In trying economic times, the employees of automotive companies and Next-Generation manufacturers, like those of other companies, face financial hardship. In some cases, this may translate into these companies facing higher than normal rates of wage garnishment requests. While no national statistics are kept, many areas of the U.S. have seen drastic increases in wage garnishment in the last several years. It is important for companies to understand the process and legal limitations placed on wage garnishment in order to avoid liability for missteps.
Federal law places limitations on the amount a company may garnish from an employee’s pay. States are free to enact stricter limitations, although often their regulations mirror the federal requirements. Under Title III of the Consumer Credit Protection Act, the federal government protects employees whose wages are garnished by limiting the amount that can be withheld for certain types of debts. Under this law, employers may not withhold more than 25% of an employee’s disposable income or more than the amount by which disposable earnings are greater than 30 times the federal minimum wage (currently $7.25). This limit applies to most debts, and applies regardless of how many garnishment orders a company receives.
However, there are exceptions to the 25% general rule. If the garnishment is for child support, bankruptcy or federal or state tax payments, the limit is raised to 50% or possibly 60% depending on whether the employee is currently supporting a spouse or child. The limit may also be increased if the garnishment is for support payments that are more than 12 weeks in arrears. If one also considers that there are individual garnishment limits for federal student loans, and greatly varying procedural requirements by state, it is easy to see how what may seem like a simple wage garnishment issue, quickly becomes complicated. In some states, failure to comply with proper procedures leaves the company liable for the employee’s debts.
Automotive companies, like all companies, are likely facing drastic increases in garnishment requests. It is important to pay close attention to the regulations in this area in order to properly comply with what can be fairly complicated requirements. This is especially true when a company has operations in multiple states, spanning a myriad of state laws and regulations.