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 whistleblower protections in the federal Taxpayer First Act, an amendment prohibiting discrimination based on reproductive health decisions in Hawaii, amendments to medical marijuana law in New Jersey and amendments regarding service animals in Rhode Island.
Updated to reflect a forthcoming change in child support remittance requirements.
Updated to reflect amended child support withholding noncompliance penalties, effective July 1, 2019.
Updated to include a creditor garnishment exemption for certain disposable earnings, effective July 1, 2019.
Updated to reflect a forthcoming amendment to the creditor garnishment withholding limits.
Updated to reflect a forthcoming increase in the creditor garnishment withholding limits.
Key issues in complying with creditor garnishments.