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Missouri 1099 wage garnishment

Discussion in 'Independent Contractors & Consultants' started by Summerclerk21, Jun 4, 2021.

  1. Summerclerk21

    Summerclerk21 Law Topic Starter New Member

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    Jurisdiction:
    Missouri
    Can anyone help me cite a case which holds that a creditor cannot make an employer garnish the wages of a 1099 independent contractor?
     
  2. army judge

    army judge Super Moderator

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  3. Tax Counsel

    Tax Counsel Well-Known Member

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    No, because there is no such case in Missouri. But let me give you an overview of how this generally works.

    First, I'll note that there is no such thing as a "1099 independent contractor". There are independent contractors and there are employees. If you are an independent contractor you are not an employee and the money you are paid for your work gets reported to the IRS on a Form 1099. So you are simply an independent contractor who receives a Form 1099. If you were an employee, the pay you get is reported to the IRS on a Form W-2. We don't say those folks are "W-2 employees". They are just employees.

    Which brings me to my second point. Because an independent contractor (IC) is not an employee it also means the IC is not being paid "wages" by the company for the work the IC does. So of course there won't be any case saying that the wages of an IC can't be garnished because an IC isn't getting wages in the first place. If served with a wage garnishment order the employer should return that to the creditor and state that there are no wages being paid to the IC. In short, a wage garnishment order would not attach to the earnings of a IC because the IC is not receiving wages.

    But that's not the end of the matter. Any asset or income of a debtor may be attached by a creditor unless there is some statute exempting it from attachment. There is no federal or Missouri statute that expressly exempts payments to ICs from attachment. Because the IC is not getting wages the creditor would have to use a non wage attachment to reach it, and that has some limitations for the creditor. Notably non wage attachments are not continuous like wage attachments are. So the creditor would have to keep sending attachment orders on a regular basis to attach the money that the IC is getting paid.

    The question then becomes how much of the payment that the IC receives gets attached. Again, unless some statutory exemption applies, ALL of the payment due to the IC at the time the order is received is attached. There is, however, an argument to be paid that regular payments made to an IC much like wage payments would fall under the federal and Missouri laws that limit most garnishment of earnings to 25% of net pay. (The Missouri law, with some tweaks, essentially follows the federal law on this.)While the federal and Missouri laws are often referred to as wage garnishment laws in articles, etc, neither of them use the word wages. They use the term "earnings" instead, which as defined in the statutes is broader. No federal court decision has directly addressed that issue for the federal garnishment law, nor do I see any Missouri court case that directly deals with how the garnishment law works with independent contractors either. There are a few decisions in other states with laws that mirror the federal one and the results in those states are mixed, some say the exemption only applies to employees, others read it more broadly.

    The bottom line is that a determined creditor can attach the payments that an IC receives from the company he/she is working for. How much of those payments may be attached depends on whether the federal and Missouri laws that limit attachments of "earnings" to 25% of net pay applies to what the IC gets, a question that surprisingly is not directly answered in the case law after all these decades.
     
    hrforme likes this.
  4. Summerclerk21

    Summerclerk21 Law Topic Starter New Member

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    Wow thank you so much for such a thoughtful answer!
     

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