Wage garnishment occurs when a creditor obtains a court order requiring an employer to withhold an employee’s wages to satisfy a debt. It is also known as a wage deduction order. Title III of the Consumer Credit Protection Act (“CCPA”) limits the amount that an employer may withhold from an employee’s earnings in any one workweek or pay period and prohibits employers from terminating an employee because he or she is subject to a wage garnishment order.

Basic Protections and Requirements

The CCPA prohibits an employer from terminating an employee who has a wage garnishment for one debt. However, the CCPA does not prohibit employers from terminating employees who have a wage garnishment imposed for two or more debts.

 

Limitations on Garnishment Amount

The CCPA also sets guidelines for the total amount that may be garnished from an employee’s personal earnings or wages in any one workweek or pay period. Personal earnings include salaries, wages, and bonuses. Tips are usually not counted as income. Wage garnishment applies to “disposable earnings.” Disposable earnings are those earnings remaining after legally required deductions are taken, such as Social Security taxes, federal, state and local taxes, and unemployment insurance. Deductions that are not legally required such as union dues and health and life insurance premiums are not subtracted from the employee’s total earnings.

An employer may withhold the lesser of 25% of an employee’s disposable earnings or the amount by which the disposable earnings are greater than thirty times the federal minimum wage. Depending on the jurisdiction, if the garnishment is imposed pursuant to a child or spousal support order and the employee is currently supporting a child or spouse, up to 50% of the employee’s disposable earnings may be garnished. If the employee is not supporting a spouse or child, up to 65% of the employee’s wages may be garnished to satisfy a spousal or child support order.

A second creditor may not garnish an employee’s wages unless the first garnishment takes either less than 25% of the employee’s disposable income or less than 50% of the employee’s income if the employee is under a child or spousal support order.

Limitations on the Types of Income Subject to Garnishment

A garnishment order cannot be enforced against income a person earns from Social Security benefits, retirement or pension benefits, or public assistance benefits. Unless a wage garnishment is based upon an order for child or spousal support, a garnishment order cannot be enforced against income derived from workers’ compensation benefits, unemployment benefits, and disability benefits.

Right to Percentage of Earnings

An employee has a right to a percentage of his earnings even if a wage garnishment order is in place. Typically, an employee has a right to at least 40-50% of his earned wages.

Penalties and Sanctions

The Department of Labor may enforce the CCPA against an employer by prosecuting the employer criminally and imposing fines up to $1,000 and jail time up to one year. The Department of Labor may order reinstatement of a terminated employee, payment of the employee’s back wages, and payment of those wages improperly garnished.

Conclusion

An employee’s wages may be garnished if he or she fails to repay a debt. The Consumer Credit Protection Act prohibits employers from terminating employees who are subject to wage garnishment for one debt, but does not prohibit employers from terminating employees subject to two or more wage garnishments. The CCPA also limits the total amount that may be garnished from an employee’s wages in any one workweek or pay period.