Thank You For Submiting Feedback!
By defining "earnings" as compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, the Consumer Credit Protection Act prioritizes the character of the payment over its label. Thus, although evidence that the Internal Revenue Service lists a recipient's disability payments as wages may support her claim, whether or not the disability payments are labeled as wages is not the central issue; the central issue is whether the disability payments are compensation paid or payable for personal services.
In 2004, Ashcraft pleaded guilty to several criminal charges. She was sentenced to a term of imprisonment and to restitution. She was released from custody in November 2012. At some time prior to her incarceration, she worked for Amana Refrigeration. Amana provided long-term disability insurance to its employees through Principal Life Insurance Company ("PLIC"). Ashcraft's employment with Amana aggravated a medical condition, rendering her unable to work; as a result, Ashcraft receives disability payments from PLIC. Those payments will continue until she reaches the age of sixty-five in November 2016. The government does not dispute that the disability insurance providing Ashcraft's current disability payments was provided by Amana in the course of Ashcraft's employment. In February 2012, the government sought to garnish Ashcraft's disability payments pursuant to her restitution sentence. Ashcraft objected. Ashcraft argued her disability payments are "earnings" within the meaning of the Act and are thus subject to the Act's limitations on garnishment. The district court ruled Ashcraft's disability payments are not "earnings" within the meaning of the Act and overruled her objection to garnishment. Ashcraft appealed. On appeal, Ashcraft argued that the language of the Act is inclusive, allowing for nonenumerated "periodic payments" to fall within the definition of "earnings," and that the disability payments are the kind of periodic payments intended to be protected by the Act. Ashcraft argued that her disability insurance was part of her compensation from Amana and that her disability payments are considered wages by the IRS. The government argued that Ashcraft's disability payments are not "compensation paid or payable for personal services" as the Act requires and that the Act does not expressly include disability payments within the definition of "earnings."
Were Ashcraft's disability payments "earnings" within the meaning of the Act?
The court held that Ashcraft’s disability payments constituted "earnings" that were subject to the garnishment limitations of the Consumer Credit Protection Act, 15 U.S.C.S. § 1673, as the disability payments were compensation paid or payable for personal services; the payments were designed to function as wage substitutes. The fact that Ashcraft’s employer received her services before Ashcraft began receiving disability payments did not take the payments out of the category of compensation.