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13.3.8.4 Wages

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  6. 13.3.8.4 Wages

13.3.8.4 Wages

Earned but unpaid wages, like bank accounts, are not clearly “located” in a specific state like tangible property is. The question then is whether a court can issue a wage garnishment order that affects wages the consumer earns in a different state.

A court in one state will not have jurisdiction over an employer in another state and therefore cannot issue a garnishment order to an out-of-state employer.161 However, the creditor may argue that the court can garnish wages earned out of state by serving a garnishment order on an in-state facility of the employer. This argument is based on the theory that the wages owed to the consumer reside wherever the employer has a presence and can be reached anywhere that the employer can be served. For example, a collector, after obtaining a judgment in Missouri, might seek to garnish the consumer’s wages earned at an Indiana Walmart store by serving the order on a Walmart store in Missouri.162

This view would dilute “fair play and substantial justice” to meaninglessness, as wages earned for a nationwide corporation in one state could be garnished in any of the forty-nine other states.163 For example, the Georgia Supreme Court rejected a judgment creditor’s attempt to garnish a California debtor’s army pay in Georgia.164 The court rejected the creditor’s argument that, because the employer had a presence in Georgia, Georgia courts could order it to turn over wages regardless of where they were earned.

A Pennsylvania Attorney General opinion similarly holds that, if a debtor works in Pennsylvania, a judgment creditor cannot obtain an out-of-state judgment, obtain a wage garnishment order in that state, and then serve the order on an office of the debtor’s employer in that state.165 Similarly, a federal decision holds that wages are located in the state where they were earned, so the judgment creditor must domesticate its judgment there and follow that state’s garnishment laws.166 A law review article points out that any other rule would invite creditors to forum shop to find the most remote jurisdiction with the most liberal garnishment laws and the most grudging exemption laws.167

Allowing this sort of interstate garnishment would also subject employers to potential double liability, as they could be liable to the creditor for any wages paid out to the debtor at any location anywhere in the country—indeed, anywhere in the world—after service of the garnishment order. An employer that withheld a portion of an employee’s wages in compliance with an out-of-state garnishment order could also face sanctions for violation of the wage and hour laws in the state where the employee worked.

Some cases, however, allow wages earned out of state to be garnished by serving a garnishment order on an in-state facility of the debtor’s employer. These courts hold that such a step is permissible if the garnishment order is issued by the court that issued the original judgment and acquired personal jurisdiction over the debtor at that time.168 For example, a Texas court held that a Florida divorce court could enforce its alimony order by serving a wage garnishment order on a Florida office of the judgment debtor’s employer, even though the debtor had moved to Texas and was working there.169 The court stressed that the judgment for alimony and the garnishment order were issued by the same court that had rendered the initial judgment against the debtor before he moved to Texas, and that the debtor conceded that the Florida judgment was valid and entitled to full faith and credit. The result might have been different if the Florida court had not acquired in personam jurisdiction over the debtor in the first instance.170

A Maryland court rejected a judgment creditor’s attempt to garnish wages earned in North Carolina, a state that does not generally allow wage garnishment, by obtaining judgment in North Carolina, enrolling the judgment in Maryland, and having a Maryland court issue a garnishment order to the Maryland headquarters of the judgment debtor’s employer.171 A later decision from Maryland’s highest court approved of this holding.172 It also held that a Maryland court, which itself obtained jurisdiction over the defendant and issued a judgment, can serve a wage garnishment order on an in-state facility of the judgment debtor’s employer and thereby garnish wages earned out of state.

A state’s wage garnishment laws may also place limits on garnishment of out-of-state wages—for example, by requiring sheriff service upon the debtor.173 South Carolina prohibits the garnishment of the wages of state residents based on an out-of-state judgment unless the creditor first obtains a judgment in South Carolina on the same indebtedness.174 The statute further provides that there shall not be “any garnishment of earnings for personal services rendered by the employee regardless of where the debt arose.” The Illinois garnishment statute’s limits, which are more protective of debtors than the federal limits,175 apply “irrespective of the place where the compensation was earned or payable and the state where the employee resides.”176 The apparent effect of this provision is that, if the employer is served with a garnishment order in Illinois, then the Illinois garnishment limits apply regardless of whether the debtor works or lives in another state.

Footnotes

  • 161 See §§ 13.3.8.1, 13.3.8.2, supra. But see Midland Funding, L.L.C. v. Mizinski, 854 N.W.2d 371 (Wis. Ct. App. 2014) (Wisconsin court can serve garnishment order on Texas office of Wisconsin debtor’s Wisconsin employer as long as it has personal jurisdiction over debtor).

  • 162 See, e.g., Strande v. Mershon, 814 S.W.2d 704 (Mo. Ct. App. 1991) (creditor that has obtained Missouri judgment can garnish wages earned in Kansas by judgment debtor, a Kansas resident, by serving Missouri registered agent of judgment debtor’s employer).

  • 163 See Robert Laurence, Out of State Garnishments: Work-in-Progress, Offered in Tribute to Dr. Robert A. Leflar, 50 Ark. L. Rev. 415, 418 (1997) (“this rule is an out-moded doctrine that does not survive modern constitutional analysis”).

  • 164 Williamson v. Williamson, 275 S.E.2d 42 (Ga. 1981). Accord Polacke v. Super. Ct., 823 P.2d 84 (Ariz. Ct. App. 1991) (military retirement pay that is not issued or received in Arizona is not constructively present there and cannot be attached by an Arizona court that lacks in personam jurisdiction over debtor); Ferguson v. Ferguson, 634 N.E.2d 506 (Ind. Ct. App. 1994) (even though federal government has a presence in all fifty states, military benefits that were neither issued nor received in Indiana cannot be garnished there by court that lacks in personam jurisdiction over debtor).

  • 165 Pa. Att’y Gen., Official Op. No. 67 (Oct. 5, 1973), available at www.nclc.org/unreported. See also 42 Pa. Cons. Stat. § 8128 (unlawful for any creditor or obligee to commence action on or transfer any claim against resident of Pennsylvania for purpose of having such claim collected by proceedings in a forum that accords such resident less favorable exemptions from attachment or execution than are accorded by Pennsylvania, or for purpose of depriving such resident of right to have his personal earnings, while in the hands of his employer, exempt from application to payment of his debts). But see Carmichael v. Pressler & Pressler, L.L.P., 646 Fed. Appx. 192 (3d Cir. 2016) (wages of New Jersey resident can be garnished based on New Jersey judgment by serving her employer’s New Jersey location even though she works in Pennsylvania; would be allowed even if she lived in Pennsylvania, which does not allow wage garnishment); Graham v. ADP Totalsource, Inc., 2015 WL 3796019 (E.D. Pa. June 17, 2015) (wages earned in Pennsylvania by Pennsylvania resident may be reached for garnishment order issued by state in which garnishment is allowed; allowing garnishment of Pennsylvania debtor’s Pennsylvania wages pursuant to judgment taken in California against debtor when she lived there; garnishment order was issued by California court but opinion is unclear as to whether, where, or how it was served on employer); West v. Ford Motor Credit Co., 2013 WL 497159 (E.D. Pa. Feb. 11, 2013) (allowing garnishment of Pennsylvania wages in response to Maryland court order, enforcing Maryland judgment, served on Maryland office of employer; Pennsylvania generally forbids wage garnishments, Maryland permits them). But cf. Bolton v. Pa. Co., 88 Pa. 261 (Pa. 1878) (allowing Pennsylvania creditor to obtain prejudgment attachment of Pennsylvania worker’s wages by serving his employer in Ohio, without notice to him; this decision is inconsistent with Sniadach v. Family Fin. Corp., 395 U.S. 337, 395 U.S. 337, 23 L. Ed. 2d 349 (1989)); Morgan v. Neville, 74 Pa. 52 (Pa. 1873) (allowing Pennsylvania creditor to attach debtor’s wages earned in Pennsylvania by serving his Pennsylvania employer in Maryland even though wages are protected from creditors in Pennsylvania; this ancient decision appears to be based on the in rem jurisdictional theory repudiated by Shaffer v. Heitner, 433 U.S. 186, 433 U.S. 186, 53 L. Ed. 2d 683 (1977)); Pa. Att’y Gen., Official Op. No. 75-32 (Sept. 30, 1975), 1975 Pa. AG LEXIS 33 (Sept. 30, 1975) (if debtor incurred debt in a state that allows wage garnishment, creditor may take judgment there and issue garnishment order to employer’s location in that state even if debtor works and lives in Pennsylvania).

  • 166 Memorial Hosp. of Martinsville v. D’Oro, 2011 WL 2679593 (W.D. Va. July 8, 2011) (creditor with Virginia judgment against debtor who now lives in Pennsylvania must domesticate judgment in Pennsylvania and follow that state’s wage garnishment law; cannot garnish wages by issuing garnishment order to non-Pennsylvania branch of debtor’s employer).

  • 167 Robert Laurence, Out of State Garnishments: Work-in-Progress, Offered in Tribute to Dr. Robert A. Leflar, 50 Ark. L. Rev. 415, 421 (1997).

  • 168 See, e.g., Smith v. Lorillard, Inc., 945 F.2d 745 (4th Cir. 1991) (Kentucky court that rendered judgment against Kentucky debtor may serve garnishment order on debtor’s employer, who does business in Kentucky, even though debtor had moved to North Carolina and now works there); Champion Int’l Corp. v. Ayars, 587 F. Supp. 1274 (D. Conn. 1984) (allowing child and spousal support to be collected by garnishment of wages earned out of state by service upon employer’s in-state facility); Garrett v. Garrett, 490 P.2d 313 (Colo. App. 1971) (divorce judgment entered by Colorado court that obtained personal jurisdiction over debtor can be enforced by wage garnishment order against Colorado office of debtor’s Washington employer; Colorado exemptions apply); CACH, L.L.C. v. Simmons, 2014 WL 7466640 (Del. Super. Ct. Dec. 16, 2014) (Delaware court that renders judgment against debtor may issue wage garnishment order to Delaware office of debtor’s Texas employer, and Texas wage garnishment protections are inapplicable); Mensah v. MCT Fed. Credit Union, 132 A.3d 332 (Md. 2016) (creditor that has obtained judgment in Maryland on debt that arose there can garnish wages of debtor who now lives and works in Texas by serving his employer’s Maryland agent); State ex rel. Dep’t of Revenue v. Control Data Corp., 713 P.2d 30 (Or. 1986) (debtor had enough contacts with Oregon to allow Oregon court to render judgment against him, and then it could issue wage garnishment order to his employer’s in-state office, even though he now worked for that employer in a different state); Jones v. U.S. Steel Corp., 4 Pa. D. & C.3d 552 (Pa. Ct. Com. Pl. 1977) (when Pennsylvania judgment debtor was employed at employer’s New Jersey plant where New Jersey wage garnishment order was served on employer, employer must comply with order even after debtor transferred to plant in Pennsylvania, which does not allow wage garnishment); Austin v. Westinghouse Elec. Corp., 59 Pa. D. & C.2d 178 (Pa. Ct. Com. Pl. 1972) (valid Ohio judgment can be enforced against Pennsylvania debtor who is employed in Pennsylvania by serving wage garnishment order on employer’s Ohio office, even though Pennsylvania does not allow wage garnishment). See also First v. Mont. Dep’t of Soc. & Rehab. Servs., 808 P.2d 467 (Mont. 1991) (Montana court can enforce child support order by using income withholding procedure against Montana unemployment compensation benefits, even though debtor lived on Native American reservation); Birl v. Birl, 24 Pa. D. & C.2d 421 (Pa. Ct. Com. Pl. 1961) (interpreting Pennsylvania law to allow Pennsylvania court’s alimony order to be collected through garnishment of wages earned out of state by service of garnishment order on employer’s in-state office).

  • 169 Knighton v. Int’l Bus. Mach. Corp., 856 S.W.2d 206 (Tex. App. 1993).

  • 170 But cf. Sagona v. Doty, 1991 WL 835319 (Va. Cir. Ct. Nov. 21, 1991) (allowing garnishment order based on Illinois judgment to issue against Virginia agent of debtor’s North Carolina employer even though debtor had no contacts with Virginia, and North Carolina does not allow wage garnishment; from court’s opinion it appears that judgment debtor was notified of Virginia garnishment proceeding but not served with it).

  • 171 Livingston v. Naylor, 920 A.2d 34, 53 (Md. Ct. Spec. App. 2007).

  • 172 Mensah v. MCT Fed. Credit Union, 132 A.3d 332 (Md. 2016).

  • 173 Brown v. Arabian Am. Oil Co., 278 N.Y.S.2d 256 (N.Y. Sup. Ct. 1967) (interpreting New York’s service rules not to allow enforcement of New York judgment by serving a garnishment order on New York employer, when debtor worked in Saudi Arabia). Cf. Oystermen’s Bank & Tr. Co. v. Manning, 298 N.Y.S.2d 355 (N.Y. Sup. Ct. 1969) (New York garnishment law requires sheriff service of wage garnishment upon debtor, but court concludes it has discretion to order service to be made upon California debtor by sheriff there).

  • 174 S.C. Code Ann. § 15-39-420.

  • 175 See § 14.2.3, infra.

  • 176 735 Ill. Comp. Stat. § 5/12-803.