Those lovely little letters from ex-spouses, debt collectors and the IRS; Wage Garnishments and the related legal issues for Payroll Professionals By Martin Kappenman Seaton, Peters & Revnew, P.A. mkappenman@seatonlaw.com (952) 921-4603

Garnishments What is a garnishment? Different types of garnishment: Generally it is a legal order for collecting a monetary judgment from a defendant. Different types of garnishment: Wage garnishment- most common form Attachment- attaches property to the judgment Military garnishment IRS garnishment https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Garnishments

Garnishments

Garnishments

Wage Garnishments What is a wage garnishment? It is a legal or equitable procedure through which some portion of a person’s earnings is required to be withheld for the payment of a debt. Generally garnishments are made by court order. Does not include voluntary wage assignments (i.e. employee voluntarily agrees employers may turn over some amount of earnings to a creditor). Common reasons for wage garnishments: Child support or spousal support garnishments Defaulted student loans Taxes Unpaid court costs https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Wage Garnishments 1 in 10 Americans between the age of 35 and 44 are having their wages garnished. With most individuals in that range owing child support. Workers earning between $25,000 to $40,000 a year are garnished for consumer debt more than for child support. https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Wage Garnishments How do wage garnishments happen? An employee will owe someone money. In most circumstances the court will issues a writ of garnishment or garnishment summons. The employer will receive that notice. Employer must serve the completed earnings disclosure on the creditor and the debtor. Under Minnesota law, the employer is paid a $15 by the creditor at the time of service. Failure to pay that fee render the garnishment void. https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Wage Garnishments How do wage garnishments happen? Assuming the employer receives their service fee, the employer is required to start withholding immediately. Employer is obligated to retain possession and control of the non-exempt disposable earnings of the debtor up to 110% of the amount claimed by the creditor. May withhold from wages, salaries, commissions, bonuses, and income from a retirement plan or pension. Employer may not deliver money or property to creditor except ”upon levy, written authorization of the debtor, court order, or operation of law.” https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Wage Garnishments Employee has certain number of days to contest the wage garnishment. If the garnishment is challenged, the employer will stop paying the creditor and send the withheld amount to the court or agency that issued the garnishment until everything is resolved. Employees may think giving debt information to their employer is an invasion of privacy. It may feel embarrassing, but it’s not against the law and employer’s need to know all the information to garnish wages correctly. https://www.garnishmentlaws.org/employer-responsibilities-in-garnishment/ Different types, consequences, under MN if you withhold something (unless legally required) you need permission, failure to pay wage

Wage Garnishments Consequences for employers Minnesota Employers who fail to comply with the law, may be cited for contempt of court and assessed attorney’s fees and court costs. In some jurisdictions, employers are liable to pay employee garnishments if the employer does not comply. Minnesota Failure to disclose a completed earnings disclosure may result in a judgment against the employer for no more than 110% of the amount claimed on the garnishment summons. Child support withholding Intentional failure to withhold or remit funds, employer will be liable for amount not paid, plus interest, attorneys fees, and for contempt. https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

Wage Garnishments Employers are not discharged from further retention obligations until: The employer discloses that the garnishee is not indebted to the debtor. The employer discloses that the garnishee is indebted to the debtor in the amount set forth on the disclosure form. Obligations are limited then to retaining the non-exempt disposable earnings that were disclosed. The employer has retained the creditor’s property until the expiration of the applicable retention period. The court has discharged the garnishee as to the disposable earnings in excess of the amount needed to satisfy the claims of the creditor. https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

Wage Garnishments Federal protection Title III of the Consumer Credit Protection Act Limits amount of individual’s earnings that may be garnished. This amount is decided by an employee’s “disposable earnings” (amount of earnings left after legally required deductions are made). Generally this amount cannot exceed the lesser of 15% 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. Also limits amount of earnings that may be garnished pursuant to court orders for child support or alimony (maximum of 65% in unusual cases). https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

Wage Garnishments Debt Collection Improvement Act Higher Education Act Authorizes federal agencies to garnish up to 15% of disposable earnings to repay defaulted debts owed to the US Government. Higher Education Act Authorizes the Department of Education’s guaranty agencies to garnish up to 10% of disposable earnings to repay defaulted federal student loans. Fair Debt Collection Act Consumer protection amendment. Creates guidelines under which debt collectors may conduct business and gives rights to consumers involved with debt collectors. It is prohibited for debt collectors to communicate with consumers at their place of employment after having been advised that this is unacceptable or prohibited by the employer. https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

Wage Garnishments Minnesota’s Stricter Limits Garnishment amount generally cannot exceed the lesser of 25% of the employee’s disposable earnings or the amount by which an employee’s disposable earnings are greater than 40 times the federal minimum wage. Creditors cannot garnish wages for: Social security benefits Retirement benefits Welfare benefits Workers’ compensation benefits Income associated with disability or unemployment insurance https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

Wage Garnishments Minnesota’s Stricter Limits In Minnesota, about 75% of an employee’s disposable earnings are exempt from garnishment. BUT this money may lose its status as exempt property 20 days after it is deposited with a financial institution (it is no longer earnings garnishments). Generally, wage garnishments shall be effective no more than 70 days from the day the garnishment summons is served. Child support garnishments are not subject to this provision. Minnesota Law Employee Protection Employers cannot discharge or discipline an employee as a result of a wage garnishment. https://www.dol.gov/whd/regs/compliance/whdfs30.pdf

The Garnishment Should not come as a surprise to the employee

Attorneys summary execution upon earnings Amounts up to $10,000

What to do if employee has multiple garnishments

What’s in it for you

$15.00

Wage levies are similar – may be delivered by sheriff

The rules are different for child support income withholdings

Payments must be sent within 7 days

Child support comes out first except…

irs

Federal tax liens entered before child support order was issued have priority

Other Deductions from wages Loss Theft Damage Loans made by Employer

Other hot topics

Record retention Federal Laws for maintaining payroll records: Age Discrimination Employment Act Three years Equal Pay Act Fair Labor Standards Act At least three years Minnesota has similar requirements Minnesota Fair Labor Standards Act In addition, payroll records should be kept separate from personnel files and from any information regarding drug testing, disabilities, etc.

Litigation holds A litigation hold is a legal hold that an organization uses to preserve all forms of relevant information when litigation is reasonably anticipated. There are federal and state rules regarding destruction (even if part of an routine destruction system) of relevant information when litigation is reasonably anticipated. Relevant information can include: E-mails Voicemails Paperwork Penalties for non-compliance include monetary fines, reimbursement of opponent’s litigation costs, or inferences against the party failing to provide the destroyed information.

Litigation holds If you receive an e-mail or communication about a litigation hold make sure not to intentionally destroy any physical or electronic data that might be helpful. If you question whether or not it is helpful, make sure to err on the side of keeping the data.

Employee access To Records Minn. Stat. Ann. §§ 181.960 to 181.966 Current employee may review payroll information once per 6-month period Former employees may access these records once during the first year of termination. Employer must comply with written request within 7 working days. Current employees may view records during employer’s normal business hours at the worksite or a nearby location.

Questions?

Thank You. Martin Kappenman Seaton, Peters & Revnew, P. A Thank You! Martin Kappenman Seaton, Peters & Revnew, P.A. mkappenman@seatonlaw.com (952) 921-4603