Employees whose income is “garnished” to pay off their debts can breathe easier thanks to new legislation that was enacted recently. On July 31, President Jacob Zuma signed into law the Courts of Law Amendment Act, which amends the Magistrates’ Courts Act.
The result of a Constitutional Court ruling, the amendments provide South Africans with greater protection against emoluments attachment orders (EAOs), the issuing and management of which have been poorly regulated in the past.
An EAO is an order issued via the courts by a creditor on an indebted worker’s employer, known as the “garnishee”. It compels the employer to deduct money from the worker’s salary or wage to pay the creditor.
Previously, EAOs were authorised by the clerk of the court and could easily be obtained from almost any court, regardless of where employees worked or lived, or whether they were present to defend themselves. Any number of creditors could demand such orders, 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. “The new law affords employees the opportunity to defend themselves and relieves the economic burden imposed on them.”
The law imposes a limit on the total amount that may be deducted, which can be no more than 25% of a worker’s salary or wage, regardless of the number of active EAOs against them. “Before, there was no limit,” Leggat says, “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.”
The legislation does not apply retrospectively, meaning that EAOs already in place are not affected.
The 25% limit applies to basic income and excludes additional remuneration for overtime or other allowances, meaning that such additional remuneration cannot be garnished.
Further, an EAO must be authorised 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 factors such as the size of the debt, alternatives to recover the debt, the worker’s income and necessary expenses, and any existing EAOs.
Another protective mechanism is a clause that prohibits anyone from requiring a credit applicant to consent to a judgment, instalment order or EAO prior to the granting of a loan. Those doing so may be fined or imprisoned for up to three years. The same penalty applies to anyone who fraudulently obtains or issues a judgment, instalment order or EAO.
Payroll practitioners need to familiarise themselves with all the amendments, Leggat says. “It has a major impact on how they manage EAOs and their service to employees. 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.”