Third-Party Garnishment Liability: Are You Properly Managing Employee Wage Garnishments?
In today’s economic climate, garnishments have increased as much as 20% over 2007 and are expected to increase up to 38% in 2009. Without a robust compliance program, companies that receive a high volume of wage garnishments can face significant liability exposure to third-party creditors and governmental agencies (including child support enforcement agencies). Federal and state law can impose substantial civil penalties in addition to possible criminal charges for failing to comply with employee wage garnishments properly and in a timely fashion.
Developing a garnishment compliance program can be a challenging undertaking for companies with employees in a number of different states. Although the federal Consumer Credit Protection Act sets basic standards governing compliance with wage garnishments, each state can create supplemental wage garnishment laws adding further employee protections or imposing stiffer noncompliance penalties. As a result, complying with a patchwork of federal and state garnishment and employment laws can be a daunting task. Even so, strict compliance is a must because employers risk potential liability on at least two separate fronts. First, employers can face civil penalties and liability and even criminal charges for not properly withholding and remitting amounts to creditors and governmental agencies. Second, employers can be confronted by wrongful discharge or wrongful dismissal actions and severe civil penalties as high as $10,000 per violation for discharging or firing employees that are subject to a garnishment.
