What Employers Should Know About Wage Garnishment

Sep 12 2019 - Compensation - HRWatchdog

An order to garnish an employee’s wages is not a piece of mail employers should ignore.

In this episode of The Workplace, CalChamber Executive Vice President and General Counsel Erika Frank is joined by employment law expert Jennifer Shaw to discuss what responsibilities employers have when served with a wage garnishment order for an employee.

Obligations

The government has the authority to garnish a portion of employee’s wages, Shaw tells Frank. Typically, a garnishment against wages is issued due to tax liens, back spousal support or missing child support payments. Failing to deduct earnings can result in contempt of court penalties or late fees.

What employers need to understand, Shaw emphasizes, is that a wage garnishment is a court order.

“It’s basically like having a court order you to appear at jury duty…or to come to a hearing on a traffic ticket. It’s not a request. It’s an order,” Shaw says.

Frank points out that wage garnishment is a touchy issue because employers are faced with taking away their employee’s earnings.

“We’ve had it drilled into our heads for so long, ‘You don’t mess with the money,’” Shaw replies. “If you have an employee who is a problem, you discipline them…You can discipline them for not following your policy, but in the meantime, you don’t mess with the money. This is one of those big exceptions to that rule.”

Employers are obligated to garnish wages, even if after deductions employees are left with less than minimum wage.

Cautions

Because rules are constantly changing, employers should contact a certified public accountant, not a payroll company, if they have questions, as the firms have been known to give bad advice, Shaw says.

“If you call your payroll hotline…they will tell you a federal rule, they will not tell you the rule that is applicable in your state. So, it’s ‘buyer beware’ on these calls to the payroll company,” Shaw warns. “It makes a lot more sense to call the accountant.”

Employers should look at a wage garnishment order carefully. It will look like a court order, Shaw says, that states “Wage Garnishment.” Sometimes employers may receive a letter from a lawyer asking to “implement the garnishment,” or requests from spouses. But employers need to act based on evidence, Frank stresses. The wage garnishment needs to come from a government agency or else the employer is liable for wage penalties, Shaw says.

Employers also should beware if an employee states that the garnishment has been dealt with.

“Frequently, when an HR person gets a wage garnishment, they will call the employee and say, ‘Hey, listen we got this wage garnishment,’ and the employee will try to talk them out of it. ‘Oh, I already dealt with that debt. This is a mistake.’ And I think that employer is tempted to not go ahead and enforce that garnishment and make those deductions,” Shaw says.

Oftentimes, this happens due to a power dynamic, such as when a wage garnishment is on an executive, Shaw points out. Ultimately, employers are on the hook for following the court order. If an employer does not deduct wages, the employer faces penalties and fees.

Steps to Take

Frank summarizes what employers need to remember when they receive a wage garnishment order:

  1. Pick up the phone and talk to your certified public accountant or in-house counsel.
  2. Notify the employee.
  3. Honor the garnishment. Do NOT act based on verbal requests. Read and follow what the garnishment order states.
  4. Keep the garnishment confidential. Have a process in place to ensure your human resources team maintains confidentiality. “Treat those documents like we treat a Social Security number,” Shaw advises. “Don’t talk about it unless someone ‘needs to know.’”

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