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Law limits total garnishment

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Employees whose income is garnished to pay outstanding debts can breathe easier thanks to new legislation that was recently enacted. On 31st July 2017, the State President signed into law the Courts of Law Amendment Act No 7 of 2017. It amends the Magistrates’ Courts Act, 1944.
The result of a Constitutional Court ruling, the amendments offer greater protection to indebted persons against emolument attachment orders, the issuing and management of which have been poorly regulated in the past.

The previous situation
An emolument attachment order (EAO) is an order issued by a creditor on an indebted person’s employer, known as the “garnishee”. It compels them to deduct a specified amount from the defaulting worker’s income to pay the creditor.
Previously, EAOs were authorised by the clerk of the court and could be easily obtained from almost any court, regardless of where the employee works or resides, and their ability to be present to defend themselves. Any number of creditors could demand such deductions be made, without well-defined limitations.
“This lack of control gave credit providers extensive power to garnish workers’ salaries or wages with little consideration for their ability to survive or their constitutional right to justice,” says Arlene Leggat, a director of the South African Payroll Association (SAPA). “The new laws afford employees the opportunity to defend themselves and relieves the economic burden imposed on them.”

Highlighted amendments
Of greatest significance is that the law now imposes a limit on the amount that may be deducted, which can be no more than 25% of a worker’s salary or wages, regardless of the number of active EAOs against them. “Before, there was no limit,” says Leggat, “and I’ve personally seen workers go home penniless because their entire income was attached to debts.
While everyone has a responsibility to pay their creditors, the situation was unsustainable.” It should be noted that the limit applies to basic income and excludes additional remuneration for overtime or other allowances.
Further, authorisation of an EAO must be given by a magistrate – not the clerk of the court – at a court that has jurisdiction. Before approving the order, the magistrate must consider whether the order is just and equitable, taking into account various factors such as the size of the debt, alternatives to recover the debt, the worker’s income and their necessary expenses, existing EAOs, and more.
Another protective mechanism is a clause that prohibits anyone from requiring a credit applicant to consent to a judgement, installment order or EAO prior to the granting of a loan. Those doing so may be fined or imprisoned for up to 3 years. The same penalty applies to anyone who fraudulently obtains or issues a judgement, installment order or EAO.

Payroll’s duty
Payroll practitioners should familiarise themselves with all the amendments of the new legislation. “It has a major impact on how they manage EAOs and their service to employees,” advises Leggat. “Employers who are legally obliged to enforce garnishment orders will also benefit from their administrator’s understanding of the law and how it can be applied to relieve their burden.”
Payroll practitioners and employers are invited to contact SAPA for more details.