A garnishment is the result of a court preceding that authorizes a creditor to claim a portion of an employee’s paid earnings to satisfy a legal financial debt the employee owes the creditor. The court ruling authorizes the employer to withhold funds from the employee’s pay and forward the funds to the creditor.
Common types of garnishment orders are:
child support
federal tax levy
student loan
bankruptcy
The Consumer Credit Protection Act is the basic federal law that controls garnishments. The law limits the amount of an employee’s “disposable earnings” that may be garnished in any one pay period. It also protects employees from severe financial hardship because of a single garnishment for any one debt. In most cases, this federal law takes precedence over state law.
Garnishments are usually issued by a court order. The court order describes in detail how the garnishment must be calculated. It is sometimes necessary to contact the agency issuing the garnishment order for additional information when:
calculation instructions are unclear
multiple orders have been served for the employee
the employee works in more than one state, or
the employee lives in one state but works in another.
Wages subject to garnishment are based on the employee’s disposable earnings. Disposable earnings are different from gross pay or take-home (net) pay. Disposable earnings are the portion of earnings remaining after the deductions required by law have been made.
For federal purposes, garnishments should be withheld on all wages without regard to classification (for example, salary, bonus, commission). State regulations may vary.
withholding for federal and state income tax
FICA (social security and Medicare)
state unemployment and disability taxes
deductions required by state employees’ retirement systems
deductions to purchase savings bonds or stock in an employer's corporation
contributions to religious, charitable, or educational institutions
union dues
health or life insurance premiums (including cafeteria plan amounts)
contributions to retirement programs
payment under a garnishment, support order, or assignment of earnings
The amount of the employee’s disposable earnings that is subject to garnishment is restricted.
The maximum part of an employee’s total disposable earnings that is subject to garnishment in any work period generally may not exceed the lesser of:
25% of disposable earnings for that pay period, or
the amount by which disposable earnings for a week exceeds 30 times the federal minimum wage in effect at the time the earnings are payable. To calculate this amount for other than weekly payrolls, multiply 30 x 52 (the number of weekly pay periods per year) x federal minimum wage, and divide the result by the employee’s number of annual pay periods.
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If the minimum wage is $2.00, only the amount of disposable income that exceeds $60.00 per week ($2.00 x 30) would be subject to garnishment for an employee paid weekly. For an employee who is paid semi-monthly (24 pay periods per year) when the minimum wage is $2.00, the calculation would be (30 x 52 x 2.00) / 24 = $130.00. |
An employee’s pay may be subject to more than one garnishment at the same time. Since each court issuing orders is probably unaware of any other attachments, the employer has the task of determining whether to make payments on all garnishments in a pay period, or to honor only certain ones according to rules of priority.
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If two or more garnishment orders are received and the employee’s earnings are not sufficient to cover both orders, contact the courts issuing the orders to resolve the priority. For example, the first order received may take priority, or you may need to allocate a portion of the amount available for garnishment to each order. |
The types of garnishments, in priority order, are:
Child support orders and federal tax levies. Child support orders and federal tax levies have equal priority with regard to other types of orders, but if both a child support order and a federal tax levy are served, the one served first has priority.) The only instance that child support does not take top priority is over a bankruptcy order issued before 10/17/05, in which case bankruptcy takes priority.
Bankruptcy
State tax levies
Student loan garnishments
All other garnishments
The rules in particular states may vary from these general principles.
In general, for federal purposes, if an employer does not withhold the correct amount for a garnishment, the employer may be liable for the full amount that should have been withheld plus interest and other administrative costs. States may have different penalties.
If any amount cannot be withheld (for example, because of insufficient disposable income), the employer must report the deficiency to the agency issuing the garnishment order. It is not the employer’s responsibility to withhold additional amounts if the employee is in arrears. The agency will notify the employer of any change in the garnishment amount needed.
Refer to the U.S. Department of Labor web site for specific garnishment information.
