History of Wage Protection Law In Alabama, 1117 ALBJ, 78 The Alabama Lawyer 436 (2017)

Author:By Farah Majid
Position:Vol. 78 6 Pg. 436
 
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History of Wage Protection Law In Alabama

Vol. 78 No. 6 Pg. 436

Alabama Bar Lawyer

November, 2017

By Farah Majid

For more than 148 years, the constitutions of the state of Alabama have contained a provision that allowed a citizen to protect up to $1,000 of personal property from collections.1 The first constitution to include this protection was adopted in 1868. That is the same year that Ulysses S. Grant was elected president, the first year that floats appeared in the Mardi Gras celebration in Mobile and the year that Cornell University first opened its doors. As early as 1884, the Supreme Court of Alabama held that the phrase "personal property" in the constitution applied to wages and protected Alabama's working population from collection activity that might impoverish them.2 The most recent protection, found in the Alabama Constitution of 1901, provides that, "The personal property of any resident of t his state to the value of one thousand dollars, to be selected by such resident, shall be exempt from sale or execution, or other process of any court, issued for the collection of any debt..."

The purpose of exemption laws has always been to afford debtors a minimum amount of personal property so that they do not become destitute and thus become public charges.3 In 1868, when the $1,000 personal property exemption was enacted, that amount had roughly the same buying power as $24,243.13 in 2016, according to the Consumer Price Index.4The framers of the constitution thus intended that judgment debtors be able to protect that much personal property from collection by judgment creditors. In light of that fact, the fact that the personal property exemption found in the constitution today is only $1,000 is telling.

A judgment debtor claiming an exemption under the constitutional provision might make $500 per biweekly paycheck. The debtor would then presumably spend that amount on rent, food, transportation and medical expenses. By the time they received their next paycheck of $500 in two weeks, he or she would have already expended their entire previous paycheck. A debtor in this situation never reaches the $1,000 minimum threshold that the constitution sets out that he or she is able to claim as exempt.

In the past two years, there have been two attempts to modify a debtor's right to claim up to $1,000 per paycheck as exempt, as debtors have been able to do for more than 100 years. This includes confusion caused by a court of appeals case that some creditors interpreted as allowing only a one-time exemption, as opposed to a recurring exemption when wages were expended, and a legislative amendment that appears to remove wages from constitutional protection at all.

Ability to Protect Wages of Debtors Living Paycheck to Paycheck

As early as 1970, in Walker v. Williams and Bouler Construction, the court of appeals ruled that not only did Alabama's exemption laws protect a single amount, but also allowed for citizens to protect their income on an ongoing basis where income was expended for the upkeep of their family. 241 So. 2d 896,900 (Ala. Civ. App. 1970). In that case, the court stated, "When the property which he had selected has been lost to him, or has deteriorated in value, without fault on his part, or has been consumed in the maintenance of himself or his family, or applied by him to the payment of debts, the right secured to him would be impaired, if he could not select and retain property, notwithstanding the former claim of exemption. The rights of creditors are not impaired, so long as the debtor is not permitted to hold property exceeding in value one thousand dollars."5

In Ex Parte Avery, 514 So. 2d 1380 (Ala. 1987), the Alabama Supreme Court confirmed that future wages could be claimed as exempt. In Avery, the supreme court overruled a court of appeals decision that would have prevented a garnishment from being quashed for lack of property based on the existence of future wages, but would have prevented a debtor from claiming those same wages.6 The Avery court reasoned that it would be "untenable" to recognize the existence of future wages for the benefit of the creditor without allowing the debtor to exercise his or her rights as to those future wages.

In Avery the court states, "The purpose of the exemption laws is to protect the debtor and his family from being deprived of the items necessary for subsistence, and possibly to prevent them from becoming a burden upon the public. The decision of the Court of Civil Appeals in the case at bar thwarts this purpose. The holding of the Court of Civil Appeals gives an undue advantage to the creditor, albeit the statutes were designed to protect the debtor. This Court has held on numerous occasions that exemption laws must be liberally construed. In the context of the garnishment and exemption laws, courts of this state should be concerned with the rights of the debtor, as the creditor is almost always in a better position to protect its interests." Id. at 1382.

As recently as 2013, the court of appeals agreed, based partially on Avery, that the constitutional exemption includes wages and allows a judgment debtor to choose to exempt wages as long as the amount being claimed as exempt does not exceed $1,000.7

The filing of a claim of exemption should be relatively straightforward under the constitution and this precedent. Pursuant to Alabama Rules of Civil Procedure 64 A and 64B, a debtor must simply file a sworn claim of exemption in the trial court where the garnishment has been filed. This can be done through an attorney or through use of pro se form PS-20 found at www.alabar.org/for-the-public/need-legal-help/ The creditor is then allowed 15 days to notify the court of any contest through a sworn objection stating any reasons they believe the claim is incorrect. The court can thereafter hold a hearing on the matter. In the absence of any objection, the rules require the garnishment to be automatically dismissed. At such hearings, the garnishment is usually quashed, so long as the claimant is able to demonstrate that his/her wages are below $1,000 and that he/she spends those wages prior to the next paycheck (living paycheck-to-paycheck without accumulating money).

The functional result of this interpretation of the constitution was that Alabama's working families were allowed to retain the minimum level of income they needed to provide food, shelter and transportation while allowing creditors to seize excessive assets for the payment of debts. It both protected the integrity and stability of Alabama families and ensured that no one became rich by ignoring his obligations.

Recent Legislation To Interpret Constitutional Provision

On June 11, 2015, things became somewhat...

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