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SMALL BUSINESS HANDBOOK: LAWS, REGULATIONS AND TECHNICAL ASSISTANCE SERVICES10. WAGE GARNISHMENTTitle III, Consumer Credit Protection Act (15 U.S. Code, Sections 1671 et seq; 29 CFR 870).Who is CoveredTitle III of the Consumer Credit Protection Act (CCPA) protects employees from being discharged by their employers because of garnishment for any one indebtedness and limits the amount of employees' earnings which may be garnished in any one week. Title III applies to all individuals who receive personal earnings and to their employers. Personal earnings include wages, salaries, commissions, bonuses and income from a pension or retirement program but does not ordinarily include tips. The law applies in all 50 states, the District of Columbia, Puerto Rico and all U.S. territories and possessions.Basic Provisions/RequirementsWage garnishment is a legal procedure through which the earnings of an individual are required by court order to be withheld by an employer for the payment of a debt. Title III prohibits an employer from discharging an employee whose earnings have been subject to garnishment for any one debt, regardless of the number of levies made or proceedings brought to collect it. It does not, however, protect an employee from discharge if the employee's earnings have been subject to garnishment for a second or subsequent debts. Title III also protects employees by limiting the amount of their earnings that may be garnished in any workweek or pay period to the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage prescribed by section 6(a)(1) of the Fair Labor Standards Act of 1938. This limit applies regardless of the number of garnishment orders received by an employer. The federal minimum wage is $4.25 per hour.In court orders for child support or alimony, Title III allows up to 50 percent of an employee's disposable earnings to be garnished if the employee is supporting another spouse or child, and up to 60 percent for an employee who is not. An additional 5 percent may be garnished for support payments which are more than 12 weeks in arrears. "Disposable earnings" is the amount of employee earnings left after legally required deductions have been made for federal, state and local taxes, Social Security, unemployment insurance and state employee retirement systems. Other deductions which are not required by law, e.g., union dues, health and life insurance, and charitable contributions, are not subtracted from gross earnings when calculating the amount of disposable earnings for garnishment purposes. Title III specifies that garnishment restrictions do not apply to bankruptcy court orders and debts due for federal and state taxes. Nor does it affect voluntary wage assignments, i.e., situations in which workers voluntarily agree that their employers may turn over some specified amount of their earnings to a creditor or creditors. Assistance AvailableTitle III is administered and enforced by the Employment Standards Administration's Wage and Hour Division. More detailed information, including copies of explanatory brochures and regulatory and interpretative materials, may be obtained by contacting the offices listed in the appendix.PenaltiesViolations of Title III may result in the reinstatement of a discharged employee, with back pay, and the correction of improper garnishment amounts. Where violations cannot be resolved through informal means, court action may be initiated to restrain and remedy violations. Employers who willfully violate the discharge provisions of the law may be prosecuted criminally and fined up to $1,000, or imprisoned for not more than one year, or both.Relation to State, Local and Other Federal LawsIf a state wage garnishment law differs from Title III, the law resulting in the smaller garnishment, or prohibiting the discharge of any employee because his or her earnings have been subject to garnishment for more than one indebtedness must be observed. |
