The reality of a tough economy is an increase in financially troubled employees, which can lead to wage garnishments or child support orders. Employers served with these orders must be prompt in their response. Otherwise, they risk liability for the debt on their employee’s behalf.
Support orders or garnishments typically fall under three common categories. The most common type is a court order stating the amount owed by the employee to a third party and instructing the employer to withhold certain amounts. Such orders, if proper, are to be fulfilled in a timely manner as stated in the order (e.g., upon the next pay period beginning 14 days after the employer is served with the order).
Less common are states that require an employer to answer “garnishment interrogatories,” which ask basic questions about an individual’s employment status. These questions require a timely response, possibly signed and notarized, sometimes in as little as 20 or fewer calendar days. Once a court receives the response, it will issue a subsequent order to the employer, only then triggering the actual garnishment.
Third, some states, such as Illinois, allow a private party to pursue a wage garnishment without any court intervention using a “wage assignment” form. Because the entire process occurs outside the judicial system, there is significant room for error and abuse. Employers should proceed with extreme caution and are well advised to seek legal counsel.
Regardless of the type, most federal and state laws contain provisions that place employers on the hook for a garnishment if they are not timely in their response, or fail to follow the order. Even if a garnishment concerns a former employee, a response is still required.
At times, an employer may find itself in receipt of more than one garnishment order. Normally, such orders are prioritized as follows: child or family support orders, IRS tax levies, federal levies such as a Department of Education garnishment, and other garnishments. It is important for employers to understand the type of garnishment so it can properly prioritize withholdings. A failure to withhold an IRS tax levy with priority because an employer is instead fulfilling a standard garnishment may similarly subject the employer to the employee’s liability.
Because family support, child support, and many garnishment matters are handled at the state level, an employer must typically abide by the state laws of the employee’s place of employment. Given the broad mix of applicable state laws, employers present in multiple states should seek legal counsel if they are uncomfortable maintaining a firm grasp on the varying laws. Finally, employers must bear in mind that, in most scenarios, the law prohibits employer retaliation, such as terminating an employee, because of a support order or garnishment.
Federal agencies, as well as many states, offer useful guides to explain the garnishment process to employers. The IRS offers a guide to the collecting process (http://tinyurl.com/5uhbj9t). The U.S. Department of Labor offers wage garnishment guidance (http://tinyurl.com/2g4a2wg) as well. The U.S. Department of Education has an Employer’s Garnishment Handbook.
As for state garnishments and child or family support orders, the law varies by state. If an employer is in receipt of a garnishment or support order that causes confusion or concern, it should seek legal advice. Whether an employer handles such garnishments internally or utilizes outside legal counsel, it is critical to be responsive in a timely manner. Otherwise, the employer may be left paying the bill.
On January 28, 2011, the NLRB ruled that it is unlawful to terminate an employee who may, in the future, engage in a protected activity, even if the employee has not yet engaged in the protected activity. The board held that the employer terminated the charging party as a “preemptive strike” to thwart potential concerted activity. This ruling represents a significant departure from the longstanding rule that an employee actually has to engage in protected activity (like discussing wages with other employees) for an employer to be held liable for interfering with that protected “concerted activity.” This decision focuses on the employer’s intent, rather than the employee’s actions.
In Parexel International, LLC, 356 NLRB No. 82 (January 28, 2011) (http://www.nlrb.gov/case/05-CA-033245), the charging party (mistakenly) believed that a South African co-worker, who had quit and was later rehired, got a pay increase because the company favored South Africans. She complained to her supervisor. Human resources and the department manager investigated and asked the employee if she had discussed the perceived unfair treatment with her co-workers. She said she had not; days later, she was fired.
The National Labor Relations Act prohibits an employer from terminating an employee for engaging in "protected concerted activity." Talking to co-workers about wages or other working conditions (described in Section 7 of the Act) is considered protected concerted activity. Following precedent, initially the NLRB administrative law judge concluded that the company had not violated the Act because the employee had not engaged in any protected activity. On appeal, the NLRB panel agreed that the charging party had not engaged in protected activity. However it found that, “[i]f an employer acts to prevent concerted protected activity — to 'nip it in the bud' — that action interferes with and restrains the exercise of Section 7 rights and is unlawful without more.”
A critical finding in this case was “the employer’s intent to suppress protected concerted activity.” The facts that led to this decision are somewhat extreme and unlikely to be repeated. Nevertheless, the decision serves as an opportunity for employers to check their policies on termination of employees. An evenhanded, well-documented approach is necessary, and your attorney can help you design a termination protocol.
Legal News is part of our ongoing commitment to providing legal insight to our clients and colleagues. If you have any questions about or would like to discuss these topics further, please contact your Foley attorney or the authors of this issue.