With just over 7% of all workers having had their wages garnished,* odds are your business will be asked to garnish the wages of an employee at some point. The primary reasons for garnishment are unpaid child support, tax liens, and student loans/consumer debt. What are your obligations when it comes to wage garnishment? Are there risks to noncompliance?
Overview
Generally, when wages are garnished, an employer withholds money from an employee’s paycheck and sends these funds to a creditor for the payment of a debt. Since wage garnishments are made by court order or other types of legal procedures, you can’t afford to ignore one. Depending on the applicable state law, an employer that fails to withhold garnished amounts may be held liable for the amount of the debt and for possible additional penalties, such as collection costs.
Steps to Take
Because of the risks associated with noncompliance, you’ll want to have procedures in place to handle wage garnishments properly.
- Determine the Amount To Withhold. The federal Consumer Credit Protection Act (CCPA) limits the amount of a garnishment to a percentage of the employee’s “disposable earnings,” which is the amount left after legally required deductions are made. Applicable percentages depend on the type of debt being collected. Moreover, if a state wage garnishment law differs from the CCPA, the law resulting in the smaller garnishment must be observed. You may want to consult an attorney to determine the appropriate amount to withhold.
- Respond in a Timely Manner. Promptly contact your payroll department or outside provider, let them know that you have received a wage garnishment order, and provide them with all the necessary information. Begin withholding the required amount from the individual’s wages as soon as you receive the order. Continue to comply with the order until notified to discontinue the wage garnishment.
* Garnishment: The Untold Story, ADP Research Institute, 2014 (2013 data)
