You Got Served – Now What? An Employer’s Primer on Wage Garnishment Notices and Orders

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Employers are surprised when they receive notice to withhold wages or a Writ of Garnishment. Wage garnishments occur more often than you think. In fact, data show that wage garnishments are on the rise. Therefore, it is imperative for employers to know how to respond to withholding notices or orders.

Generally, garnishing wages is a complex area to understand with tons of nuances. But before we dive fully into the complexities of wage garnishments, let us first lay the foundation. In this article, we will provide an overview of wage garnishments, how employers should respond, and how much to withhold.

What is a wage garnishment? This is an equitable procedure to apportion a person’s earnings for the payment of a debt. This does not include voluntary wage assignments to which an employee willfully allows the employer to submit apportioned earnings to a creditor.

When does this arise? Generally, a notice to withhold wages is triggered when an agency, creditor, or individual initiates a remedy to recover for lost payment. Some states are restrictive of creditors seeking repayment through garnishment, while other states are broad and allow private parties to seek wages. In South Carolina, there are three kinds of situations where garnishment arises:

(1) An employee owes the government (failure to pay student loans or taxes);

(2) An employee owes a debt in another state, but is domiciled in South Carolina; or

(3) An employee owes child support.

When should employers respond? Employers must respond upon receipt of specific proof of the garnishment. This typically comes in the form of a notice from an agency such as the Department of Social Services or the Department of Revenue, or a court order. An employee could also tell you that they are subject to wage garnishment. However, employers cannot apportion wages until official documentation proves that apportionment is required and specifies the amount to withhold.

What if the employee no longer works for the employer? If the employer was withholding wages and the employee’s employment later ended, the employer should notify the issuer within a reasonable time and provide the date employment ended and the date of the final paycheck. However, if the employer receives a notice or order to garnish wages after termination, the employer should immediately respond to the notice and inform the issuer that the debtor is no longer employed with the employer.

How much do I withhold? Good News: the notice will tell you. Bad News: the employer will still need to do math. Generally, the garnishment the employer will withhold depends on the employee’s disposable income, which is the balance of pay remaining after the employer has deducted taxes and other expenses (e.g., health insurance and retirement investments).

Here comes the math – the limit on how much can be withheld from the employee’s disposable income depends on the purpose of the garnishment. For example, if the garnishment is related to unpaid taxes to the government, then the employer may not exceed 25% of the employee’s disposable income. However, if the garnishment is related to child support, the employer cannot exceed 50% of the employee’s disposable income if the employee is supporting another spouse or child, or 60% if the employee is not. If the employee has overdue payments, an additional 5% may be garnished for support payments.

What should employers do now? As mentioned earlier, wage garnishments are on the rise. Therefore, employers need to be vigilant and respond accordingly. Most withholding notices and orders impose strict deadlines for responding, and delays can increase the risk of holding the employer financially responsible. Therefore, employers should maintain a system for tracking withholding notices and orders and compliance. Employers should also confirm key details included in the notice or order before processing garnishments. Finally, employers should contact counsel to ensure the withholding calculations are accurate.