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Federal Wage Garnishment Rules and Procedures

business.com editorial staff
business.com editorial staff

What to do if you need to garnish an employee's wages

  • If an employer receives a wage garnishment order, they are legally required to withhold money from the employee’s paycheck.
  • An employer cannot fire an employee for one debt, but they may be able to for multiple debts. 
  • An employee must receive a written notice that their wages are going to be garnished before their employer withholds the money.

What is wage garnishment?

Garnishment is a court-ordered process whereby a person's property is confiscated to pay a debt; in the case of a wage garnishment, that property is one's paycheck. The federal government protects debtors and sets limits on how much can be garnished from an individual. State governments, meanwhile, enforce their own, separate debt collection laws.

In the wage garnishment process, there are three parties: your employee (the debtor), the party that's owed money (the creditor) and you, the employer (the garnishee). As an employer, you're legally bound to comply with wage garnishment court orders. It's your responsibility to make the proper deductions from your employee's paycheck and send payments to the creditor. Common reasons for wage garnishment include:

  1. Alimony.
  2. Child support.
  3. Defaulted student loans.
  4. Bad debts.
  5. Bankruptcy.
  6. Tax levies. 

Do employers have to notify employees of garnishment?

According to FindLaw, a creditor must take you to court to be able to garnish your wages. They have to schedule a hearing first. In most cases, you are notified of the date, time and place of the hearing. At the hearing, the creditor must prove that you owe them money and have failed to make those payments. This is usually fairly easy to prove. If the court agrees, it issues an order to your employer requiring them to withhold a specific amount of money from your paycheck. There are also instructions with that order telling your employer how much and for how long. Your employer should send you a letter stating your paychecks will be garnished before it happens. When your employer withholds the money, it is sent directly to your creditor. The withholding continues until the debt is paid. 

Does an employer have to honor a garnishment?

Yes, an employer is legally obligated to garnish employee's wages. The employer must do exactly as the order states and withhold a certain amount. The employer then sends that money directly to the creditor. It is important that the employer takes swift action when receiving the withholding notice. If action is not taken within a specified amount of time, the employer faces penalties.

It is important to note that by law, you cannot be fired if your wages are garnished for one debt. However, if you have multiple garnishments for multiple debts, you do not have that same protection. Some states extend more protection to you if you have your wages garnished. They allow for a larger number of garnishments before your employer can terminate you because your wages are garnished. If you find yourself in a situation where you have more than one garnishment orders, you should check the law in your state to understand how that may impact your job.

Some states also allow employers to charge you for any fees or costs to them for garnishing your wages. It may depend on the type of garnishment that a state may allow an employer to charge you for any of their fees. It is also important that you are aware of those particular laws for the state in which you live. 

What to do if you need to garnish an employee's wages

It's a fact of life: Not everyone pays his or her bills. Sometimes, when that happens, creditors might turn to a debtor's employer for help through a process called wage garnishment.

Submit the proper forms

  • If an employee's wages are to be garnished, the creditor will notify you by sending you a Wage Garnishment package (SF-329). This package includes a letter to the employer (SF-329A), the wage garnishment order (SF-329B), a wage garnishment worksheet (SF-329C) and an employer certification form (SF-329D). Complete and return the employer certification form (SF-329D) within 20 days of receipt. If you don't, you may be subject to civil and criminal action. 

Calculate withholdings and make payments

  • Calculating the proper amount to garnish can complicate your payroll accounting process to a large degree. Do it wrong and you could face legal repercussions. Even if you're within the legal limits, you can still draw heat from a creditor for garnishing too little or from your employee for garnishing too much. Payments are generally made each pay period. Many payroll software solutions can help you calculate garnishment amounts. 

Prioritize garnishments 

In some cases, an employee's wages may be garnished by more than one creditor. For instance, you may be asked to garnish wages for child support and for a defaulted student loan. It's your responsibility to know which types of garnishments take priority.

Reimbursement fees 

In some states, the garnishee can be reimbursed for administrative costs associated with processing garnishments.

Termination of garnishment

When your employee's debt has been paid off, the creditor will notify you with a Notice of Termination of Wage Garnishment Order (SF-329E). Once you receive this form, you are to stop deducting withholdings from the employee's paycheck immediately.

Can an employer garnish wages without a court order?

While most debts require a court order before your employees can withhold money from your paycheck, that is not true for all debts. There are some cases when your creditor does not have to go through the process of going before a judge. This is called administrative wage garnishment.

If you owe money to the IRS or any other federal agency, they do not have to get a court order from a judge to garnish your wages. If you owe money on student loans, you can also have your wages garnished without a court order.

Your employer still must notify you in writing that they are withholding money due to a specific debt. You may be able to request a hearing to explain why wage garnishment is a hardship, but often when it gets to this stage, you may have no other options.

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