Episode 28: Garnishment of Wages

Welcome to the Workplace, a podcast by Cal Chamber. My name is Erica Frank and I am executive vice president and general counsel at the California Chamber of Commerce. And with me today is Jennifer Shaw, principal of the Shaw Law Group. Welcome, Jennifer.

Thank you, Erica. It's great to be here.

Oh, it's always great to have you here. It's so much fun. And I know that we always find interesting things to talk about.

We do.

So today we are going to talk about something that some folks might think is a snoozer. But I actually think there's going to be a lot for us to talk about here, and that's the garnishment against wages. Wage garnishments, as they're normally or commonly referred to as.

Well, and here's what's interesting to me about wage garnishments. We sometimes forget as employers that the court or the government has a right to take a portion of our employees wages. It's usually for something like a tax lien, somebody owes some taxes, maybe for child custody, child support or back spousal support. And what happens is the court will, will order the employer to withhold a certain amount of money from an employee's paycheck. Now, I gotta tell you, it probably goes without saying that the employee's not usually too happy about this. So frequently when an HR person gets a wage garnishment, they will call the employee and say, hey, listen, we got this garnishment. And the employee will try to talk them out of it. Oh, I already dealt with that debt. This is a mistake. And I think the employer is tempted to not go ahead and enforce that garnishment and make those deductions because they think, oh well, the employee told me that it's okay. What the employers need to understand is it is a court order. It's basically like having a court order you to appear at jury duty. Right. Or to come to a hearing on a traffic ticket. It's not a request, it's an order. So it's very important how employers handle these orders that they make sure that as soon as they come in, they are processed. There are a lot of different details that employers need to keep in mind.

I know that getting a summons from the court or any documentation from the court. Scary. Absolutely. It's official. There's things you're looking at it, trying to figure out what do I need to do. And when it's talking about an employee's wage or earnings, we also know that that's a very touchy issue. And that's one that employers just can't grab and take away.

That's right. This is really kind of like a third rail, to be honest, because we've had it drilled into our heads for so long. You don't mess with the money. Right. If you have an employee who's a problem, you discipline them. If the employee, they were helping client and so they didn't get to take their meal, period, you pay them. Right. Now you can discipline them for not following your policy, but in the meantime, you don't mess with the money. Right?

Right.

This is one of those big exceptions to that rule where you are being ordered to mess with the money. And sometimes you'll leave people with very little. So oftentimes the courts don't even recognize that after the garnishment, the other taxes, any other required deductions, you. You're leaving folks in some circumstances with less than minimum wage. And it's all part of the statutory scheme to make sure that these, quote, debts are being paid.

Okay, so, Jennifer, if I'm an employer and I see that after all of these garnishments and taxes have been withheld that the employee is now making less than minimum wage, do I need to make the employee whole?

You might. It depends on what kind of garnishment it actually is. Right. So when you're looking at a garnishment for something like child support, they can actually go below minimum wage. If you're looking at a garnishment for something like taxes, it's going to be a different issue, believe it or not. It also depends on whether the garnishment is from the California Tax Authority, the Franchise Tax Board, or the Internal Revenue Service. Here's what I tell clients to do. This is not meant to be full employment for lawyers and CPAs, but you really should talk to your accountant when you get a garnishment to understand what the implications. These rules, by the way, change all the time. And we have to stay on top of what the rules are. And most of us in employment law, we're not staying on top because it doesn't come up that often. So most of the time, your first call should be to the cpa, your tax accountant, someone who can tell you, okay, what do I really need to do here? Many payroll companies will give you bad advice. So if you call your payroll hotline, particularly if you have a nationwide payroll company, and you tell them we have a garnishment, they will tell you a federal rule. They will not tell you the rule that is applicable in your state. So it's buyer beware on these calls. To the payroll company, it makes a lot more sense to call the accountant. And then you can call your employment lawyer if there's a question at that point. Most of the time, quite honestly, there won't be. Most of the time, there won't be a reason to call the employment lawyer. You'll just make sure that you're meeting the rules as the CPA explains them to you. Also, believe it or not, the garnishment documents have a lot of information on them. And sometimes clients will call me in a panic. They'll scan the document to me, and then I'll sit down and say, okay, look at page two. This explains what we can do. Oh, oh, my gosh. Okay. I didn't see that before.

Yes, because it is scary. That's the panic, right?

Absolutely.

That's the freak out. Oh, my gosh. Now let me ask you this too. We talk about it being court ordered. Should our employers really make sure that what they're receiving is from the court, an order from the court, as opposed to just some letter drafted on an attorney's letterhead?

Yes. Most of the time, it is going to look like a court order. It will be a judgment. It will be a satisfaction of judgment. It'll be a lien, and it'll say wage garnishment. And there'll usually be some underlying documents there. If you just get a lawyer who writes you a letter, you're going to want to say, I need the underlying documents before I can what's called implement the garnishment. I've also had situations where, like, we had a company once where the ex wife called to say, oh, my husband hasn't been paying spousal support. You have to withhold $1,500 from his paycheck and direct it to this account. And they did it for 14 before the employee actually realized, like, why his check was less. I don't think it would take me that long to figure it out. But they did it on the verbal request of this ex wife. So we have to be really careful about. Yes, it should be on an official looking document. And if you ever have questions, you can always call the court. You can always call. Sometimes there'll be a cover letter with the garnishment order. And that'll be from a lawyer saying, you know, I was the family lawyer in this divorce. We now have this garnishment. We need you to execute on the garnishment or implement the garnishment. That's something that you can ask, actually call and ask questions about what I don't want us to do is stuff it in the drawer and not think about it.

Well, what I'm thinking as I'm sitting here listening to you talk about this issue is we really have to act based upon evidence in this situation. Right. We have to have that written documentation. Because if the ex spouse or somebody's calling saying, hey, this guy's behind, he's owing me X amount, or this woman's behind and he or she's owing me X amount, and we do that without an order, we've withheld wages. We've withheld wages.

That's right. We have a Labor code section 224 problem because we took an invalid deduction. If the employee leaves us, we could have a waiting time penalty issue. We're going to have wage order penalties. It's a big deal.

And if we get that order and the employee says, oh, no, just ignore that, it's nothing, there was a mistake, we could face some penalties too if we don't honor the order.

Yes, it's called contempt of court. It's not where employers want to be. And let me tell you how this comes up. It usually comes up with an executive. So HR gets a garnishment order for an executive and the executive goes in and says, oh no, no, this is a total mistake. And because of the power dynamic, the HR person will sometimes say, okay, sure, I totally get it. They file it away, they think everything's fine. Later there will be a problem. Right. Because the company did not do what they were supposed to do with the garnishment. And many times the person who made the statement doesn't remember making that statement. It turns into a weird version of facts and the company's left holding the bag. The employer really has to be sure that we're doing this correctly. And there are a lot of dynamics that come, especially when you talk about spousal support and child support. Here in California, we have a disso master. And I can tell you from personal experience, this is what they use. They look at your earnings, your spouse's earnings, and they decide how much you need to be paying. Well, it's a frightful number for anyone, right? And pretty soon when you start doing the math, you think, but you're doing this pre tax, like you don't even know what my deductions are gonna be. So there's a lot of emotion that comes into play. And this is what I think happens when people internally are trying to do the right thing, whether it's accounting or the CFO or hr, and then they See the emotion. They'll sometimes say, okay, well let's just, why don't you check it out, Jennifer, and get back to us. And before you know it, several months have gone by and now we have interest and penalties and all kinds of things.

Because isn't there also a time limit or once the order is received, depending upon what type of garnishment, the garnishment needs to start happening within a second.

Period, within the next pay period. Most of the time.

Most of the time, right.

Because keep in mind it's not easy to get a wage garnishment. So to go in and get a wage garnishment you have to show that someone has pretty much willfully failed to pay. And the only way we can get the money is to go in and garnish their wages because wages are pretty protected. Right. Particularly in California. So there's a pretty significant showing. So once you have a judicial officer stamp that, okay, file approved, let's go, we've got it. The time is going to tick very quickly. And I'll be honest, there are very specific rules about these that I have not memorized because it's just not what we do every day. But I can tell you I usually get called when it's gone wrong and sometimes the sheriff will show up. We had this happen at a large retailer we represent. The sheriff showed up to execute this garnishment for a huge child support order and took money out of the till to satisfy the order. And nobody knew what was going on. Nobody could figure out what was happening. And I got the call at that point so we could try to retrace our steps and figure out how to solve the problem. So it's really important for HR people to know. And obviously for owners of businesses, you may not have your own HR department, but that is not a piece of mail you want to ignore.

Okay, so let's just summarize this for our listeners because there's a lot of really good information in a very short period of time is a when that garnishment, court ordered garnishment comes through, pick up the phone, talk to your cpa, talk to even your in house counsel might have some words of wisdom. But also notify the employee who's affected to let them know, honor the garnishment. Don't listen to verbal requests, follow what the garnishment says, read the garnishment because there's some helpful information in there. And how about keeping that garnishment confidential?

Well, it's very important to keep it confidential. I had a client the other day Ask me, would I please come up with an agreement that the HR people could sign to maintain confidentiality. I said, well, first of all, if you have a question about that with your HR team, we have a problem. Second of all, it's a piece of paper. It's not that enforceable. What you have to do is make sure you have a process. So, for example, you don't want someone leaving the garnishment on the table when they go to a lunch break. So we want to treat those documents like we treat a Social Security number. Right. Put it in a locked file cabinet, don't talk about it unless someone, quote, needs to know. And really, the only person who's going to need to know might be the payroll person and the employee who's affected.

Yeah. And I think even payroll needs to really understand because you, when you look at some of this stuff, nobody wants other people to know their personal business. And wage garnishments are very personal because it is issues outside of the workplace that now is coming inside impacting that employee on a whole host of levels.

Well, and let's face it, we don't think kindly, most of us about folks who have wage garnishments. Right. Because our thought is, well, they didn't pay their child support or they didn't pay their spouse's support or they've got a tax lien or a tax judgment. There is a lot of morality issues that come into play there. And this is another one of those examples where I tell folks, listen, you've got to put those aside.

Yep.

Whatever your judgments are, deal with them in your head. Inside thought, not outside voice. Right. We have to figure out exactly what we're supposed to be doing. And if there's a question, you could always call. There's always a place where you can get the advice. But the biggest mistake we make is we just don't do it. We don't implement the order. And that brings a lot of problems down the road.

Well, thank you, Jennifer, again, for joining us today on the workplace. We really appreciate it.

Thanks for having me.

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