Garnishment Reform Awaits Governor’s Signature; Good News for Employers

March 29, 2015

Legislation championed by the Michigan Chamber to reform Michigan’s wage garnishment system overwhelmingly passed the State Senate last week by a vote of 37-0. The bills are now on Gov. Snyder’s desk and we have every reason to believe he will sign them.

The wage garnishment process is a growing issue for many Michigan employers and can be time intensive and costly. For a one-time $6 payment, employers are required to process employee garnishments, respond to court orders, calculate and withhold from employee’s paychecks for 182-days, and make payments to creditors.

One small administrative mistake can expose an employer to the risk of being held liable for the entire bad debt of an employee, former employee or even someone they’ve never met – plus court costs and attorney fees. Two of the most extreme examples brought to our attention by members involved a $596,000 default judgment against an employer for the bad debt of an employee; the other involved a $264,000 default judgment against an employer for the bad debt of a non-employee.

House Bills 4119 and 4120 (Reps. Garcia and McCready) fix several of the issues employers face with the current garnishment process, including:

  • The bills essentially put an end to the practice of allowing creditors to pursue a default judgment against the full bad debt of an employee by requiring several notices to the employer of its failure to garnish and give ample opportunity to employers to cure their errors.
  • The bills specify that a Writ of Garnishment would continue until the debt is paid off (current practice requires renewal every 182 days) and increase the fee creditors pay to administer garnishments from $6 every 182 days to a flat $35 fee.
  • The bills make the service of garnishment consistent with the service of other legal documents.
  • The bills define “garnishment” to help the courts and others better identify what types of court orders qualify as a garnishment, thereby requiring third parties and/or employers to withhold income and remit payment.

This legislation is a real solution to a real problem our members are facing and is intended to address the most serious issues and financial risks associated with the garnishment process while still ensuring the right of creditors to collect monies owed to them. The Michigan Chamber is urging the Michigan Senate to take swift action on this proposal.

For more information, contact Wendy Block at (517) 371-7678 or wblock@michamber.com.