New Law Will Protect Low-Wage Earners from Debt Collectors
The fight for fifteen is no longer just a slogan, or a hashtag. It is now the law in an increasing number of California cities and will soon be a checkbox on our ballots. And, in January, California will have the highest minimum wage in the nation. As the most prosperous state in the country, with one of the highest rates of income inequality, it is only right that we should.
But, for some minimum wage workers who have been consumed by debt, either because they have lived lifetimes in poverty or because they became newly poor during the recession, the increasing wage offers little relief. This is because existing state law allows a low-income worker to be garnished at the maximum rate of 25% when they earn more than the state minimum wage. As a result, workers earning $12 an hour because of a local minimum wage (for example) can be subject to a $3 an hour garnishment – making their take-home pay no more than it was before the local initiative raised the wage.
This 100% taking from workers earning higher minimum wages undermines not only workers, but also local decision making. Low-income workers want to honor and pay back their debts like everyone else, but a 100% taking on these earnings discourages work and contributes to poverty among working families, putting life essentials – food, rent, utilities – out of reach. When low-income workers’ wages are garnished, they often face more severe setbacks, losing their assets and falling into further debt to credit card companies or predatory lenders. A new report by ProPublica shows how this kind of aggressive debt collection not only hurts low-income workers, but also low-income communities, especially black communities.
On July 1, 2016, these workers and their communities will see some relief. That’s the day that SB 501, a new law authored by Senator Bob Wieckowski, goes into effect.
SB 501 makes important changes to California’s wage garnishment law.
- SB 501 Honors Local Minimum Wage Ordinances: Current law ties the garnishment calculation to the state minimum wage. SB 501 ties the garnishment calculation to the state minimum wage unless there is a local minimum wage ordinance that is higher. As of July 1, 2016, workers cannot be garnished until their paycheck is higher than the amount someone would earn working full-time at the local minimum wage.
- SB 501 Graduates the Garnishment Rate: As of July 1, 2016, the garnishment rate will be tapered so people who earn less than twice the supplemental poverty rate for a family of three pay less in garnishment, and workers who are the poorest pay the lowest rates of garnishment.
- Government Debt Not Included in SB 501: SB 501 does not reduce garnishment rates paid on child support or tax debt.
As we continue to build toward more equitable wages and workplace policies, I look forward to also continuing to lightening the burden of debt carried by workers who have been undermined by low-wages for far too long. We will need to do both, improve wages and reduce debt, if we are going to win an economy built on shared prosperity. For more information about this new law and how it will impact your clients or constituents, contact Jessica Bartholow at email@example.com or click here.