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The basic thing employers need to know regarding garnish wage laws is that they cannot refuse to comply with a notice from the court asking to withhold a certain amount of an employee’s salary as garnishment, subject to the limitations and protections available to the employee in the law. As such, wage garnishment needs an important place in the payroll processing checklist and the HR policy manual.
On receipt of the wage garnishment notice, known as “administrative wage garnishment" employers need to withhold the appropriate amount from the employee's disposable pay on each payday beginning on the first payday after receipt of the garnishment order, and should continue withholding from the subsequent payrolls until instructed to do so. The employer needs to make the payment to the debtor as specified in the notice. If the employer receives the notice within ten days of the payday, the withholding can start from the second payday after receipt of the notice.
The employer need not alter the normal payday or wage period to comply with the garnishment order.
Image Credit: flickr.com/David Shankbone
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Federal law limits the maximum amount of garnish wages by one or more garnishment orders at 25 percent of the employee’s disposable earnings for the week, or the amount by which the employee’s disposable earnings for the week exceeds 30 times the federal minimum hourly wage, whichever is less. “Disposable income" is the wages left after payment of all taxes, and national insurances. In other words, with federal minimum wages at $7.25, an employee who earns less than $217.50 a week cannot have his or her wage garnished.
Many states have stipulated maximum thresholds for garnishments lower than the 25 percent provided by federal law.
Some states also have laws that restrict wage garnishments. North Carolina, Pennsylvania, South Carolina and Texas allow wage garnishment only for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution. Florida completely exempts wage garnishments for a person who provides more than half the support for a child or other dependent.
Most state garnishment laws have also exempted certain categories of cash payments from garnishment. Ohio, for instance does not allow garnishment of cash paid to employees as worker’s compensation payments, disability assistance payments, and some other payments.
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Another basic thing an employer needs to know about garnish wage laws is the priority. Generally, child support orders take priority over other garnishments.
At times, an employee may face multiple garnishments, and the net pay in the employee’s payroll may be inadequate to satisfy all such garnishments. The priority is for federal tax garnishments, state tax garnishments, and credit card garnishments, in that order.
State laws also provide guidelines on priorities. Ohio law, for instance forbids other creditors from garnishing an employee's wages for 30 days after one creditor has garnished the same employee's wages.
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An employee paid $400 a week, spending 15 percent of the income on tax and insurance, and another $60 on child support has a disposal income of $340. $400-($400*15%) = $340. The maximum amount that creditors can garnish from the payroll is normally $85 ( 25 percent of $340), but since the employer is paying for child support, the amount of $60 takes priority from the allowable garnishment of $85, meaning that the creditors can recover only $25 ($85-$60) from the payroll.
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Federal law prohibits an employer from using a garnishment order issued to terminate or take any other disciplinary action against an employee. Employers can however terminate employees in some situations if more than one garnishment order comes within a twelve-month period.
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- Federal Register Vol 68, No 246. December 23, 2003. Rules and Regulations. “What are your employer’s responsibilities under an administrative wage garnishment order?". http://edocket.access.gpo.gov/2003/pdf/03-31489.pdf. Retrieved 01 January 2011
- FairDebtXCollection.com “Garnishment law". http://www.fair-debt-collection.com/garnishment-law.html. Retrieved 01 January 2011
- OhioLegal Services. “Wage Garnishments." http://www.ohiolegalservices.org/public/legal_problem/consumer-rights/debt-collection/Home/public/legal_problem/consumer-rights/debt-collection/wage-garnishment/garnis.pdf. Retrieved 01 January 2011.