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
Numerous legislative changes take effect on or about January 1, affecting minimum wage rates, employee leaves, health care benefits and more. HR should take note of these legal developments and take appropriate steps to comply.
Updated to reflect increased creditor garnishment withholding limits, effective January 1, 2020.
Updated to reflect the requirement to remit child support payments electronically, effective September 17, 2019.
Updated to include garnishment withholding limits on consumer debts, effective July 28, 2019.
Updated to include a creditor garnishment exemption for certain disposable earnings, effective July 1, 2019.
Updated to reflect amended child support withholding noncompliance penalties, effective July 1, 2019.
Updated to include forthcoming changes regarding creditor garnishment withholding.
Key issues in complying with creditor garnishments.