14.2.1.4.1 Wages, vacation pay, sick pay

36 15 U.S.C. § 1672(a).

37 EARNINGS: United States v. Ashcraft, 732 F.3d 860 (8th Cir. 2013) (question is whether payments are compensation for personal services, not whether they are labeled as wages); Shearin v. Beaman, 323 B.R. 917 (E.D.N.C. 2004) (North Carolina exemption of earnings for personal services would exempt portion of year-end bonus but not interest in capital account of partnership), aff’d, 126 Fed. Appx. 640 (4th Cir. 2005) (per curiam); Ighnat v. Ighnat, 1989 WL 34733 (Ohio Ct. App. Apr. 11, 1989) (profit-sharing proceeds were “earnings” protected by CCPA and Ohio law, even when garnishment was for child support and alimony). See also Bueno v. Pyle, 2001 WL 1544455 (10th Cir. Dec. 5, 2001) (Colorado garnishment limitation applies only to earnings; state tax authorities could garnish prison inmate’s account, which contained gifts); Rooney v. Rooney, 669 N.W.2d 362 (Minn. Ct. App. 2003) (church was employer and payer within meaning of child support garnishment statute; it required members to give up all individual property and provided for their needs; obligor was doing work for the church). Cf. Cadle Co. v. G & G Assocs., 757 So. 2d 1278 (Fla. Dist. Ct. App. 2000) (evidentiary hearing required to determine if sums held by employer for “expense reimbursement,” “reimbursement for investment,” and “capital account” were earnings under Florida statute); Bartel v. Zucktriegal, 47 P.3d 581 (Wash. Ct. App. 2002) (judgment creditor could garnish employee’s compensation that was disguised by collusive employer).

NOT EARNINGS: Cusano v. Klein, 485 Fed. Appx. 175 (9th Cir. 2012) (song royalties not earnings for personal services covered by CCPA); United States v. Crawford, 2006 WL 2458710 (E.D. Cal. Aug. 22, 2006) (annuities funded by deductions from deceased father’s salary not protected by CCPA; not personal earnings of debtor); Aetna Cas. & Sur. Co. v. Rodco Auto Body, 965 F. Supp. 104 (D. Mass. 1996) (debtor’s voluntary contributions to individual retirement account were not earnings protected by garnishment limitations of CCPA); John Hancock Mut. Life Ins. Co. v. Frost Nat’l Bank, 393 F. Supp. 204 (E.D. Tenn. 1974) (proceeds of life insurance policy were not payment for “personal services,” so were not “earnings” under CCPA), aff’d, 516 F.2d 901 (6th Cir. 1975) (table).

38 PROTECTED: United States v. Alexander, 2016 WL 2893406 (D. Ariz. May 18, 2016) (distributions to sole member of L.L.C., who was also its sole worker, were protected by Arizona garnishment exemption); In re Mayer, 388 B.R. 869, 872 n.1 (Bankr. N.D. Ill. 2008) (accounts receivable for professional services are protected by Illinois statute that applies to “wages, salary, commissions and bonuses”); In re Jones, 318 B.R. 841 (Bankr. S.D. Ohio 2005) (payments made by Veterans Administration to independent contractor for counseling services are earnings as defined by CCPA, which is incorporated into Ohio exemptions law); In re Atkinson, 258 B.R. 769 (Bankr. D. Idaho 2001) (doctor’s accounts receivables are compensation for personal services so are protected as earnings under Idaho law); Rhodes v. Sinclair, 2012 WL 5993806 (Ohio Ct. App. Nov. 30, 2012) (legal fees owed to solo practitioner are earnings for personal services, which are protected by CCPA and can be reached only by garnishment, not by a creditors’ bill, which would enable creditor to take the entire amount). See also In re Woller, 483 B.R. 886 (Bankr. W.D. Wis. 2012) (payments for trucking services, by independent owner-operator who drove the truck himself, were earnings for personal services, protected by Wisconsin wage garnishment limits); In re Cook, 454 B.R. 204 (Bankr. N.D. Fla. 2011) (base salary, paid at regular intervals to minority shareholder of closely held corporation who worked full-time in the business, was earnings, excluded from bankruptcy estate as “earnings from services performed” by 11 U.S.C.A. § 541(a)(6), but bonuses, paid at irregular intervals and dependent on company’s profits, were not).

NOT PROTECTED: In re Osworth, 234 B.R. 497 (B.A.P. 9th Cir. 1999) (despite broad language, Oregon statute did not protect the accounts receivable of self-employed real estate agent); In re Lawrence, 219 B.R. 786 (E.D. Tenn. 1998) (Tennessee garnishment statute did not protect accounts receivable of podiatrist; it is not an exemption statute but simply a restriction on use of a wage deduction order to reach earnings in hands of employer), aff’g 205 B.R. 115 (Bankr. E.D. Tenn. 1997); In re Siegel, 214 B.R. 329 (W.D. Tenn. 1997) (Tennessee statute limiting garnishment of wages does not provide exemption for lawyers’ accounts receivable); In re Im, 495 B.R. 46 (Bankr. M.D. Fla. 2013) (funds in bank account of president of small business not earnings; account contained fees received from clinic patients, but owner had no employment agreement with his clinic and controlled its disbursements); In re Cerda, 2007 WL 4893451 (Bankr. D. Neb. Dec. 6, 2007) (Nebraska exemption does not protect accounts receivable of home health aide, an independent contractor; key issue is degree of control exercised by employer); Kane v. Stewart Tilghman Fox & Bianchi, P.A., 197 So. 3d 137 (Fla. Dist. Ct. App. 2016) (payments to partners of two-person law firm not wages exemptible under Florida law when partners had complete control over timing and amount of payments). See also In re Tobkin, 2013 WL 1292679 (Bankr. S.D. Fla. Mar. 26, 2013) (key issue in applying Florida’s head-of-family wage exemption is whether there is an arm’s length agreement for payment or whether debtor controls amount of compensation; denying exemption for contingent fee owed to solo practice attorney), aff’d, 638 Fed. Appx. 822 (11th Cir. 2015); In re Smith, 284 B.R. 460 (Bankr. W.D. Mo. 2002) (accounts receivable from sales of old cars restored by debtors not protected by Missouri exemption for earnings for personal services; debtors were selling a product—that is, the cars—not a service, and sale price included purchase of cars and parts as well as debtors’ labor); Mickler v. Mickler, 245 S.W.3d 809 (Ky. Ct. App. 2008) (fact question whether accounts receivable are protected by Kentucky exemption for earnings for personal services; here, physician failed to show that sums owed to his practice by insurers were for his services, not those of his employees). See generally § 14.2.1.4.4, infra (payments to independent contractors).

39 United States v. Ashcraft, 732 F.3d 860 (8th Cir. 2013) (CCPA garnishment limits apply to periodic payments from disability plan provided by former employer); Villano v. Villano, 414 N.Y.S.2d 625 (N.Y. Sup. Ct. 1979) (disability pension payments are “earnings” protected by CCPA). See also Lizardo v. Ortega, 78 N.E.3d 89 (Mass. App. Ct. 2017) (lump-sum Social Security Disability Insurance (SSDI) award is earnings covered by CCPA limitations because it is the equivalent of wages that were lost as a result of recipient’s disability; limiting family support garnishment to 65%; note that the provisions of the Social Security Act—42 U.S.C. §§ 659(a) and 666(b)—that allow garnishment of SSDI benefits for child support explicitly incorporate the CCPA limits); U.S. Dept. of Labor, Field Assistance Bulletin No. 2016-3 (Nov. 30, 2016) (payments from an employer-based disability plan qualify as earnings under CCPA), available at www.dol.gov. But cf. United States v. France, 782 F.3d 820 (7th Cir. 2015) (CCPA does not protect private disability insurance payments and 18 U.S.C. § 3613, which establishes procedure for collecting fines, would not protect them even if CCPA did; stressing section 3613’s explicit exemption of two types of disability benefits but not private disability insurance), vacated, 136 S. Ct. 583 (2015) (vacating judgment based on Solicitor General’s confession of error; Solicitor General’s brief (available at www.justice.gov) takes the position that private disability insurance benefits are earnings protected by CCPA); Equitable Life Assurance Soc’y v. DeGeorge, 2008 WL 11337717 (C.D. Cal. June 13, 2008) (payments for private disability insurance policy, held by debtor when he was self-employed, do not fall within CCPA’s protection of payments from a pension program; must be part of employer-employee relationship); Comerica Bank v. Kelman, 2018 WL 3635042 (Mich. Ct. App. July 31, 2018) (unpublished) (disability benefits under privately-purchased insurance policy are protected by Mich. Comp. Laws § 600.6023(1)(f), but not by the CCPA earnings exemption, which only covers employer-funded plans). See generally § 13.4.2.4, supra.

40 See, e.g., Bd. of Trs. v. Castillo, 2015 WL 8436895 (E.D. Cal. Dec. 10, 2015) (payments by general contractor to sub-contractor for work by sub-contractor and his employees; existence of employees is fatal to California exemption claim); In re McDermott, 2011 WL 740727 (M.D. Fla. Feb. 24, 2011) (distinguishing between “a salaried job” and “running a business”; when debtors controlled timing and amount of payments from family-owned business, funds were non-exempt equity withdrawals, not wages exempted by Florida law); ASKM, L.L.C. v. Fry, 2009 WL 4642060 (D. Utah Dec. 1, 2009) (returns on investments paid to a corporate entity not “compensation for personal services” and thus not earnings protected by Utah law); In re Adams, 506 B.R. 688 (Bankr. E.D.N.C. 2014) (rentals from ownership of manufactured-home park not protected by North Carolina exemption for earnings for personal services; they arose from ownership of the land, not any specific services performed by debtors); In re Oberdick, 490 B.R. 687 (Bankr. W.D. Pa. 2013) (draws owed to working partner, calculated based on partnership profits and partner’s billable hours, are not protected by Pennsylvania exemption for wages); In re McDermott, 425 B.R. 848 (Bankr. M.D. Fla. 2010) (earnings from business controlled by debtor not protected by Florida exemption for head of house’s wages), aff’d, 2011 WL 740727 (M.D. Fla. Feb. 24, 2011); In re Christy, 306 B.R. 611 (Bankr. C.D. Ill. 2004) (fact question as to what part of receivables of two-physician professional corporation was attributable to personal services of debtor-physician and therefore exempt as wages or salary under Illinois law); In re Welty, 217 B.R. 907 (Bankr. D. Wyo. 1998) (earnings of business owner who paid himself what was left after settling expenses of the business were not exempt earnings under federal or Wyoming law); In re Harrison, 216 B.R. 451 (Bankr. S.D. Fla. 1997) (“deferred wages” due to dentist after dissolution of professional association, over which he exercised substantial control, were intended as return on his investment and were not wages protected by Florida exemption for personal services); In re Zamora, 187 B.R. 783 (Bankr. S.D. Fla. 1995) (courts will look behind labels “employee” and “independent contractor” to determine whether debtor has an arrangement “like a job” or is in control of business, with power to decide how much to draw for salary; income from solo law practice and marina owned by debtor was not protected by Florida wages exemption); Corto v. Nat’l Scenery Studios, Inc., 705 A.2d 615 (D.C. 1997) (producer’s share of box office receipts of theatrical production was not exempt “wages” for “personal services” protected by District of Columbia garnishment exemption); Brock v. Westport Recovery Corp., 832 So. 2d 209 (Fla. Dist. Ct. App. 2002) (key question is whether work is like “a salaried job” or “running a business”; “draws” taken by vice president of family corporation from profits not “compensation for personal services or labor” within meaning of Florida statutes); Vining v. Siegal, 731 So. 2d 826 (Fla. Dist. Ct. App. 1999) (accounts holding proceeds of sole proprietorship’s dental practice not earnings within meaning of Florida garnishment exemption); Gerry Elson Agency Inc. v. Muck, 509 S.W.2d 750, 753 (Mo. Ct. App. 1974) (debtor leased eight trucks from trucking company, hired drivers, and hauled loads for it; its payments to him are not “earnings” under CCPA); Swig v. Props. Asset Mgmt. Servs., L.L.C., 924 N.Y.S.2d 368 (N.Y. App. Div. 2011) (neither base salary nor incentive compensation was protected by New York earnings exemption; “base salary” not earnings when contract provided that it was earned if debtor’s company provided the services of asset managers, who need not be debtor personally; incentive compensation not earnings when it depended on profits, and no showing that debtor’s services were the cause of profits); Friedt v. Moseanko, 498 N.W.2d 129 (N.D. 1993) (earnings protected by North Dakota exemption do not include “business profits”; milk distributor’s payments to dairy farmer not exempt earnings); Wesbanco Bank, Inc. v. Ettayem, 2015 WL 1432551 (Ohio Ct. App. Mar. 31, 2015) (unpublished) (rent paid by judgment debtor’s tenant is not earnings under Ohio garnishment law or CCPA). See also In re Morley, 2013 WL 501681 (Bankr. D. Mont. Feb. 11, 2013) (state exemption law uses CCPA definitions; denying exemption to debtor who received fixed amount per month to perform services for one company but did business as sole proprietorship and reported earnings as profit and loss for business). But cf. In re Bhalla, 2018 WL 3854018 (Bankr. M.D. Fla. July 12, 2018) (allowing Florida head of household exemption to shareholder in closely held company who negotiated employment agreement with his business, worked forty hours a week, and received regular compensation that was not at his discretion).

41 In re Hidy, 364 B.R. 679 (Bankr. W.D. Mo. 2007) (payments for unused sick leave and vacation, required by employment contract, were for personal services); Bd. of Educ. of E. Hartford v. Booth, 654 A.2d 717 (Conn. 1995) (Connecticut definition of earnings covers accumulated sick leave and a deferred salary increase payable at termination); Riley v. Kessler, 441 N.E.2d 638 (Ohio 1982); U.S. Dep’t of Labor, Wage & Hour Div., Field Operations Handbook Ch. 16, § 16a11 (sick and vacation pay are considered earnings under CCPA), available at www.dol.gov. See also Montgomery Ward Credit Corp. v. Brewer, Clearinghouse No. 44,517 (D. Minn. 1989) (state law intended to exempt severance pay from garnishment). But see In re Henrickson, 2007 WL 703620 (Bankr. D. Alaska Mar. 5, 2007) (Alaska exemption for property traceable to “weekly net wages” protects only amount accrued during one work week, not accrued vacation pay and tax refund).

42 In re Burns, 482 B.R. 164 (Bankr. E.D. La. 2012). But cf. In re Nelson, 2003 WL 22331776 (Bankr. D. Colo. Oct. 1, 2003) (judgment for tortious interference with prospective economic relation, calculated as amount of earnings lost, was not earnings under Colorado exemption statute because plaintiff performed no personal services).