An Introduction to Wage Garnishment

From time to time, employers receive court orders or letters from attorneys informing them of their legal obligation to garnish employee wages. Wage garnishment is a tool used to force people to make good on their debts. It can be utilized to collect back child support, pay creditors during a bankruptcy proceeding, etc.

As an employer, you have certain obligations stipulated by federal law. The employee whose wages are being garnished also has certain rights. It is incumbent upon you to know what those responsibilities and rights are. To that end, this post serves as a basic introduction to wage garnishment.


Regulation and Admnistration

Wage garnishment in the U.S. is regulated by Title III of the Consumer Credit Protection Act (CCPA). If you are interested in reading the actual text of the law yourself, most of the pertinent information can be found in 15 USC §1671 et seq of the CCPA.

Administering the law is the responsibility of the Department of Labor's Wage and Hour Division (WHD). Any questions or concerns about Title III, as it applies to employees in your company, should be directed to WHD.


General Provisions

The general provisions of wage garnishment law are pretty straightforward. To start with, employers are compelled to comply with wage garnishment orders issued by a court or any other legal or equitable procedure. One example of an equitable procedure would be a ruling by a child protective services officer requiring an absentee parent to pay a child's medical bills.

Next, the amount to be garnished is calculated based on a worker's disposable earnings. The law defines disposable earnings as "the amount of earnings left after legally required deductions (e.g., Federal, state, and local taxes; the individual's share of Social Security, Medicare, and unemployment insurance taxes; and contributions to state employee retirement systems required by law) have been made."

Notice that this definition does not include money a worker might need to pay his/her own bills. Employers are not to consider rent, food expenses, etc. when calculating amounts to be garnished.

Lastly, there are times when state wage garnishment laws conflict with federal law. In such cases, employers are obligated to comply with the laws that result in the lower garnishment amount. Failure to comply with applicable laws could result in fines, penalties, and potential litigation.


Employee Rights

Employees do have some limited rights under wage garnishment law. First and foremost, they cannot be terminated based on a wage garnishment order. For example, if wages are being garnished because an employee is behind on child support, that employee cannot be terminated as a direct result of the garnishment order.

Next, the law limits the actual amount that can be garnished. Amounts are limited to the lesser of the following two options:

  • 25% of the employee’s disposable earnings; or
  • the amount by which disposable earnings exceed 30 times the federal minimum wage.

These limits prevent employees from having their wages garnished so severely that they cannot make ends meet. For all intents and purposes, an employee must receive at least some compensation for services provided even if wages are being garnished. He/she cannot be sent home with nothing at the end of the week.

Wage garnishment adds yet another level of complexity to payroll processing. If you have ever had to garnish a worker's pay, you know exactly what we're talking about. If you haven't, good for you. But beware: not having experienced wage garnishment does not mean you will never face the issue. You can always call us should a wage garnishment order motivate you to hire a payroll service provider.



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