Wage Garnishment: Does Florida’s Head-of-Household Exemption Apply to Independent Contractor Income

Often, an entire household is dependent upon the wages earned by a single head-of-household. To protect the financial well-being of these dependents, the Florida legislature has exempted some of these wages from wage garnishment. However, Florida courts have struggled to consistently apply the exemption. The greatest issue has been whether independent contractor income qualifies for the exemption.

Head-of-household Exemption

The Florida legislature codified the head-of-household exemption in Fla. Stat. § 222.11. Under this statute, the head of household’s disposable earnings cannot be attached or garnished for a six-month period.^[1] To qualify for the exemption, the head of household must:

1. provide more than half the financial support for the household’s dependents ^[2]; and
2. earn compensation paid or payable, in money of a sum certain, for personal services or labor, whether denominated as wages, salary, commission, or bonus. ^[3]

Distinction Between Employees and Independent Contractors

Most litigation regarding the head-of-household exemption involves the meaning of “personal services or labor.” Courts have eagerly applied the exemption to employee income. In contrast, courts have been reluctant to apply the exemption to independent contractor income. Therefore, determining whether an employer-employee relationship exists is crucial to determining whether the exemption applies.

Typically, courts consider four factors when making this determination: (1) control of the worker’s conduct, (2) selection and engagement of the worker, (3) power of dismissal, and (4) payment of wages. Ware v. Money-Plan Intern., Inc., 647 So.2d 1072, 1073 (Fla. App. 2 Dist. 1985). In Ware, the court emphasized that the determinative factor is who holds the power to dictate the manner in which the work is completed. Id. at 1073. If the worker holds this power, the court will likely determine he is an independent contractor. Id.

Treatment of Independent Contractor Income

(1) The Early Days:

When courts first interpreted the head-of-household exemption, they placed controlling weight on the distinction between employees and independent contractors. In Patten Package Co. v. Houser, the Florida Supreme Court affirmed this categorical approach and held that independent contractor income falls outside the exemption’s scope. 136 So. 353, 356 (1931). The court’s reasoning hinged on the terms of the employment agreement. Id. at 356. Because the worker would receive the same compensation regardless of whether he personally performed the labor and services or assigned them to another, the court determined he was an independent contractor. Id.

Additionally, the court in Patten clarified that the particular method of calculating wages is immaterial to the exemption’s applicability. Id. at 356. According to the court, the term “wages” does not imply that compensation must be determined by calculating an hourly rate.  Id.  Wages can also be calculated by the work done. Id.

(2) The Modern View:

Most courts have interpreted Patten as establishing a binding precedent that independent contractors cannot qualify for the head-of-household exemption.[4] However, some courts have looked beyond the distinct categories and employed a totality of the circumstances approach.

Under this approach, the central inquiry is whether the individual’s activities “were essentially a job or whether they were in the nature of running a business.” In re Zamora, 187 B.R. 783, 784 (Bankr. S.D. Fla. 1995). If the worker is essentially “running a business,” he will not qualify for the exemption. Id. at 784. Because these individuals have full discretion over which expenses to pay, courts reason they should not be entitled to protection. Id.

To determine whether the individual is essentially “running a business,” courts consider several factors. Id. Most importantly, courts consider the pattern of wages and the nature of the employment agreement. Id. If one “receives regular compensation dictated by the terms of an arm’s-length employment contract,” courts will likely apply the exemption.

(3) Recent Cases:

In In re Pettit, the court held a salesperson qualified for the exemption despite being labeled as an independent contractor. 224 B.R. 834, 839 (Bankr. M.D. Fla. 2013). The verbal agreement was negotiated at arms-length and established the salesperson’s monthly commission and yearly bonuses. Id. at 836. Although the employer had no control over the individual’s hours, it had absolute discretion concerning his pay. Id. at 839. Because the individual was not a business insider capable of manipulating his own compensation, the court applied the exemption. Id.

In the most recent case applying the exemption, the court strayed even further from Patten’s strict categorical view. In In re Bhalla, the court exempted the worker’s monthly earnings despite the worker’s 50% ownership interest in the company. [5] The court reasoned the services performed by the worker were separate and distinct from the individual’s responsibilities as an owner. [6] Importantly, the other 50% owner maintained absolute control over the timing and amount of his compensation. [7] Therefore, based on the totality of the circumstances, the court concluded the individual’s wages qualified for the exemption. [8]

A review of the relevant case reveals that courts have struggled to consistently apply the head-of-household exemption to independent contractors. However, the modern case-by-case framework appears to be appropriate for deciding difficult cases. Because of the unpredictability of this framework, those concerned about the exemption’s applicability should seek the advice of a qualified attorney.