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I honestly can’t quite figure out how things are wired. These days, disposals are wired with a standard 3 wire cord set plugged into a switched outlet. If yours is hard wired, did the electrician use the disposal as a junction box, that is unswitched power enters the unit and the switch is connected inside the junction box of the disposal? There usually isn’t enough room in them to do that.
Actually, the other way around - the disposal uses the dish-washer as the junction box. Three wire nuts (green, white and black wire), each nuts has 3 wires twisted together (main power in, power out to disposal, and power for dish washer).
I think my concern is influenced by my disliked that connection - and is looking for a reason to redo it. There is very little slack with that power cable to the disposal. Just to pull the dishwasher out a couple of inches to replace the water hose washer... I had to "un-nut" everything, remove both the main and disposal-power cables from the junction box on the dish washer, replace the water host washer, and reconnect the power cables after the dishwasher is pushed back in. When it is in, there is very little maneuvering space so reconnecting is difficult.
The factory stranded 16 AWG power wire has strands soldered together. Soldering makes the exposed part very stiff and difficult to twist around the other two wires. I very much dislike that. It is always a struggle when I have to reconnect them.
In some states, code requires garbage disposer and dish washer not share circuit with anything else. In other states, they don't care.
The circuit breaker is 20 Amp. Wire coming out of your wall is 12 gauge, correct? If it goes into a junction box, and whatever wire comes out of appliances are connected to it directly with wire nuts correct? And they are all in a junction box that happens to be under dish washer? That's alright. There is no problems there. Most common way for garbage collector is to use 14 gauge wire and put it in armored sleeves. Naked Romex are not approved for use in where house hold members can easily reach and possibly cause damage.
If your house was built in that way, I'd not be too concerned.
The 20 Amp was as the house was built so I assumed it was AWG 12. The garbage disposal was added on. It is naked romex but hidden inside the under-sink cabinet. It seems so much thinner than the 20 Amp it may be AWG 16 instead of 14.
I have some concern about it being naked too. Besides the nest of water pipes in there, some cleaners are kept in that cabinet. So in theory, I could accidentally burn/cut the wire if I am torch-soldering on a new tap carelessly.
re:"In some states, code requires garbage disposer and dish washer not share circuit with anything else. In other states, they don't care."
Those connections were done more than 20 years ago. I know as recent as 2014, dish washer and disposal on the same circuit was fine (when combined load is less than 20 Amp). But 2014 is a long time ago...
And then there is local (township) rules... I very much dislike big-brother rules, and they get more intrusive every time they change it. My water heater was replaced recently. After the heater was replaced, the plumber doing the work told me: "new regulation, you have to get the township to come inspect it and get it certified." They didn't require that when the last water-heater was replaced. It was just as the State-wide virus full lock down started. I can't get anybody to even answer the phone... I do wonder if they are just doing it for the certification fees...