Garnishment Protection For Owner/Employee
Previous blog entries have discussed issues concerning wage exemption from garnishment for single owner businessmen or professionals. In short, there are cases in Florida that say that creditors can garnish wages paid to a person who is the sole owner of his employer. These cases pertain to doctors/lawyers/dentist who are solo practitioners and who draw a salary form their professional corporation or businessmen who are the sole owners of their own corporations or LLCs even when the debtors are head of family. The Florida cases held that the sole owner has too much control over his business and distributions to qualify for wage garnishment protection which, the cases say, is designed to protect people who earn compensation from an arms length relationship with an employer. The cases previously discussed in other blog post involved “bad facts” including lack of a written employment agreement and varying amounts to distributions to the debtor rather than fixed amounts of periodic payments usually associated with arms length employment.
Anyway, I came across a reference to a New Jersey court case which supports salary exemption for small businessmen and professionals taking distributions from their corporation. The New Jersey case of Zavodnick v. Leven, said that distributions (not salary) from a law firm partnership to one of the partner attorneys should be afforded the same garnishment protection under New Jersey law. The court said that even though profit distributions are not technically wages they play the same role in the partner’s life as wages paid to the firms’s employees in that the partner and his family depend on his distributions to purchase food, shelter, and other basic necessities for himself and his family.
The debtor should not be denied protection from garnishment just because of the profession he has chosen to earn his living. Hopefully, this case will be used to persuade a Florida court to extend the statutory protection form garnishment afforded heads of families to professionals or people who work through their own single owner companies.
Last updated on May 22, 2020
About the Author
Jon Alper is an expert in asset protection planning for individuals and small businesses.