Wage Garnishment Laws

The wage garnishment provisions under Title III of the Consumer Credit Protection Act (CCPA) protect employees from discharge by their employers because their wages have been garnished for any one debt, and it limits the amount of an employee's earnings that may be garnished in any one week. CCPA also applies to all individuals and employers who receive earnings for personal services (including salaries, wages, bonuses, commissions and income from a retirement or pension program, but ordinarily not including tips).

Basic Requirements/Provisions

Wage garnishment occurs when an employer withholds the earnings of an individual for the payment of a debt as the result of a court order or other equitable procedure. Title III prohibits an employer from discharging an employee because her or his earnings have been subject to garnishment for any one debt, regardless of the number of proceedings brought or levies made to collect it. However, Title III does not protect an employee from discharge if the employee's earnings have been subject to garnishment for a subsequent or second debt.

Title III also protects employees by limiting the amount of earnings that may be garnished in pay period or any workweek to the lesser of twenty five percent of disposable earnings or the amount by which disposable earnings are greater than thirty 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 how many garnishment orders an employer receives. The federal minimum wage is $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009.

In court orders for alimony or child support, Title III allows up to fifty percent of an employee's disposable earnings to be garnished if the employee is supporting a current child or spouse, and up to sixty percent if the employee is not doing so. An additional 5% may be garnished for support payments over twelve weeks in arrears. The restrictions noted in the preceding paragraph do not apply to such garnishments.

"Disposable earnings" is the amount of earnings left after legally required deductions (e.g., state, federal and local taxes, unemployment insurance, Social Security and state employee retirement systems) have been made. Deductions not required by law (e.g., health insurance and life insurance, union dues and charitable contributions) are not subtracted from gross earnings when the amount of disposable earnings for garnishment purposes is calculated.

Title III specifies that garnishment restrictions do not apply to debts due for state and federal taxes and bankruptcy court orders. Nor do they affect voluntary wage assignments, i.e., situations where workers voluntarily agree that their employers may turn over a specified amount of their earnings to a creditor or creditors.