Spotlight On the Garnishee Order (Again!) — Possible Legislative Changes on the Cards

Speaking at a recent (3 October, 2015) two day Provincial General Council meeting at Coastlands Hotel, South Beach, KwaZulu-Natal (KZN) African National Congress (ANC) chairperson (also the KZN Premier) Senzo Mchunu, put the issue of garnishee orders (Emolument Attachment Orders, EAO’s) squarely back in the spotlight of South African labour issues. He said that garnishee orders affects policy.[i]  He alluded to the need for a review of the laws and regulations pertaining to Emolument Attachment Orders. Mchunu said that in order to address the burgeoning problem of SA’s growing consumer-debt nightmare, this proposed review is a necessary intervention, and that the government needed to help people in debt.

 

The renewed spotlight being cast upon the garnishee order system is in reaction to the spiralling debt crisis in South Africa. “There are many areas we need to look at. Like how the courts apply the law when it comes to garnishee orders” said the KZN ANC-chair. He further remarked that, “some people get garnishee orders even when they haven’t appeared in court. Sometimes money is taken without your permission, sometimes you are overcharged, sometimes there is duplication and other times once you have paid off the debt, they continue to charge you”.

 

“If we are to protect employees against what may seem to be unfair policy on garnishee orders, … then we need to look at every section of society that is affected by this policy. … We need to look at whether we have adequate policy, laws and regulations [to govern this]”, he maintained.

 

Mchunu’s statement should alert commercially oriented business enterprises to the ongoing necessity for prudent administrative and human resources management when it comes to following due process related to garnishee orders.

 

Employer administration of the garnishee order is not all that simple

As an employer, when it comes to garnishee orders, administration thereof is not all that simple to implement and manage.[ii]

 

Accordingly, in light of Mchunu’s broad national-standpoint, Ian Hurst, CEO of Paymaster Payroll, cautions employers not to lose the employee-wellbeing perspective on garnishee order ‘due process’ and administration. Hurst stresses that payroll departments “are dealing with people’s take-home pay”. As a result, in many cases, this frequently results in ‘surprise’ net “take-home pay” that shocks the employee. In many cases, these ‘surprises’ to the employee stem from EAO maladministration on the employer’s part. “This directly impacts an employee’s standard of living”, says Hurst.

 

Importantly, obligation remains with the employer to deduct stipulated monies and duly pay it over too the lawyer or collections agency.  Hurst advises payroll and HR departments to ensure that they comply with all aspects of the prescribed legislation pertaining to EAO’s.

 

“One way of assisting staff”, says Hurst, “… is to take a necessary compassionate approach towards the plight of the employee”. He suggests that payroll administrators can act as ‘soft’ (i.e. unofficial) financial counsellors to their staff[iii] by “encouraging the affected employee—having difficulty with an EAO—to go for debt counselling.”

Garnishee order issues are wide-ranging and complex

A short survey of recent media reports reveals solid evidence of the wide-ranging complexity that lies behind the implementation and management of EAO’s. These include liability for maladministration to garnishee order fraud, validity and invalidity of certain garnishee orders, to apparent flaws in the current garnishee order system. For a prominent recent case worthy of reminder, is to refer the reader to Wendy Appelbaum’s landmark judgement against illegally obtained EAO’s. These particular illegal garnishee orders were the work of embattled law firm Flemix & Associates, made on behalf of various microlenders.

 

A notable learning to be gained from the Appelbaum judgement serves as a warning to companies to “clear their payrolls of illegal deductions”.[iv] Seemingly, the trend is that debtors’ collective fight against the garnishee order system, in order to get rid of the “surprise garnishee order”, is a key issue that remains of importance to the ANC-led government.

 

Companies should be mindful of court judgements that are made in respect of EOA’s, by frequently scanning the media (ed.: and Specialist Company-blogs like this) for reports on these judgements. Precedents being set in these judgements may have a decided impact upon the manner in which new policy takes form in the future.

 

 

Industry expert — insights

Zak King, editor at Debtfree DIGI offers valuable insights[v] as to how current EAO-related legislation might change. “We may see increased judicial oversight, meaning that a judge or magistrate will have to consider each case, particularly if the debtor can afford the garnishee order. We hopefully will see greater enforcement of NCA Section 103(5), commonly called induplum.”[vi]

 

King advises that, should anticipated future change indeed be made to current EOA-related legislation, then HR and Payroll departments, and accountable management at all levels could be expected to remain alert, proactive and observant of ongoing EAO occurrences in the industry. An example of this, suggests King, is to factor in the tracking of the amount paid versus the Section 103(5) double-up limit so, as to prevent an overpayment. King said one thing was certain: that likely future changes to EOA-related legislation, in all probability, will spell out “more work” for the employer.

 

Therefore, it’s best for employers to remain on their toes by being proactive when it comes to the meticulous implementation and management of the garnishee order process. Prevention is better than cure! To save workers from surprise financial distress, it may be wise to consider building administrative checks and balances into the organisation’s relevant ‘admin’ processes. King suggests that, “since section 103(5) applies—regardless of other regulations or legislation—perhaps a note should be made of the original debt amount when a garnishee order (EAO) is received.” Thereafter, “a quick calculation-run could be made on exactly when the garnishee payment should reach the induplum[vii] (i.e. the basic double-up figure).”

 

Lastly, when closing the case on each garnishee order, King suggests that thorough enquiries first be made in order to ensure that the EAO is removed before closing the file on that particular garnishee order.

[i] Amanda Khoza, “ANC’s Mchunu Says SA Is Drowning in Debt,” News24, accessed October 5, 2015, http://m.news24.com/news24/SouthAfrica/News/ANCs-Mchunu-says-SA-is-drowning-in-debt-20151003.

[ii] Ian Hurst, “Why Is a Garnishee Order so Complicated & What Must You Check in This Order? – Hr Pulse,” Professional – Human Resources, HR Pulse, accessed October 5, 2015, http://www.hrpulse.co.za/employee-management/change-management/230287-why-is-a-garnishee-order-so-complicated-a-what-must-you-must-check-in-this-order.

[iii] “Payroll Administrators as Financial Counsellors,” Corporate website, Paymaster Payroll Solutions, accessed October 7, 2015, http://paymaster.co.za/financial-counselling/payroll-administrators-as-financial-counsellors/.

[iv] “Landmark Judgement Is Not End of Garnishee War,” Fin24, accessed October 5, 2015, http://www.fin24.com/City-Press/Landmark-judgement-is-not-end-of-garnishee-war-20150712.

[v] Zak King, Email Interview — Growing Consumer Debt, and Garnishee Orders Back in the National SA Labour Spotlight, interview by Adrian Baillie-Stewart, Email, October 7, 2015.

[vi] The common law in duplum rule holds that “interest stops running when the unpaid interest equals the outstanding capital.” — In Duplum Interest and the National Credit Act | Bentley Credit Management,” accessed October 15, 2015, http://www.creditmanagement.co.za/in-duplum-interest-and-the-national-credit-act/.

[vii] Ibid.

ENDNOTES and SOURCES

[1] Amanda Khoza, “ANC’s Mchunu Says SA Is Drowning in Debt,” News24, accessed October 5, 2015, http://m.news24.com/news24/SouthAfrica/News/ANCs-Mchunu-says-SA-is-drowning-in-debt-20151003.

[1] Ian Hurst, “Why Is a Garnishee Order so Complicated & What Must You Check in This Order? – Hr Pulse,” Professional – Human Resources, HR Pulse, accessed October 5, 2015, http://www.hrpulse.co.za/employee-management/change-management/230287-why-is-a-garnishee-order-so-complicated-a-what-must-you-must-check-in-this-order.

[1] “Payroll Administrators as Financial Counsellors,” Corporate website, Paymaster Payroll Solutions, accessed October 7, 2015, http://paymaster.co.za/financial-counselling/payroll-administrators-as-financial-counsellors/.

[1] “Landmark Judgement Is Not End of Garnishee War,” Fin24, accessed October 5, 2015, http://www.fin24.com/City-Press/Landmark-judgement-is-not-end-of-garnishee-war-20150712.

[1] Zak King, Email Interview — Growing Consumer Debt, and Garnishee Orders Back in the National SA Labour Spotlight, interview by Adrian Baillie-Stewart, Email, October 7, 2015.

[1] The common law in duplum rule holds that “interest stops running when the unpaid interest equals the outstanding capital.” — In Duplum Interest and the National Credit Act | Bentley Credit Management,” accessed October 15, 2015, http://www.creditmanagement.co.za/in-duplum-interest-and-the-national-credit-act/.

[1] Ibid.