Overview: A garnishment is a legal means for collecting money from an individual to pay off a debt, such as an unpaid loan or credit card amount. When an employee becomes subject to a court ordered creditor garnishment, the court will send the employer an order requiring it to withhold from the employee's wages according to the terms of the order. To successfully fulfill all the employer responsibilities of a creditor garnishment order and avoid the imposition of penalties, employers must know how to calculate payroll withholding, when to follow state law and the order of priority when there are multiple garnishments in effect against one employee.
Employers must comply with the Consumer Credit Protection Act (CCPA) when calculating withholding for a garnishment. The CCPA limits the amount of an employee's earnings that can be garnished to repay a debt in any workweek or pay period. State garnishment limits apply if they are lower than the CCPA limits. State law also applies if the state prohibits creditor garnishments altogether. State laws also govern the following issues:
Employers also must figure out which order to satisfy first when an employee is subject to more than one garnishment and/or how much to withhold for each. Withholding more than the maximum permitted by the CCPA may reduce an employee's wages below the minimum wage in violation of the Fair Labor Standards Act (FLSA).
Author: Rena Pirsos, JD, Legal Editor
Updated to include information on amended creditor garnishment withholding limits, effective July 1, 2016.
HR departments should get ready now to comply with a wide variety of employment law requirements that are changing on July 1. Depending on the employer's presence in various jurisdictions, a number of workplace practices may be affected by legislative changes, ranging from employment contracts to payroll.
Updated to include information on the forthcoming introduction of garnishment of independent contractor earnings.
Updated to include important new requirements regarding lump-sum payments to be made to employees subject to a child support withholding order.
Updated to include amended creditor garnishment withholding limits, effective June 7, 2016.
In-depth review of the spectrum of Michigan employment law requirements HR must follow with respect to involuntary and voluntary pay deductions.
In-depth review of the spectrum of Oklahoma employment law requirements HR must follow with respect to involuntary and voluntary pay deductions.
Key issues in complying with creditor garnishments.