An assignment is a transfer of property, right or interest from one person to another.[i] The assignment of a wage is a transfer of the right to receive wages effected by means of a contract.[ii]
The right to salary or fees which have been earned may be assigned and such an assignment is a valid assignment not in contravention of public policy.[iii] Such an assignment may be made even though the contract under which the money is to become due is not assignable.[iv]
In re Martin, 117 B.R. 243 (Bankr. N.D. Tex. 1990), the court held that it is not essential that an assigned fund should have been earned or is in existence at the time of the assignment. It is sufficient that it has a potential existence, that there is a reasonable expectancy that the fund will be earned and come into existence. Thus, if there is an existing employment under which it may reasonably be expected that the wages assigned will be earned then the wages may be assigned.[v]
The right to receive monies due or to become due under an existing contract may be assigned.[vi] Accordingly, wages to be earned under an existing contract can be assigned.[vii] In Duluth, S.S. & A. R. Co. v. Wilson, 200 Mich. 313 (Mich. 1918), the court held that an assignment of wages to be earned in the future, under an existing contract, is valid.
In Leitch v. Northern P. R. Co., 95 Minn. 35 (Minn. 1905), the court observed that an assignment of wages to be earned in the future under an existing contract of employment to secure a present debt or future advances is valid as an agreement and takes effect as an assignment as the wages are earned. However an assignment of wages to be earned, without limit as to amount or time, is void.
In Rodijkeit v. Andrews, 74 Ohio St. 104 (Ohio 1906), the court held that an assignment of wages to be earned in the future under an existing employment, even though the employment is for an indefinite time, is not against public policy and is valid if made for a valuable consideration and is without fraud.
Further, an assignment of wages or salary to be earned under an existing employment, made in good faith and for a valuable consideration, is valid where the relation between the employee and his employer is such that the employee may reasonably be expected to earn the wages covered by the contract.
Ordinarily it is not necessary to obtain the assent of the employer to the assignment of wages under an existing contract, but if the employer consents, it gives assurance of validity to the assignment.[viii] Similarly, an employee may assign his wages as security for a debt.[ix]
However, a mere expectancy or possibility is not assignable at law. [x] Thus, an assignment of wages expected to be earned in the future and not based upon an existing contract, engagement, or employment, is void.[xi] An assignment which purports to transfer a portion of earnings not based upon present employment or an existing contract is void.[xii]
Further, an assignment of future compensation, not yet earned, whether payable by salary or fees, is opposed to public policy, and void.[xiii] In Huling, Brockerhoff & Co. v. Cabell, 9 W. Va. 522 (W. Va. 1876), the court held that an assignment of future wages, there being no contract of service, is invalid.
The future salaries of public officers are not assignable on the ground of public policy and an attempted assignment thereof is void.[xiv] The assignment of such funds before they are due is forbidden under public policy since it harms the efficiency of public service.[xv] However, the salary or emoluments of a public officer, when they are already earned, is capable of assignment.[xvi] A public officer may assign his salary and confer upon the assignee the power to collect it after he has earned it.[xvii] Similarly, compensation, if due may be assigned.[xviii]
Assignment of wages is expressly recognized by statutes and the rights of wage earners are protected by different statutory provisions.[xix] Statutes provide that assignment of wages, salaries, or earnings:[xx]
- should be in writing
- should contain the correct date of the assignment
- should contain the correct amount assigned, and
- should contain the name or names of the party or parties owing the wages, salaries and earnings so assigned
All assignments of wages, salaries, and earnings not earned at the time the assignment is made are null and void.[xxi]
The state may regulate assignments of wages.[xxii] In International Text-Book Co. v. Weissinger, 160 Ind. 349 (Ind. 1902), the court held that the assignment of future wages to be earned are valid contracts, provided they are not prohibited by a statute which the legislature has the constitutional authority to enact.
Individuals have no unrestricted power to contract; the power is always subject to regulation.[xxiii] Under the police power, the legislature may regulate the assignment of unearned wages or salary without infringing upon a constitutional right.[xxiv] Regulations under the police power of a state are designed to promote the public welfare or the general prosperity and include regulations designed to promote the public health, the public morals, or the public safety.[xxv]
The right to recover a statutory penalty for the failure to pay wages due to an employee cannot be assigned for collection, particularly when the assignment is made as part of a commercial transaction.[xxvi] However, in Nordling v. Johnston, 205 Ore. 315 (Or. 1955), the court held that a statutory penalty against an employer for nonpayment of wages may be assigned as incident to an assignment of the contract debt represented by the unpaid wages.
The assignability of wages is determined by the same law which governs the contract of employment.[xxvii] In Mogul v. Jenkins Bros., 203 Misc. 635 (N.Y. App. Term 1953), the court held that the question of whether a contract is assignable is controlled by the law of the place where the contract is made and is to be performed, whereas the question of the validity of the transfer of a claim which is capable of assignment is governed by the law of the place where the assignment is made.
[i] State ex rel. Leach v. Price, 168 Ohio St. 499 (Ohio 1959)
[ii] Western v. Hodgson, 494 F.2d 379, 381 (4th Cir. W. Va. 1974)
[iii] In re Martin, 117 B.R. 243 (Bankr. N.D. Tex. 1990)
[v] Rodijkeit v. Andrews, 74 Ohio St. 104 (Ohio 1906)
[vi] 232 B.R. 497 (Bankr. M.D. Fla. 1999)
[vii] Denver v. Jones, 85 Colo. 212 (Colo. 1929)
[viii] Brand v. State, 109 Tex. Crim. 96 (Tex. Crim. App. 1928)
[ix] State Street Furniture Co. v. Armour & Co., 345 Ill. 160, 163 (Ill. 1931)
[x] Rodijkeit v. Andrews, 74 Ohio St. 104 (Ohio 1906)
[xi] Coyle v. Des Moines Gately’s, Inc., 230 Iowa 511 (Iowa 1941)
[xii] Orkow v. Orkow, 133 Cal. App. 50 (Cal. App. 1933)
[xiii] Byers v. Comer, 50 Ariz. 8 (Ariz. 1937)
[xiv] Holt v. Thurman, 111 Ky. 84 (Ky. 1901)
[xv] State ex rel. Leach v. Price, 168 Ohio St. 499 (Ohio 1959)
[xvi] Holt v. Thurman, 111 Ky. 84 (Ky. 1901)
[xvii] Byers v. Comer, 50 Ariz. 8 (Ariz. 1937)
[xviii] Fischer v. Liberty Nat’l Bank & Trust Co., 61 F.2d 757 (2d Cir. Conn. 1932)
[xix] State Street Furniture Co. v. Armour & Co., 345 Ill. 160, 163 (Ill. 1931)
[xx] Brinley v. Karnes, 595 S.W.2d 465 (Mo. Ct. App. 1980)
[xxii] State ex rel. Leach v. Price, 168 Ohio St. 499 (Ohio 1959)
[xxiii] Heller v. Lutz, 254 Mo. 704 (Mo. 1914)
[xxiv] Murphy v. County of St. Louis, 187 Minn. 65 (Minn. 1932)
[xxv] Mutual Loan Co. v. Martell, 222 U.S. 225 (U.S. 1911)
[xxvi] Robinson v. St. Maries Lumber Co., 34 Idaho 707 (Idaho 1921)
[xxvii] Coleman v. American Sheet & Tin Plate Co., 285 Ill. App. 542 (Ill. App. Ct. 1936)