Source: http://zigmat.com/2017/07/25/miscellaneous-state-exemptions/
Timestamp: 2018-06-23 14:03:51
Document Index: 419622982

Matched Legal Cases: ['§222', '§222', '§222', '§222', '§222', '§222', '§222', '§222', '§222']

Miscellaneous State Exemptions – Zig Mat Blog
Exemption and Extent Thereof
Prior to October 1, 1993, Florida exempted all wages of the head of a family from claims of creditors. Effective October 1, 1993, Fla. Stat. §222.11 generally limits the exemption to $500.00 per week. However, even the excess over $500.00 per week may not be attached unless the debtor agrees in writing. Thus, from a practical standpoint, it appears that the new law will only apply on a prospective basis to the extent creditors require the debtor to waive the exemption in writing in consideration for the extension of credit. In addition, the exempt portion of wages will retain their exempt status if placed in a bank account. However, they will remain exempt in such account for only 6 months. Furthermore, where other funds are deposited into the bank account making it impossible to trace the exempt wages, the account will not be exempt. There has been a split in the Florida courts as to whether earnings as an independent contractor are protected by Fla. Stat. §222.11.
In In re Glickman, 126 B.R. 124 (Bankr. M.D. Fla. 1991) the court found that nothing in the wage statute limits its protection to employees. It then said that amounts owed to a dentist who was an independent contractor were exempt because it was owed for personal labor and services.
In In re Pettit, 224 B.R. 834 (August 14, 1998), the U.S. Bankruptcy Court for the Middle District of Florida, Jacksonville Division, held that commissions and bonuses earned by debtor are exempt earnings pursuant to Fla. Stat. §222.11 even though the debtor was labeled an independent contractor. The Pettit court then adopted a totality of the circumstances approach to determining whether a debtor’s compensation constitutes exempt earnings pursuant to Fla. Stat. §222.11, and further noted that it would not base its decision solely on whether a debtor is labeled an employee or independent contractor. The court stated the debtor was an independent contractor whose activities were essentially a job and not in the nature of running a business. He received regular compensation dictated by the terms of an arm’s length employment agreement, although oral. The owner of the company had complete discretion as to the timing and the amount of debtor’s compensation and could adjust it if he chose to do so. Accordingly, the court held that, in light of all of the circumstances, debtor’s commission and bonuses were exempt earnings pursuant to Fla. Stat. §222.11. In deciding this case, the court did a survey of the case law with respect to said statute both before and after its amendment in 1993.
The court noted that most Florida Bankruptcy courts have held that money due for personal labor or services can only be earned by an employee and consequently that the payment of wages to an employee is exempt whereas compensation to an independent contractor is not. The court also noted that in 1993, the Eleventh Circuit Court of Appeals in Sclein v. Mills (In re Schlein), 8 F.3d 745 (11th Cir. 1993), addressed the issue of whether Fla. Stat. §222.11 exempts compensation of independent contractors. In that case, Schlein conceded that he was an independent contractor but argued that the phrase “money due for personal labor or services” was not limited to earnings of employees. The court disagreed and held that “earnings” of an independent contractor are not money due for personal labor or services and are thus not exempt pursuant to Fla. Stat. §222.11. In October, 1993, said Statute was amended and the term “earnings” was substituted with “money or other thing due to any person… or the personal labor or service of such person,” and the term “earnings” is defined as compensation paid or payable in money of a sum certain for personal services or labor whether denominated as wages, salary, commission or bonus. The court noted that only two cases have dealt with the effect of the amendment in the Schlein:
In re Zamora, 187 B.R. 783 (Bankr. M.D. Fla. 1995) the debtor owned a law practice as a sole practitioner and a marina. The Zamora court held that cash in bank accounts from debtor’s law practice and marina as well as accounts receivable from his law practice were not exempt earnings pursuant to Fla. Stat. §222.11. The court pointed out that in addition to performing personal services as a business, the debtor must receive regular compensation dictated by the terms of an arm’s length employment agreement to perform services that are much like a job. In Zamora, the court found that the debtor was in complete control of the business, the amount of his compensation and terms of his employment.
In re Lee. 190 B.R. 953 (Bankr. M.D. Fla. 1995). In that case, the court stated that Schleinwas still controlling with regard to its holding that the exemptions do not extend to earnings of an independent contractor. Accordingly, the court held that insurance renewal commissions earned by an independent contractor were not exempt pursuant to Fla. Stat. §222.11.
In In re Branscum, 229 B.R. 32 1999 (Bankr. M.D. Fla. 1999) follows Schlein and disallows the wage exemption for independent contractor fees paid to a private investigator.
To benefit from the wage exception, funds must be deposited in a financial institution. The prior statute required the funds be held in a bank account. In In re Rutenberg 164 B.R. 683 (Bankr. M.D. Fla 1994) the court held that the wage earner exemption did not protect funds maintained in a cash management account at a stock brokerage company. In addition the employee must be the head of the family i.e., someone who provides more than one-half the support for a child or other dependent).
To avoid arguments such as those raised above for employees of closely held businesses, employment agreements should be utilized to reflect the employees wages and temptation should be avoided to take compensation as funds become available. A line of credit should be considered so the employee can receive regular wages based upon anticipated annual earnings.