Changes Make Michigan Garnishment Law More Forgiving to Employers
Technical rules governing garnishments were a bit tricky and often tripped up companies that received garnishment demands. Recent changes that took effect in September, 2015 are more forgiving. Note that garnishments come in two varieties: non-periodic and periodic. Non-periodic garnishments are most commonly sent to banks—and grab whatever funds are in the account for the creditor. A debtor’s paycheck is a common example of a periodic garnishment. The changes in the law only affected periodic garnishments. What do the changes mean for an employer who might receive a garnishment of their employee’s wages?
Certain procedures of the garnishment process changed. The new law requires a more formal process for sending garnishment demands, reducing the likelihood that garnishments are misplaced or mishandled. A garnishment continues until the judgment amount is paid in full. The creditor will send both the employer and the debtor a statement every six months showing the remaining balance. When the judgment is paid in full, the creditor must send a release of the garnishment to the employer.
Most importantly, the employer is less likely to become liable for the employee’s debt. Under the prior law, an employer could become fully liable for the debt if it failed to respond to a garnishment within just two weeks. The new timeline for responding is more flexible.
Before an employer can be liable for the debt, the law requires more notice to the employer. A creditor can still request a default judgment if the employer is unresponsive. At any time before entry of the default judgment against the employer, the employer can avoid liability by submitting a disclosure or by withholding the wages. Even if a creditor succeeds in obtaining a judgment against an employer, the employer has the opportunity to set aside the default judgment due to a good faith mistake or other reason that prevented the employer from responding.
As a last resort, the employer can recover against the employee’s future wages for any debt it paid on the employee’s behalf. However, the employer must comply with rules that require proper notice to the employee. Employers should not ignore garnishments believing that they will collect from the employee later.
Even though the new law provides more time and notice before an employer can be liable for an employee’s debt, it is still possible. Employers are wise to implement a plan to handle garnishments before they receive one.