There are multiple reasons you might receive a notice of wage garnishment in regards to one of your business’ employees. If an employee falls behind on paying his child support, alimony, student loans, taxes or other debt, his creditor may have a legal right to demand that you garnish his / her wages to resolve the unpaid debt. In the case of most consumer debts, wage garnishment requires a court order, according to the Consumer Financial Protection Bureau. In the case of federal tax debts to the Internal Revenue Service, no court order is required.
If you receive a notice that an employee of your business is subject to wage garnishment, you must be extremely careful to comply with all applicable federal and state laws regarding the garnishment. As an employer, you have a responsibility to handle the situation promptly and correctly.
It’s important for you to confirm that you’ve received the notice and that you intend to comply with it. Send this communication promptly; you’ll want to issue it within one week of receiving the notification.
Consult both federal and state laws to figure out how much should legally be garnished from your employee’s wages. The US Department of Labor (DOL) makes a fact sheet available to help you understand the federal laws regarding garnishment of wages under the Consumer Credit Protection Act's Title III (CCPA). The DOL has also published some clarifications and examples at their website.
The amount you’ll need to garnish depends on the exact nature of the debt and the state that has jurisdiction over the matter. The agency or entity you’ll need to send the payment to will also differ, depending on the circumstances.
Be aware that your employee may have the right to contest the garnishment. If your employee does challenge it in court, the proper protocol is for you to remit the payments to whichever court or agency initiated the garnishment order.
Some jurisdictions will allow you, as the employer, to retain a nominal processing fee to defray administrative costs of dealing with wage garnishment. Some US states even reimburse business owners for administrative expenses relating to garnishment. When you receive a garnishment notice, you’ll want to consult your payroll company, human resources department and / or attorney to get a better understanding of the situation in your state.
Be aware that the law prohibits you from firing an employee or otherwise taking any kind of punishing or retaliatory action over wage garnishments resulting from a single debt. If you’re dealing with more than one wage garnishment, speak to an attorney to better understand your options under the law in your specific jurisdiction.
You must comply with wage garnishment orders. But, if you do have an employee whose wages are garnished, you might want to encourage that employee to speak to an attorney for help. In some cases, the attorney may be able to negotiate with creditors to arrive at a solution other than the wage garnishment. That could possibly be ideal for everyone involved.
We hope this information is helpful to you in better understanding what to expect if one of your employees becomes subject to wage garnishment.