Employers Obligations and Considerations For Wage Garnishments
An Employer’s duties and responsibilities to process wage garnishments continue during the COVID-19 pandemic. Compliance with court-ordered deductions and garnishments are to be maintained to avoid a potential judgment from a court finding the Employer to be in default and fully responsible for the full amount of the debtor’s outstanding debt.
Garnishments are generally at the State or Federal level for the specific debt an employee owes. Wage garnishments are covered by the Federal Consumer Credit Protections Act (FCCPA) and administered by the U.S. Department of Labor (DOL). Under the law, wage garnishments can claim either 25 % of an employee’s disposable earnings or all earnings beyond 30 times the federal minimum wage, whichever number is less.
Employers Must Continue Wage Garnishments
Employers must continue to deduct the amount of money for employee garnishments that were enforced prior to the COVID-19 outbreak unless they are in receipt of a modified Court Order or Federal exception that would allow for changes, a notification to cease the garnishment, or Federal law to address the economic fallout (CARES ACT).
Routine types of garnishments include:
- Child Support Orders
- Student Loan Orders
- Government levies
- Creditor Garnishments
There are exceptions that allow for the suspension of garnishments which have been halted by the U.S. Department of Education (DOE) for collection actions and wage garnishments due to COVID-19 for Federal Student Loans. This includes loans owed by the U.S. Department of Education, including Direct Loans, as well as Federal Perkins Loans and Federal Family Educational Loans held by the Department of Education.
Loans owed by commercial lenders are not included as part of this relief program. Interest is waived on federally held student loans for this limited period. Section 4513 of the Coronavirus Aid, Relief, and Economic Security Act (CARES ACT) temporarily suspends payment on Federal Student loans under the Higher Education Act (HEA) until September 30, 2020. The suspension is retroactive to March 13, 2020.
Tax Liens and Levies
Additionally, the Internal Revenue Service (IRS) announced on March 25 the new IRS People First Initiative to provide immediate relief to help people facing uncertainty over taxes. The IRS has suspended taxpayer obligations under existing Installment Agreements for payments due between April and July 15, 2020. The IRS will not default any Installment Agreement during this period. Liens and levies initiated by field revenue officers will be suspended, and new automatic systematic lien and levies will be suspended during this initiative.
Creditor garnishments must be complied with by the Employer unless a court order is extended by a judge to stay the collection action as part of the wage garnishment.
Federal Stimulus Checks
In Pennsylvania, federal stimulus checks, otherwise known as economic impact payments, are not subject to Pennsylvania personal income tax. These payments are considered a rebate that is non-taxable in Pennsylvania.
There is a great likelihood that there will be an extremely large influx of garnishments. once businesses are back and operating. Employers and their payroll departments will face the additional challenge of staying abreast of any extensions that may be granted or proceeding with business as usual in processing garnishments.