Garnishments will happen; be ready when they do
June 28, 2012
Article courtesy of SBAM Approved Partner ASE
By George Brown
In difficult economic times, all employers are likely to handle employee garnishments at one time or another. How timely and effectively you manage the garnishment is of vital importance. A garnishment, which technically is a lawsuit against the employer, can lead to serious problems if not handled properly.
For a miniscule $6.00 payment, employers must process employee garnishments, calculate and withhold funds from an employee paycheck, and at times balance competing obligations. To top it off, employers need to understand that if they mishandle a garnishment, they can be held liable.
Time is of the essence. Once a creditor obtains a judgment against an employee, Michigan law permits that creditor to garnish employers. There are two types of garnishments: periodic and non-periodic. Periodic garnishments are typically sent to employers. The clock starts ticking as soon as the employer is in receipt of the garnishment. The employer has seven days to provide the employee a copy of the garnishment. The employer has 14 days to file a garnishment disclosure with the court and send a copy of the disclosure to the creditor’s attorney and to the employee.
Under Michigan law, if the employer does not file a disclosure with the court within the required period, the creditor may take a default judgment against the employer for the full amount of the debt owed by the employee. As a result, employers who do not respond to a garnishment in a timely fashion may be surprised to receive a default judgment which the creditor has entered against them.
An employer must also handle a garnishment effectively. Federal law limits the amount that creditors may garnish from employees. Employers must correctly calculate the amount to withhold, and must make the deductions until the garnishment expires. Periodic garnishments last for 90 days; creditors may file another garnishment after the first one expires. Judgments in Michigan are valid for ten years, so creditors may file repeated garnishments against an employee until the judgment is finally paid. Employers should understand that when they withhold and remit earnings in excess of legal limits, or on invalid claims, they may be held liable to the employee for the lost wage payment.
Sometimes when an employer receives a garnishment, the employee will tell the employer to ignore it because they are working it out with the creditor. Employers should never stop withholding on a garnishment until receiving an order from the court releasing the garnishment.
Also know that federal law prohibits an employer from discharging an employee because of the garnishment of wages for any single indebtedness.
Knowing that a garnishment can happen at any time, employers should establish procedures to handle these claims. Such procedures should include these steps:
- Determining as soon as possible the correct amount to be withheld
- Determining if the person named in the order is an employee or a former employee or was never employed by the employer
- Confirming that the court order or notice is valid under state law and all required documents were delivered
- Verifying the amount of the claim to be paid under the notice
- Determining whether the garnished amount is within the legal limits of federal and state laws
- Ranking multiple garnishments for an employee according to priority
- Completing all answers or interrogatories including answers for persons who are terminated or were never employed by the employer
- Reconciling all documents received against those processed or responded to
For detailed information regarding garnishments visit the Michigan Courts website. For HR-related questions, use the ASE member-only hotline!