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Garnishments

Wage garnishment is a court order for an employer to withhold a certain amount of an employee’s wages for the payment of a debt, such as child support or back taxes.

What laws apply to garnishment?

A: The principal federal law governing garnishments is Title III of the Consumer Credit Protection Act. The law protects a certain portion of a worker’s wages from garnishment and prohibits discrimination against employees whose wages are subject to garnishment. Many states passed their own garnishment laws.

What should an employer do if it receives a garnishment order?

A: The notice or order of garnishment will generally include instructions for processing the garnishment. The order will contain information about who is subject to the order, when to begin withholding, how much to withhold, and how and where to remit payments. The order may also require a response from the employer. Once you receive a garnishment order, provide a copy to the employee and then begin withholding in accordance with the order.

Can I fire an employee because he or she is subject to garnishment?

A: Title III of the Consumer Credit Protection Act expressly prohibits an employer from discharging an employee whose earnings have been subject to garnishment for any one debt. Your state law may offer additional protections for employees.

An employee says a garnishment order is incorrect. Can I stop withholding from their wages?

A: Employers must obey a garnishment order until the employer is informed by the court (or issuing agency) that the debt has been satisfied or the garnishment order has been otherwise modified or suspended. If an employee disagrees with a garnishment order, the employer should continue to withhold as ordered and direct the employee to address the issue with the issuing court or agency.

Are there any limitations on how much I can withhold?

A: Federal law and many state laws have restrictions on how much of a worker’s wages may be subject to wage garnishment. Where state and federal law differ, the employer must observe the law that results in the smaller wage garnishment. The following is a brief summary of the federal limits.

Family Support Orders:

The federal limit on family support garnishments is:

60 percent of an employee’s disposable income if the employee is supporting no other spouse or child; 50 percent of disposable income if the employee is already supporting another spouse or child.

An additional five percent may be garnished for family support payments more than 12 weeks in arrears

 

Consumer Debts:

The federal limit on garnishments for consumer debts (excluding certain bankruptcy court orders and federal and state taxes) is the lesser of:

25 percent of disposable income; or

The amount by which disposable income is greater than 30 times the federal minimum wage (currently $7.25 per hour).

For example, if an employee’s weekly disposable income is $217.50 ($7.25 × 30) or less, there can be no garnishment made. If disposable earnings are more than $217.50 but less than $290.00, the amount above $217.50 can be garnished. If disposable income is $290.00 or more, a maximum of 25 percent can be garnished.

Taxes and Bankruptcy:

Under federal law, there are generally no restrictions on garnishment amounts for federal and state taxes and certain bankruptcy court orders.

What is considered “disposable income” for the purpose of garnishment limits?

A: Under federal law, disposable income is defined as net income after making mandatory deductions for state, federal, and local taxes. Deductions not required by law (e.g., union dues, health and life insurance, and charitable contributions) are not subtracted from gross earnings when calculating the amount of disposable income.

What is given priority if an employer receives multiple garnishment orders and the employee doesn’t earn enough to cover all of them

In general, family support orders will take priority over all other claims against the same wages, followed by tax levies. If more than one of the same type of garnishment order is in effect, the priority may be affected by the order in which the garnishments were received (i.e., first come, first served). When determining which garnishments take precedence, it is a best practice to ask the court or agency that initiated the garnishment actions and to consult legal counsel.

Can I charge employees an administrative fee for processing garnishments?

A: This answer may depend on the state as well as the type of garnishment. While most states permit an employer to charge a fee to the employee for the costs of processing family support orders, state laws generally set a limit on the fee. For other types of wage garnishments, some states require the creditor, or a combination of the creditor and the employee, to pay an administrative fee to the employer.

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