A garnishment is a legal way for a creditor to receive payment for a debt owed by an individual. General garnishments are commonly granted to a creditor by a court order to receive payments by attaching the person’s wages, whereas debts owed to a state or the federal government can be repaid by imposing a levy on possessions, such as property.
“Wage garnishment is more common than you might think. A report by ADP Research Institute found that 7.2% of the 13 million employees it assessed had wages garnished in 2013. For workers ages 35 to 44, the number hit 10.5%. The top reasons were child support; consumer debts and student loans; and tax liens.” (Source: NerdWallet, Inc., 08/16)
The Fair Labor Standards Act (FLSA), along with the Consumer Credit Protection Act’s Title III (CCPA), has guidelines in place to protect employees, to a certain degree, from garnishment orders. Such protections include prohibiting employers from terminating employees who are subject to a garnishment order and limiting the amount that can be withheld from the employee’s wages.
An employee’s wages can include salaries, commissions, bonuses, tips, or lump sum payments from agreements or pension or retirement programs. For employees who receive tips, the cash wages paid directly by the employer and the amount of the tip credit claimed, if any, by the employer are earnings for the purposes of the wage garnishment law. Tips received in excess of the tip credit amount or in excess of the wages paid directly by the employer (if no tip credit is claimed or allowed) are not earnings for purposes of the CCPA. (Source: FLSA Fact Sheet #30.)
Disposable income is money that is left after the deduction from wages of legal or required taxes have been deducted. These deductions can include federal, state, and local taxes, Social Security and Medicare taxes, and required monies withheld for individual retirement systems.
Limitations on Wages Withheld – General Garnishments
According to Title III of the CCPA, for ordinary garnishments (i.e., those not for support, bankruptcy, or any state or federal tax), the weekly amount may not exceed the lesser of two figures: 25 percent of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage (currently $7.25 an hour). Therefore, if the pay period is weekly and disposable earnings are $217.50 ($7.25 × 30) or less, there can be no garnishment. If disposable earnings are more than $217.50 but less than $290 ($7.25 × 40), the amount above $217.50 can be garnished. If disposable earnings are $290 or more, a maximum of 25 percent can be garnished. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished.
Limitations on Wages Withheld – Support or Alimony
Pursuant to a court order for child support or alimony payments, creditors (usually a government entity) are permitted to garnish up to 50 percent of an employee’s disposal income. Under certain circumstances this amount may be up to 60 percent with an additional 5 percent attached if the order is 12 weeks or more in arrears.
State garnishment laws that result in a lower amount of earnings being garnished override the federal guidelines.
For a breakdown of garnishment deadlines by state, Click Here.
For a breakdown of allowable amount by state, Click Here.
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