Garnishment Compliance

The Consumer Credit Protection Act (CCPA) establishes federal limits on the amount that can be garnished from an employee's disposable earnings in any workweek or pay period. For most garnishment types, the maximum that can be withheld is the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage. Disposable earnings are defined as the amount remaining after legally required deductions—such as federal, state, and local taxes, Social Security, and Medicare—are subtracted from gross pay. These federal limits serve as a floor; states may enact stricter limits that offer additional protections to employees. Child support and alimony garnishments have higher maximums (up to 60% or 65% of disposable earnings). Employers who withhold more than legally permitted face liability, making a thorough understanding of CCPA limits essential for payroll and accounting professionals who process garnishment orders.

When an employee is subject to multiple garnishment orders simultaneously, employers must follow a legally mandated priority hierarchy to determine which orders are satisfied first. Child support and alimony withholding orders take top priority under federal law, followed by federal tax levies (IRS), state and local tax levies, and then other creditor garnishments. Within child support orders, the first order received typically takes precedence when multiple orders exist from different jurisdictions, though some states have specific rules for concurrent support orders. The total amount withheld across all orders cannot exceed the CCPA maximum—meaning lower-priority creditors may receive nothing if higher-priority orders already exhaust the withholdable amount. Employers must carefully track each order's status, respond within required timeframes, and remit withheld amounts to the correct agency or creditor. Errors in priority sequencing can expose employers to legal liability from both employees and creditors.

Upon receiving a valid garnishment order, employers have several specific legal obligations that must be fulfilled promptly. First, the employer must acknowledge receipt of the order within any timeframe specified in the order or by state law. Second, the employer must begin withholding in the next pay period following receipt (or as otherwise directed). Third, required withheld amounts must be remitted to the issuing court, agency, or creditor on schedule. Employers may also be required to notify the employee and, in some states, provide a copy of the order. Many garnishment orders require the employer to complete and return an earnings disclosure form disclosing the employee's pay frequency, gross pay, and deductions. Importantly, the CCPA prohibits employers from terminating an employee because of a single garnishment—violation of this anti-retaliation provision can result in fines and reinstatement orders. Payroll systems should be set up to automate garnishment calculations while maintaining compliance documentation.

An IRS tax levy is distinct from a standard creditor garnishment in both its authority and its calculation rules. IRS levies are issued under the Internal Revenue Code and do not require a court order—the IRS can issue a levy directly to an employer after following required notice procedures to the taxpayer. The amount exempt from an IRS levy is determined using Publication 1494, which provides tables based on the employee's filing status and number of exemptions claimed; the levy withholds all disposable earnings above the exempt amount. Unlike CCPA creditor garnishments, IRS levies are not subject to the 25%/30×minimum wage limitation—they can result in significantly larger withholding amounts. Employers must respond to IRS levy notices promptly and continue withholding until the IRS releases the levy or the debt is satisfied. Failure to comply with an IRS levy can make the employer personally liable for the amounts that should have been withheld.

Federal law under the Consumer Credit Protection Act (CCPA) explicitly prohibits employers from discharging an employee because their earnings have been garnished for any one debt. This protects employees from losing their jobs over a single financial hardship, such as a judgment from one creditor. However, the federal anti-termination protection applies only to garnishments for a single debt—employers are not prohibited from terminating an employee who has multiple garnishment orders, though many states provide broader protections. Employers who violate the anti-termination provision can face criminal fines up to $1,000 and potential imprisonment of up to one year. Beyond termination risks, non-compliance with garnishment orders—such as failing to withhold required amounts or remitting funds late—can result in employers being held personally liable for the amounts owed to creditors. Establishing a clear internal process for receiving, tracking, calculating, and remitting garnishments is essential to avoid these significant legal and financial risks.