Limits on garnishment of partnership and self-employment income

The Wages Act limits the amount of wages that may be garnished to pay a debt – the limitation is for the obvious reason that the debtor still has to be able to survive and so needs at least part of their wages.  That limitation only applies to employment income and not to income paid to someone who is self-employed or receives partnership income.  Accordingly, without some imposed restriction by the court, a self employed person might have no income at all left.  Today’s decision in Brown Estate v. Watt, 2010 ONCA 148 sets out the Court’s equitable jurisdiction to limit garnishment and suggest that the limit on monies garnished from a self employed person may be higher than that for a wage earner.  The Court writes:

 

[2]              However, the appellant has raised on appeal the corollary issue that if partnership income can be garnished, is it subject to the Wages Act?  We agree that the jurisprudence under that Act decides that partnership income is not “wages” because there is no employer.  However, the equitable jurisdiction of the court applies to self-employed income to allow the court to reduce the amount that can be garnished in order to recognize that self-employed income is analogous to wages and can be protected from creditors in order to allow the partner to be able to bear the expenses of ordinary life.

[3]              As this matter was raised on appeal for the first time with no material to assist the court, in our view the matter must be returned to the motion judge on proper material. In our view, the 80% default rate of protection set out in the Wages Act may not be sufficient to protect the ability of a self-employed person to live given the need to pay income tax and other expenses from the gross amount of the wages.