Income Executions – Why Can't I Just Tell Them How Much?
MATRIMONIAL LITIGATION
ISSUES OF INTEREST
Submitted by Ronald A. Phillips, Esq.
Member Family Law Committee
Fellow, American Academy of Matrimonial Lawyers
Income Executions – Why Can't I Just Tell Them How Much?
As part of the overhaul of many laws effecting matrimonial practice (Chapter 398 of the Session Laws of 1997), amendments have been made to CPLR § 5241, CPLR § 5242 and CPLR § 5252. The revisions mandate changes to one of our most useful enforcement devices, the wage execution. In reviewing the recent changes to the law, it becomes more and more apparent that the lawyer must attend the "The Training Academy for Wizards" after attending law school. With each new change to the law, magic words are required to properly implement the law and its intent. Every time there is an amendment to matrimonial law (and many other areas), the legislature mandates new incantations, chants, or spells. With respect to wage deduction orders for child support and medical benefits, there are no less than fifteen (15) separate mandatory notices (incantations), and four (4) statements (chants). I must admit to having "cut" class on the day the master wizard explained the difference between "notices" and "statements" since both seem to mandate identical types of requirements in some instances. Besides including all the notices and statements, you must remember to tell the employer how much to deduct. Unfortunately, I have been practicing in this area of the law so long that I recommend that additional ones be added as "good practice" (spells?). The requirements have been numbered so that you may use this article as a checklist to insure that your wage deduction order meets all of the current requirements.
Before the recent amendments, many notices and statements were required to appear on the income execution. The recent amendments add new ones. First, a review of the existing ones and including the minor revisions. CPLR § 5241 (c), "Execution for support enforcement; form" requires that the following basic information be included on the form.
1. Caption of the Court Order.
2. Entry date of the underlying support order.
3. Name of the court where the support order was entered.
4. Amount of the periodic payments directed to be made by the debtor.
5. Amount of the arrears.
6. Nature of the default (what did the debtor fail to do).
7. Names of the debtor and creditor.
8. The name and address of the employer or income payor.
9. The amount to be deducted for current support, and the amount to be deducted for arrears.
10. Perhaps not specifically stated, but Social Security Numbers must now be assigned at birth and put on everyone's death certificates. They are required on Judgments of Divorce. Certainly, they should be included on a wage execution.
The forgoing information is both easy to obtain, specific to the matter, and obviously necessary. The form would be short if only this was required. Next comes the mandatory "Notices" contained in the subdivisions to CPLR § 5241 (c) (1).
11. A notice that "Deductions will apply to current and subsequent income".
12. A notice that "The execution will be served upon any current or subsequent employer or income payor unless a mistake of fact is shown within fifteen (15) days".
13. A notice of the manner in which a mistake of fact may be asserted and a notice that "if the debtor claims a mistake of fact, a determination will be made within forty-five (45) days after service of the wage execution upon the debtor". Specifically, a notice that states:
Where this execution has been issued by the support collection unit, the debtor may assert a mistake of fact and shall have an opportunity to make a submission in support of the objection within fifteen (15) days from service of a copy hereof. Thereafter, the agency shall determine the merits of the objection, and shall notify the debtor of its determination within forty-five (45) days after notice to the debtor as provided in CPLR § 5241 (d). If the objection is disallowed, the debtor shall be notified in writing that the income execution will be served on the employer or income payor, and of the time that deductions will begin.
Where the income execution has been issued by an attorney as an officer of the court, or by the sheriff, or by the clerk of the court, the debtor may assert a mistake of fact within fifteen (15) days from service of a copy thereof by application to the supreme court or to the family court having jurisdiction in accordance with FCA § 461. If application is made to the family court, it shall be heard and determined in accordance with the provisions of Family Court Act § 439 and a determination thereof shall be made, and the debtor notified thereof within forty five (45) days of the application. If application is made to the Supreme Court, such application shall be by petition on notice to the creditor and, it shall be heard and determined in accordance with Article Four of the Civil Practice Law and Rules, and a determination thereof shall be made, and the debtor notified thereof within forty-five (45) days of the application. The debtor will receive written notice whether the execution will be served and of the time that deductions will begin.
14. A notice that the employer or income payor must commence deductions no later than the first pay period that occurs after fourteen (14) days following the service of the execution and that payment must be remitted within seven (7) business days of the date that the debtor is paid. The seven (7) days is new, and the legislature now defines a "business day". Since a "business day" is a day when the state offices are open, this definition should be added to the wage execution. While this is not required, it will reduce claims by the employer that he/she wasn't open for business for whatever reason (slow time, vacation, death in the family, etc.) and that he/she still has time to comply. Since you may now go after the employer or income payor for failure to comply, it is important to eliminate possible employer "excuses".
15. A notice that "the execution is binding until further notice".
16. A notice of the substance of the provisions of CPLR § 5252 and that "a violation is punishable as a contempt of court by fine or imprisonment or both". This is a warning directed to the employer that he/she can't discriminate against an employee because of a wage deduction order. The proper way to handle this notice is to include a copy of CPLR § 5252 on the wage execution. Said section as recently amended reads as follows:
1. No employer shall discharge, lay off, refuse to promote, or discipline an employee or refuse to hire a prospective employee because one or more wage assignments or income executions have been served upon such employee or a former employee against the employee's or prospective employee's wages or because of the pendency of any action or judgment against such employee or prospective employee for nonpayment of any alleged contractual obligation. In addition to being subject to the civil action authorized in subdivision two of this section, where any employer discharges, lays off, refuses to promote or disciplines an employee or refuses to hire a prospective employee because of the existence of one or more income executions and/or income deduction orders issued pursuant to section fifty-two hundred forty-one or fifty-two hundred forty-two of this article, the court may direct the payment of a fine not to exceed five hundred dollars of the first instance and one thousand dollars per instance for the second and subsequent instances of employer or income payor discrimination.
2. Any employee or prospective employee may institute a civil action for damages for wages lost as a result of a violation of this section within ninety (90) days after such violation. Damages recoverable shall not exceed lost wages for six weeks and in such action the court also may order the reinstatement of such discharged employee or the hiring of such prospective employee. Except as provided for in subdivision (g) of section fifty-two hundred forty-one, not more than ten (10%) percent of the damages recovered in such action shall be subject to any claims, attachments or executions by any creditors, judgment creditors or assignees of such employee or prospective employee. A violation of this section may also be punished as a contempt of court pursuant to the provisions of section seven hundred fifty-three of the judiciary law.
A violation of CPLR § 5252 is punishable as a contempt of court by fine or imprisonment or both.
17. The next notice required is a notice indicating "the limitations upon deductions from wages" as set forth in CPLR § 5241 (g), "Deduction from income". Again, the best way to handle this requirement is to include copies of CPLR § 5241 (l) (i) and (ii) on the wage execution. Said sections read as follows:
(1) Where a debtor is currently supporting a spouse or dependent child other than the creditor, the amount of the deductions to be withheld shall not exceed fifty (50%) percent of the earnings of the debtor remaining after the deduction therefrom of any amounts required by law to be withheld ("disposable earnings"), except that if any part of such deduction is to be applied to the reduction of arrears which shall have accrued more than twelve (12) weeks prior to the beginning of the week for which such earnings are payable, the amount of such deduction shall not exceed fifty-five (55%) percent of disposable earnings.
(2) Where a debtor is not currently supporting a spouse or dependent child other than the creditor, the amount of the deductions to be withheld shall not exceed sixty (60) percent of the earnings of the debtor remaining after the deduction therefrom of any amounts required by law to be withheld ("disposable earnings"), except that if any part of such deduction is to be applied to the reduction of arrears which shall have accrued more than twelve (12) weeks prior to the beginning of the week for which such earnings are payable, the amount of such deduction shall not exceed sixth-five (65%) percent of disposable earnings.
18. The next notice is that an employer must notify the issuer promptly when the debtor terminates employment and provide the debtor's last address and the name and address of the new employer, if known. This requirement is satisfied by including language such as the following:
"Pursuant to CPLR § 5241, an employer or income payor must notify the issuer promptly when the debtor terminates employment and provide the debtor's last address and the name and address of the new employer, if known.
Issued by:
Support Collection Unit Sheriff Clerk of the Court Attorney for Creditor"
19 & 20. Chapter 398 also added new notices in that they added two additional sections to CPLR § 5241 (c) (1); namely (x) (and its subsections) and (xi).
Said sections read as follows:
(x) a notice that when an employer receives and income withholding instrument issued by another state, the employer shall apply the income withholding law of the state of the debtor's principal place of employment in determining:
A. the employer's fee for processing income withholding;
B. the maximum amount permitted to be withheld from the debtor's income;
C. the time periods within which the employer must implement the income withholding and forward the child support payment;
D. the priorities for withholding and allocating income withheld for multiple child support creditors; and
E. any withholding terms or conditions not specified in the withholding instrument; and
(xi) a notice that an employer who complies with an income withholding notice that is regular on its face shall not be subject to civil liability to any individual or agency for conduct in compliance with the notice.
These new requirements are interesting and fraught with possible danger. While the "Fortune Five Hundred" companies will set up new subdivisions of their legal departments to handle wage deduction orders and determination of which law to apply in interstate cases, the small companies are going to call the issuer with questions pertaining to "fees" they can charge, "maximum that can be withheld" in their jurisdiction, "time periods" for compliance, "priorities for withholding and allocating income", and certainly, "any withholding terms or conditions not specified in the withholding instrument" (since these terms are based upon the law in the employer's jurisdiction [location where the employee works]). Certainly, a New York attorney may not know the law with respect to our surrounding sister states.
Some states, particularly New Jersey, judiciously guard against the "practice of law by non-lawyers" (read this as New York attorneys not admitted to practice law in that state). Will explaining the law to a New Jersey employer be deemed practicing law without a license? Will the attorney have to contact a New Jersey attorney to determine the answer to the question? Will the employer be excused from complying within any time-frames mandated by either jurisdiction (lawyer's or employee's) until he/she receives answers to his/her questions? Certainly, you can't expect the employer to contact his/her lawyer and pay him a fee to review your wage deduction order. These are but some of the questions that arise.
21. The provisions with respect to "medical support" include both "notices" and "statements". You must include a notice that says: "the debtor has been ordered to enroll the dependents in any available health insurance benefits and to maintain such coverage for such dependents as long as such benefits remain available".
22. You must also include a statement directing the employer to purchase the medical insurance coverage where available and to enroll eligible family members in the plan and issue the necessary identification cards. A statement that says in words or substance the following:
"You (name of employer), must purchase on behalf of the debtor any available health insurance benefits to be made available to the debtor's dependents as directed by the execution, including the enrollment of such eligible dependents in such benefit plans and the provision to the issuer of the execution of any identification cards and benefit claim forms". Of course, the employer will ask "which plan option?" when there are several options. Some optional but contributory plans may be so "feature rich" that their cost may be prohibitive (designed for older executives with greater health risks in small companies). There may be plans that require a party to be treated by a physician in an HMO (the nearest doctor may be hundreds of miles away). Who determines the options?
22. You must include a statement that says in words or substance, the following: "You (name of employer), must deduct from the debtor's income such amount which is the debtor's share of the premium, if any, for such health insurance benefits who are otherwise eligible for such coverage without regard to any seasonal enrollment restrictions". This too is an interesting requirement; since contributions are based upon ratio of income, you will be required to indicate the percentage that the debtor is required to contribute and allow the employer to determine how much this will be. If you were to supply an amount, changes in costs and changes in ratio of income (assuming the payments to be adjustable) will require amended wage executions to be filed. Will the client's now be required to keep their matrimonial attorney's on retainer?
23. A notice must be included that "You, (name of employer), must notify the issuer promptly at any time the debtor terminates or changes such health insurance benefits". You, the attorney are the issuer. When you receive notice that the employer is changing plans and there are several options, what do you do? Pick the most costly or the one that best suits your client's needs. How do you determine this?
24. You must include a statement that says in words or substance, the following: "You, (name of employer) shall not be required to purchase or otherwise acquire health insurance or health insurance benefits that would not otherwise be available to the debtor by reason of his employment or membership".
25. You must include a statement to the employer or income payor that says in words or substance, the following: "Your failure to enroll the eligible dependents in such health plan or benefits or failure to deduct from the debtor's income the debtor's share of the premium for such plan or benefits shall make such organization jointly and severally liable for all medical expenses incurred on the behalf of the debtor's dependents named in the execution while such dependents are not so enrolled to the extent of the insurance benefits that should have been provided under the execution". Obviously, this statement is really a WARNING. Should it be put under "Warnings to Employer or Income Payor"? Oh yes; together with the warnings which are not required but which fall under the category of "good practice".
26. Among the things that should be added to the income execution are the definitions of "income" and the definition of "business day". Years ago, employers friendly to the worker might reject a wage execution claiming the worker was an "independent contractor" or a "commissioned salesperson" (employee received a 1099 Misc. income statement rather than a W-2). They generally reversed their position when served with a property execution. However, why have to explain what "income" consists of after your client doesn't receive the check in accordance with the withholding timetable. Put the definition of income in the wage deduction order. The second definition that is really mandatory (although not required by statute) is the definition of business day. It is not the employer's business day, but the state's business days. The employer's vacation doesn't extend the withholding; if the employer is only open one (1) day a week, he/she doesn't get seven (7) weeks to start withholding. Why is it important? Because finally, you can go after the employer for not withholding. We have all had the small employer who has never heard of the employee who shows up every morning and has worked for him/her for years. They apparently operated under the "what are they going to do to me theory?". Now, there is something you can do. While, the courts will probably accept every single excuse offered by the employer the first time around, the warnings proposed are designed to limit those excuses. The first time around, the court would probably accept the excuse that "That piece of paper contains 15 notices, 4 statements, and several warnings; you can't expect me to know what's in there! I have a limited education; I'm not a wizard you know!" Only where an employer habitually ignores the law will the courts impose penalties on the employer. The penalties are FIVE HUNDRED AND 00/100 DOLLARS ($500.00) for the first transgression and ONE THOUSAND AND 00/100 DOLLARS ($1,000.00) for the second and each subsequent transgression. However, the warnings may limit the number of employers who fail to comply with the wage execution. Those warnings should include the following:
27. Warning to Employer or Income Payor
A. An employer or income payor served with an income execution in accordance with paragraph one of CPLR § 5241 shall be liable to the creditor for failure to deduct the amounts specified. The creditor may commence a proceeding against the employer or income payor for accrued deductions, together with interest and reasonable attorneys fees.
B. An employer or income payor served with an income execution in accordance with paragraph one of CPLR § 5241 shall be liable to the creditor and the debtor for failure to remit any amounts which have been deducted as directed by the income execution. Either party may commence a proceeding against the employer or income payor for accrued deductions, together with interest and reasonable attorney's fees.
C. In addition to the remedies set forth in subparagraphs A. and B. above, upon a finding by a court of competent jurisdiction that the employer or income payor failed to deduct or remit deductions as specified in the income execution, the court shall issue to the employer or income payor an order directing compliance and may direct the payment of a fine not to exceed five hundred ($500.00) dollars for the first instance and one thousand ($1000.00) dollars per instance for the second and subsequent instances of employer or income payor noncompliance.
So, you may ask, what is the big change. The debtor could not object to anything except incorrect amounts. He couldn't challenge the form or technical defects. Now, the employer can be held liable for the support and fined for a failure to properly comply. Attacks will be made on the income execution itself by employers should someone seek to enforce that portion of the law that makes them, the income payors, responsible too. Will the courts indicate that the employers or income payors cannot be held responsible for support unless all 15 notices and 4 statements are included? Will some court engraft some of the warning language suggested herein, or similar warning language onto the statutory requirements. A new group can now attack a wage execution and they can attack it based upon technical objections, something the debtor has not been able to do. If someone can attack it, someone will attack it, especially if a creditor is seeking to make the employer pay.
Under the revisions, the statute makes it clear that you may now serve an execution upon a pension administrator to obtain support from a debtor's pension fund which is in "pay status" (see definition of income CPLR § 5241 (a) 6.). This is not a change in the law but merely a formal codification of existing law. While some attorneys believed that a pension fund in pay status was not subject to garnishment, this belief was usually based upon service of a state court order upon the pension administrator that did not qualify as a QDRO. The pension administrator would send back a totally misleading letter that the debtor's benefits could not be touched in that they were exempt under ERISA. Generally, this is true; except for child support, maintenance (alimony), or a distribution of marital property (see 29 USCA 1056, Form and payment of benefits). 29 USCA 1056 (C) sets forth what must be included by way of information; 29 USCA 1056 (D), sets forth the "magic words" as to the negatives that must be stated. Meet both requirements and you can garnish a pension in pay status. The key was to make the wage execution comply with ERISA just like a QDRO dividing property. What were the requirements? The names and addresses of the debtor and creditor, best referred to as the "Plan Participant" and the "Alternate Payee". The name of the plan. The social security numbers of the "Plan Participant" and the "Alternate Payee" and their full mailing addresses. And of course, last but certainly not least, the "magic words"
"That this wage deduction order is not intended to alter the amount or form of benefits received by the "Plan Participant" nor to compel the plan (or plan administrator) to provide any form of benefit, or any option, not otherwise provided under the plan. It is also not intended to compel the plan (or plan administrator) to provide any increased benefits based upon actuarial value or otherwise. This order doesn't require or compel the plan (or plan administrator) to make payments to the "alternate payee" listed above of any benefits which are required to be paid to any other alternate payee under any order previously determined to be a Qualified Domestic Relations Order."
The foregoing was the combination that opened the vault to the pension fund. The only thing that has changed by including the pensions in the definition of income is that the misleading letter from the pension administrator won't work. The attorneys who receive that letter now will not simply go away. However, what they will find is that you will still be required to comply with ERISA. You won't get the money until you meet the requirements set forth in 29 USCA 1056. Just as our QDRO's dividing property are written to comply with ERISA, our wage executions must comply. "The Training Academy for Wizards" would never have been formed but for federal funding. It is the federal mandates and threats of cutting off federal funds to the states that cause our laws to contain much of the "magic words".
To summarize the foregoing, when you have a simple income execution to do, follow the rules set forth herein, or go to a forms company such as Julius Blumberg, Inc. and get a current pad of forms (that one that you have been improperly photocopying for the last decade won't pass muster. Buy a new pad!). When you have a complicated or interstate income execution to do, advise your client to apply for support services and let SCU handle it, at least until some of the possible problems are resolved (SCU is not going to like this response in that their work load is already going to increase dramatically as a result of Chapter 398). However, this advice may save your client substantial counsel fees and you substantial headaches.
P.S. I have come to the conclusion that I can't be brief; Sorry!