30 July 2015

New Laws Provide Relief for Employers Complying With Wage Garnishments

Employers attempting to navigate Michigan’s wage garnishment laws quickly learn that legal compliance can be complex and risky. Indeed, if an employer does not timely answer or fully comply with a garnishment, it may be subject to a judgment against it for the full amount of the employee’s debt. This is a high price to pay for employers, particularly where noncompliance is often the result of administrative error.

In April 2015, employers were granted some relief from these stringent requirements and penalties when Michigan Governor Rick Snyder signed into law two bills that will effectively reduce the administrative burden and financial risk for employers complying with wage garnishments. These changes are outlined below and take effect on September 30, 2015.

Continuing Garnishment. Wage garnishments will now continue until paid off rather than expiring after six months. This will significantly reduce the administrative burden and risk involved with receiving and properly administering multiple garnishments over the time it takes to pay off a debt.

Increased Fee for Creditors. The fee that creditors have to pay employers complying with garnishments will increase from $6 to $35. This amount will more effectively compensate employers for administrative costs associated with garnishments.

Recovery by Withholding. Employers will be allowed to recoup any money paid for a default judgment resulting from a failure to comply with a garnishment by withholding that amount from the employee’s wages without written consent from the employee.

This not only allows employers to recover this expense but also reduces the administrative burden associated with recovering the expense.

Proper Service Required. Wage garnishments will now have to be properly served on employers in accordance with the Michigan Court Rules. If the Court Rules are not followed, the garnishment will be void. This eliminates the possibility that garnishments might be mailed to branches or local offices where the likelihood of mismanagement is dramatically higher.

Multi-step Process for Creditors. Creditors will now need to undertake a multi-step process that includes giving the employer multiple warnings and opportunities to achieve compliance before an employer can be liable for failing to comply with a garnishment. Previously, there was little to prevent creditors from obtaining default judgments against employers quickly and without notice that were difficult to set aside or reduce.

If a default judgment is taken against the employer consistent with the multi-step process noted above, employers will now have an opportunity to petition the court to reduce the default judgment to an amount not more than that which would have been withheld if the garnishment had been in effect for 56 days. This could dramatically reduce an employer’s financial risk for failing to fully comply with a garnishment.

Miller Johnson attorneys can help employers take advantage of these welcome changes to Michigan law. If you have questions regarding wage garnishment, contact the authors of this article or another member of Miller Johnson’s wage and hour practice group.