During tax season, some people may be excited by the prospect of receiving refund checks from the Internal Revenue Service (IRS) or their state’s respective Department of Revenue. For some, those expected payouts may never materialize if there are orders allowing that money to be surrendered to repay things like back taxes or owed child support or to satisfy other debts. When individuals owe money, there are means by which a creditor can also seek to garnish wages until the debt is satisfied. In such cases, employers may be drawn into this financial foray. Here are some things employers should know about garnishments.
What is a Garnishment?
Generally, a garnishment is an order requiring an employer to withhold a sum of money from an employee’s pay. Depending on the type of garnishment, the withheld wages may be directed to the body that issued the order, a third-party entity, or the creditor itself.
The garnishment requires those wages to be withheld until there’s an order revoking the garnishment or the debt has been satisfied in its entirety.
What Laws Govern Wage Garnishments?
In Massachusetts, Massachusetts General Laws Ch. 246 §28 governs the garnishment of wages and pensions. Under that statute, the amount recoverable by the creditor per pay period is limited to 15% of gross wages or the amount of disposable income remaining after the deduction of 50 times the Massachusetts’ minimum wage, whichever calculation is less. The federal Consumer Credit Protection Act similarly provides a withholding limit of the lesser of 25% of disposable wages or the amount remaining when you subtract 30 times the federal minimum wage from the amount of disposable wages. Calculations for the amounts recoverable for specific situations—child support, federal student loans, and taxes—maintain different limits to recovery in a pay period pursuant to state and federal laws.
Wages include salaries, commissions, bonuses, and some payments issued by a pension or retirement plan, but disposable income is the amount of income remaining after deductions mandated by law, such as taxes.
How Does a Garnishment Come To Be?
The process for obtaining a garnishment is dependent on the type of underlying debt asserted. In common cases like debts incurred because of defaulted credit card payments or a loan, the creditor can file litigation. If a judgment is entered against the employee, the creditor can then follow procedures to request a garnishment of wages to satisfy such judgment.
Garnishments for child support, federal student loans, or taxes follow a more administrative path that doesn’t necessitate a separate court order and are issued at the time the amount is set or are initiated by the agency overseeing the debt.
What Responsibilities Do Employers Have?
First, you must act in a timely manner upon receipt of an order for garnishment. You must review your records to verify the employment of the debtor, perform the necessary calculations to determine the amount to be withheld, and then provide an adequate response to the body issuing the garnishment within the time frame ordered.
Second, you must keep detailed records. In most cases, you’ll need to start withholding wages from the first paycheck after the garnishment is received. Sometimes that money remains held with you until a further order is issued, and other times it’s immediately released to the designated recipient. You should maintain records of the calculations of the amount to be withheld, any monies withheld (date, pay period, amount), to whom funds were dispersed, and a running calculation of the amounts withheld.
Third, you should be aware that federal law protects employees from being fired if they receive one garnishment.
Lastly, if a garnishment is received and you’re unsure of what type of response is needed or how to perform the calculations, or you’d like to discuss concerns regarding an employee with more than one garnishment, then you should consult employment counsel.
Maureen James is an attorney with Skoler, Abbott & Presser, P.C., in Springfield, Massachusetts, and can be reached at mjames@skoler-abbott.com.