For cases of multiple wage garnishments, finance leaders must understand applicable regulations, associated processes and the consequences of noncompliance.
Approximately "12 percent of those with a garnishment have more than one type," according to the ADP Research Institute® report, The U.S. Wage Garnishment Landscape: Through the Lens of the Employer. According to the U.S. Department of Labor, although the federal Consumer Credit Protection Act (CCPA) provides employees certain protection from termination because of wage garnishment, this protection does not cover employees who have their wages garnished for more than one debt.
However, some states have laws that provide employees additional protection from termination. As well, employers which receive multiple wage garnishments for the same employee need to follow federal and state laws that regulate among other things, how to prioritize, schedule and withhold wages for multiple orders. This is why it's so important for finance leaders to understand the regulations that are applicable, the potential consequences of noncompliance and the processes and procedures that can help standardize this process and reduce the risk of noncompliance.
Financial Strain of Multiple Wage Garnishments
Wage garnishments can financially strain employees. According to the CCPA by the U.S. Department of Labor, a worker's earnings can be garnished up to the lesser of 25 percent of disposable earnings, or the amount by which the workers disposable income is greater than 30 times the federal minimum wage.
One way employers can try to address this is by offering voluntary professional coaching or counseling, and personal financial training. An organization will want to ensure that any such activities are not perceived by the employees as threats or harassment. It would be wise to work with HR, a wage garnishment expert or legal counsel before undertaking such activities
For employers, understanding which laws apply to various aspects of a wage garnishment order is fundamental to complying with the order. The applicable rules regarding matters such as how much to withhold, employer administrative fees, the form, content, frequency and deadline for submitting a garnishment response, and the release and remittance of payments, may vary based not only on the order itself, but also on the garnishment type (child support, tax levy, student loan, creditor garnishment), the state which issued the garnishment, and the state in which the employee works.
Organizations should therefore have processes in place to help ensure that they adhere to the applicable rules for all of these aspects of a wage garnishment. Adding to this complexity, an employer is generally subject to complying with a wage garnishment from not only the state where their principal office is located, but also from any state in which the employers does business.
As discussed above, the rules on priority of wage garnishments vary from state to state too. In almost all states, however, garnishment for child support takes precedence. If an employee has multiple garnishments for child support, the most recently issued orders takes precedence. An employer's processes and procedures should therefore track receipt of the garnishment order, review and understand the order's instructions, determine the applicable laws and any additional rules and then ensure an appropriate response is prepared and sent within the designated time frame.
Once the wage garnishment is entered into your payroll and possibly other systems, the payment history and amount must be tracked to ensure ongoing adherence to the order and other requirements.
Consequences of Noncompliance
If an organization does not comply with wage garnishment requirements, they not only expose themselves to fines and penalties, but they can also be held liable for the amount of their employee's judgment debt "Employers can be found 100 percent liable [for the full amount of the debt] if the garnishment is processed incorrectly," says Flores, or if the firm failed to properly respond.
"Companies may avoid these consequences if they become familiar with wage garnishments laws, develop robust, reliable and timely procedures for garnishment processing, and ensure that they implement policies that in no way discriminate against an employee facing a wage garnishment," Flores says.