Michigan Garnishment Reform Law Eases Employer Burdens

Author: Rena Pirsos, XpertHR Legal Editor

April 23, 2015

Michigan Governor Rick Snyder has signed two bills into law (H.B. 4119 and H.B. 4120) that reform the state's creditor garnishment process in favor of employers. The new law will apply to garnishment orders issued after September 30. It does not apply to child support orders or state tax levies.

H.B. 4119

Under H.B. 4119, garnishment orders will continue in effect until the full amount of the underlying debt is paid off. Currently, creditor garnishments expire every 182 days, only to be quickly reissued afterwards in most cases. This burdens Michigan employers by making it necessary for them to reprogram their payroll systems every six months to make the required periodic deductions of the amount required to be withheld from a subject employee's pay for each pay period to satisfy the debt. The new law relieves employers by allowing for one-time-only programming for new garnishment orders.

In addition, garnishments not properly served on an employer in accordance with the Michigan Court Rules will not be enforceable. This will eliminate the current problem of garnishments often being mailed to an employer's local or branch offices instead, where mishandling tends to occur and which, in turn, causes processing delays. This should help minimize instances of an employer being harshly penalized for the full amount of an employee's debt for the untimely or improper processing of a wage garnishment.

The frequency of an employer being subject to penalties for making administrative errors in the garnishment-handling process will also likely be minimized under the reform law. Although default judgments will still be allowed against an employer that fails to fully comply with an order, creditors will be required to give employers ample notification, via a multi-step process, when they are not in compliance. Employers will then have 28 days to rectify the situation.

Further, even if a default judgment is entered against an employer by a court, the employer will have 21 days to petition the court to limit the amount of the judgment to the amount that would have been withheld if the garnishment had been in effect for 56 days, rather than entering the judgment for the full amount of the debt. Current law allows creditors to obtain default judgments without giving any advance warning.

Regarding priority of multiple garnishment orders, creditor garnishments will now have priority according to the order in which they were received. However, child support withholding orders and tax levies still have priority over a creditor garnishment order regardless of when received.

Finally, the fee that employers may collect from creditors will increase from the current $6 to $35. This increase will go a long way toward helping employers pay for the administrative costs they incur when processing creditor garnishments.

H.B. 4120

H.B. 4120 allows an employer to withhold funds from an employee's future wage payments if the employer is ordered under a default judgment to pay any part of the employee's debt. The employer may recoup the amount by deducting it from the employee's regularly scheduled wage payment without the employee's written consent, if all of the following conditions are met:

  • The employer provides the employee with a written explanation of the deduction at least one pay period before it is made;
  • The deduction does not exceed 15% of the employee's gross wages earned in the pay period in which the deduction is made;
  • The deduction is made after the employer has made all deductions expressly permitted or required by law or a collective bargaining agreement and after any employee-authorized deductions; and
  • The deduction does not reduce the employee's pay to less than the Michigan or federal minimum wage.