Personal tools

Issue Alert - 08-11-01

Document Actions
Date:

Nov 20, 2008

Program Area:

Child Day Care (CDC) and Home Help Services

Issue Summary:

Department of Treasury is illegally garnishing payments owed to child day care aides and home help workers

Persons Affected:

Parents receiving CDC or Medicaid recipients with serious disabilities who owe a debt to the State of Michigan or a debt subject to garnishment and who employ either day care aides for their children using CDC. or a home help workers using HHS

For More Information:

Center for Civil Justice 320 S. Washington, 2nd Floor Saginaw, MI 48607 (989) 755-3120, (800)724-7441 Fax: (989) 755-3558 E-mail: info@ccj-mi.org

Michigan Poverty Law Program 611 Church Street, Suite 4A Ann Arbor, MI 48104-3000 (734) 998-6100 (734) 998-9125 Fax


Background

The Social Welfare Act is the state statute that implements such programs as Medicaid, Family Independence Program, the Food Assistance Program, the Child Development Care program, as well as other state programs.  M.C.L 400.01 et al. 

Child Day Care (CDC) is a benefit for low income parents, foster parents, and kinship care providers who need assistance paying for child care while they work, attend school, or engage in certain activities necessary to keep the family intact. 

The Michigan Social Welfare Act prohibits any benefit conferred by the Act from being garnished, assigned to creditors or sold. M.C.L 400.63 (1)

THE CDC PROGRAM AND DAY CARE AIDES

There are four categories of child care providers for CDC purposes.

Child Care Centers

Child care centers are licensed and include day care centers, pre-schools, Head Start, and latchkey programs.

Family or Group Homes

Childcare is provided in a residential home. Home day care centers are required to be registered.

Relative Care Provider

A relative of the child who provides care in their home and who does not live with the child. To receive payments from the state, care giver must be enrolled with the Department of Human Services and be at least 18 years old.

Day Care Aide/ Babysitter

A person who cares for your child in your home.  To receive payments from the state, the care giver must be enrolled with the Department of Human Services and be at least 18 years old. 

Day Care Aides are considered employees of the parents and not the State of Michigan.  Thus, CDC payments for day care aides are issued in the name of the CDC recipient (e.g. the parent), while payment for other providers, including Relative Providers and Family Day Care homes, are issued in the name of the provider.   

HOME HEALTH SERVICES

Home Help Services (HHS) is a benefit for low income individuals who qualify for Medicaid and have severe, disability-related needs for personal care or chore services help.  

HHS is administered by the Department of Human Services under the Social Welfare Act.  Because HHS is Medicaid-funded, ultimate responsibility for its operation is with the Department of Community Health and the Medical Services Administration, which operate the Medicaid program under the Social Welfare Act.

HHS payments for individuals (as opposed to HHS agencies that employ direct service providers) are issued as two-party warrants (checks) to the HHS recipient and the HHS provider.  Neither party can cash the check without the other’s endorsement.

What's Happening?

The Department of Treasury has been treating both CDC and HHS payments as being subject to third party garnishments for the debts of any person named on the warrant (check), without regard to statutory protections in the Social Welfare Act and the Consumer Credit Protection Act. 

 

Civil legal services and legal aid providers are seeing debt collection scenarios in which the Michigan Department of Treasury is failing to implement the protections of the federal Consumer Credit Protection Act and Michigan’s Social Welfare Act, and the Michigan Court Rules.    These scenarios include the following:

 

þ      The State allows third parties to collect judgment debts from Home Help Services benefits payable jointly to the recipient and the provider

o        The Department of Treasury does not disclose the HHS recipient’s joint interest in the HHS benefits, as required by the MCR 3.101(L), which is protected under the Social Welfare Act, MCLA 400.63(1)

o        The Department of Treasury does not disclose that the payment is earnings and does not apply the protections of the Consumer Credit Protection Act, 15 USC 1673(a) which prohibits garnishment of the first 30 times minimum wage (currently $196.50) per week (and limits garnishment of the excess to 25% of disposable earnings)

þ      The Department of Treasury intercepts Child Day Care benefits payable to the parent (i.e. parent using a day care aide provider) to satisfy a debt owed to the State (e.g. Driver’s Responsibility fees), in spite of the inalienability of such payments under the Social Welfare Act

þ      The State allows third parties to garnish Child Day Care benefits payable to the provider (e.g. relative care provider) in order to satisfy the provider’s judgment debt

o        The Department of Treasury does not apply the protections of the Consumer Credit Protection Act, which prohibits garnishment of the first 30 times minimum wage (currently $196.50) per week (and limits garnishment of any excess above 30 times minimum wage to  25% of the disposable earnings)

 

PRACTICAL PROBLEMS WITH GARNISHMENT

As a practical matter, taking Home Help Services or Child Day Care payments through garnishment or an offset to collect an old debt makes it impossible for low-income recipients to pay for their current personal care, chore services, or child care needs.   This places children and adults with disabilities at risk of serious harm.  It also is likely to cost the state more in the long run to ameliorate the problems caused when children or adults with disabilities do not receive necessary or care, or when families or individuals must use the funds they need for other necessities to pay for child care, personal care, or chore services.  When home help or child care providers are not paid, they are forced to quit or stop working until payment is made. [1]   Individuals with disabilities or families with children experience a gap in services and usually must find a new provider, preventing continuity of care and disrupting developmentally critical child-caregiver relationships. 

 

WHY GARNISHMENT IS ILLEGAL

 

HHS and CDC payments are fully protected from attachment, offset, or garnishment because they are benefits paid under the Social Welfare Act

Under the Social Welfare Act,

all aid, relief, or assistance given under this act is absolutely inalienable by any assignment, sale, garnishment, execution, or otherwise, and in the event of bankruptcy, shall not pass to or through any trustee or other person acting on behalf of creditors.

MCLA 400.63(1).   This provision ensures that benefits under Social Welfare Act programs that are intended to meet the current, subsistence needs of low-income individuals or families will be available for that purpose, rather than being diverted to satisfy past debts of the individual who is entitled to the aid, relief, or assistance.    Because the current benefits cannot be taken to pay off old debts, the recipient or beneficiary is less likely to incur additional debts and is more likely to be able to meet his or her current, basic needs.

 

The Court of Appeals has emphasized the very broad nature of the protection under MCLA 400.63.

Under the plain language of this statute, "all” aid given pursuant to the Social Welfare Act is "absolutely" inalienable.   We summarily reject plaintiffs' position that a withholding order is not included within the scope of the statute.   The act in the broadest possible terms prohibits any and all alienations of such aid by "assignment, sale, garnishment, execution or otherwise."

Lapeer County Dep't of Social Services v. Harris, 182 Mich. App. 686, 688-9 (1990).    Thus, both CDC and HHS benefits cannot be taken by any means to satisfy any debt owed by the CDC or HHS recipient. 

 

Taking benefits through an offset to collect a Driver’s Responsibility debt owed to the Secretary of State -- just like taking them through a withholding order to collect child support owed to the Department of Social Services – is prohibited by the broad language of the Social Welfare Act, MCLA 400.63(1), even though the Act does not specifically refer to common law offsets or to debts owed to the Secretary of State.[2]

 

HHS and CDC payments also are protected from garnishment or offset because they are earnings under the Consumer Credit Protection Act

Under the Consumer Credit Protection Act [CCPA}, except for child and spousal support payments,

the maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment may not exceed

(1) 25 per centum of his disposable earnings for that week, or   

(2) the amount by which his disposable earnings for that week exceed thirty times the  Federal minimum hourly wage prescribed by section 6(a)(1) of the Fair Labor Standards Act of 1938 in effect at the time the earnings are payable, whichever is less.

15 USC 1673(a).   Like the Social Welfare Act, this provision ensures that workers will receive a minimum level of income to meet their current needs, rather than having all their hard-earned dollars diverted to satisfy past debts.[3]  

 

The CCPA explicitly provides, “no State (or officer or agency thereof), may make, execute, or enforce any order or process in violation of this section.”   15 USC 1673(c).    State law explicitly prohibits any offset of earnings exempt from garnishment under 15 USC 1673 to collect debts owed to the state (except unpaid taxes). MCLA 205.25(5).[4]

 

Payments made under the CDC and HHS program are protected under the CCPA, because they are earnings, which are defined as “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise.”   Id. at 1672(a).   Child day care aides, relative providers, and personal care/chore service providers are personally providing care and services to low income children and persons with disabilities.  HHS and CDC payments are made to pay them for those services. 

 

Although the state of Michigan does not have an employer-employee relationship with the HHS and CDC provider, the state is making the CDC payments on behalf of the recipient as compensation for personal services rendered by the child care or home help provider.   Indeed in the HHS program, the State withholds FICA and union dues from the HHS warrants paid to the recipient and provider.   Accordingly, the CDC and HHS payments are “earnings” within the meaning of the Consumer Credit Protection Act, 15 USC 1672(a).  

 

However, the State of Michigan is failing to identify HHS and CDC payments as earnings for purposes of exempting them from 100% “setoff” or garnishment to collect a debt owed to the state.  Instead, the Department of Treasury (mis)characterizes the payments as “vendor payments” that are not protected.  



[1]     The problem is exacerbated by the delays that recipients experience when attempting to switch CDC payments to a different provider, and the delays experienced by provider who are seeking to reenroll as day care aides or relative providers.  

[2]    There is only one, statutory exception to the protection against taking of benefits payable under the Social Welfare Act, and it does not apply to Home Help Services and Child Day care benefits because they are not a “cash grant” like Family Independence Program and State Disability Assistance benefits.  See MCLA 400.63(2).    

[3]   The United States Supreme Court noted in Kokoszka v. Belford, 417 US 642, 651 (1974), “Congress… sought to regulate garnishment in its usual sense as a levy on periodic payments of compensation needed to support the wage earner and his family on a week-to-week, month-to-month basis.” 

[4] The CCPA defines garnishment to include  “any legal or equitable procedure through which the earnings of any individual are required to be withheld for the payment of any debt.”  15 USC 1672(c).

What Should Advocates Do?

If you have a client whose CDC or HHS payments have been withheld for any reason, tell them to contact their local  legal services immediately or the Center for Civil Justice at (800) 724-7441 to learn about their rights and options.  Legal advocates can contact CCJ for more information about this problem.

What Should Clients Do?

If you employ a home help services worker or are a parent who employs a Day Care Aide to care for your children and the Department of Treasury has garnished or offset your CDC or HHS payment, contact your local legal services office (see below) or CCJ immediately.

Finding Help

Most legal aid and legal services offices handle these types of cases, and they do not charge a fee.

You can locate various sources of legal and related services, including the free legal aid office that serves your county, at MichiganLegalAid.org.

You can also look in the yellow pages under "attorneys" or call the toll-free lawyer referral number, (800) 968-0738.