Why it matters

In promising news for employers, the Uniform Law Commission finalized approval of the Uniform Wage Garnishment Act (UWGA). If adopted by the state legislatures, the UWGA would provide national uniformity for employers garnishing the wages of workers, with consistent legal definitions, court procedures, and forms. The Act would establish jurisdiction for a garnishment action to be initiated in the state where the employee works and clarifies that garnishments apply to payments made to independent contractors, protected by the applicable deduction maximum. Employers would receive a notice of failure to comply with a garnishment and would be provided with the opportunity to achieve compliance before being held liable for an error, with penalties capped at the amount of the garnishment per day.

Detailed discussion

“For a lot of companies, even relatively small businesses if they operate in more than one state, payroll is handled centrally rather than in individual offices,” the Wage Garnishment Act Committee of the Uniform Law Commission (ULC) explained in its mission statement. “Wage garnishments, however, are governed by widely varying law in all of the states, and this creates difficulties and inefficiencies in complying with wage garnishment orders.”

To alleviate such problems, the Committee spent three years studying and drafting a proposed law, releasing the Uniform Wage Garnishment Act (UWGA) for approval and enactment in all 50 states (plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands).

The proposed statute would decrease costs and risks for employers by providing national uniformity and consistency in handling wage garnishments.

Pursuant to the UWGA, jurisdiction would be established in the state of the employee’s principal place of work. This change—from the current possibility that garnishment actions can be initiated in any state where the employer is present, regardless of the employee’s location—limits the number of states to which an employer may need to answer.

The proposal establishes who must be served with the garnishment motion (an employer’s registered agent) and what the motion must include, including the name of the employee, the amount the creditor claims is owed, “information sufficient to identify the judgment on which the garnishment action is based,” and a notice for the employee that satisfies the UWGA. That notice, with an example in Section 308 of the proposed law, provides a worker with necessary information (how much is owed, what options are available) in a reader-friendly format.

Under the UWGA, payments to independent contractors for personal services are subject to garnishment and protected by the applicable deduction maximum. Drafters also included a calculation worksheet for employers, who may need to provide a copy to employees or creditors upon request. If an employer withholds earnings from more than one employee for the same creditor, the employer may combine the amounts in one payment to the creditor, so long as the amount attributable to each employee is specified.

The proposed law also placed boundaries on the extent of an employer’s liability. Prior to being held liable, an employer will receive a notice of failure to comply with a garnishment motion and will be given the chance to achieve compliance. Penalties under the UWGA range from $5 per day for failure to comply to the amount of the garnishment.

Employers are prohibited from discharging or taking other adverse action against an employee because of a garnishment or attempted garnishment, according to the UWGA.

To read the proposed UWGA, click here.