of disposable earnings and the length of the employee 
          pay period.  For reference, the table below reflects the updated 
          amounts that would become effective if this bill were to become 
          law in its current form.

          TABLE 1: California minimum wage:  $8.00 per hour

            ----------------------------------------------------------------- 
           |   PAY    |  Daily   | Weekly  |Every Two | Twice a  |  Monthly  |
           |  PERIOD  |          |         |  Weeks   |  Month   |           |
           |----------+----------+---------+----------+----------+-----------|
           |DISPOSABLE|$0 - $320 |  $0 -   |$0 - $640 |   $0 -   |   $0 -    |
           | EARNINGS |          |  $320   |          | $693.33  | $1,386.67 |
           |----------+----------+---------+----------+----------+-----------|
           |WITHHOLD  |   None   |  None   |   None   |   None   |   None    |
           |----------+----------+---------+----------+----------+-----------|
           |DISPOSABLE|$320.01 - | $320.01 |$640.01 - |$693.34 - | $1,386.68 |
           | EARNINGS | $426.67  |    -    | $853.01  | $924.44  |     -     |
           |          |          | $426.67 |          |          | $1,848.89 |
           |----------+----------+---------+----------+----------+-----------|








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           |WITHHOLD  |  Amount  | Amount  |  Amount  |  Amount  |  Amount   |
           |          |  above   |  above  |  above   |  above   |   above   |
           |          |   $320   |  $320   |   $640   | $693.33  | $1,386.67 |
           |----------+----------+---------+----------+----------+-----------|
           |DISPOSABLE| $426.68  | $426.68 | $853.02  | $924.45  | $1,848.90 |
           | EARNINGS | or more  | or more | or more  | or more  |  or more  |
           |----------+----------+---------+----------+----------+-----------|
           |WITHHOLD  | Maximum  | Maximum | Maximum  | Maximum  |Maximum of |
           |          |of 25% of | of 25%  |of 25% of |of 25% of |  25% of   |
           |          |Disposable|   of    |Disposable|Disposable|Disposable |
           |          | Earnings |Disposabl| Earnings | Earnings |Earnings   |
           |          |          |    e    |          |          |           |
           |          |          |Earnings |          |          |           |
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          Because existing California law incorporates by reference the 
          federal rule and formula for calculating earnings to be 
          withheld, the bill establishes a new California rule to:  1) 
          adopt the federal definition of "disposable earnings"; and, 2) 
          specify the mathematical multipliers that are used to calculate 
          equivalent amounts when converting weekly earnings into 
          equivalent figures for pay periods other than every week.

          Finally, at the request of Judicial Council, this bill delays 
          operation of these provisions until July 1, 2013, in order to 
          give the Council more time to update all relevant wage 
          garnishment forms.

          The California Association of Collectors (CAC) writes in 
          opposition, "This bill is premature . . . and undermines the 
          fundamental principles of personal responsibility, and also 
          undermines the business community's ability to provide credit 
          for goods and services by removing important tools necessary to 
          enforce legitimate and undisputed financial obligations."  CAC 
          also asserts its long-standing position that exemptions from 
          wage garnishment are bad public policy because they simply allow 
          debtors to avoid paying creditors for goods or services already 
          rendered, in cases where a court has already issued a judgment 
          to satisfy a valid debt.

           
          Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334 


                                                                FN: 0004237








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