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 reflect a change in the priority order for satisfying multiple child support orders, effective April 3, 2019.
Updated to reflect amended creditor garnishment order procedures, effective March 22, 2019.
Updated to reflect a forthcoming creditor garnishment exemption for disposable income.
Updated to reflect changed creditor garnishment withholding limits, effective March 8, 2019.
Updated to reflect the lifting of the stay of enforcement regarding the New York City Fair Work Practices ordinances.
The US Department of Labor opined about how to ascertain travel time by employees without regular working hours, whether frequent rest breaks required by a "serious health condition" are compensable, and which types of lump-sum payments are "earnings" subject to garnishment limits.
Updated to include the requirement to submit copies of child support orders with employees' workers' compensation reports, effective January 1, 2018.
Key issues in complying with creditor garnishments.