Protecting Employers Since 1985

Employee Debt – The Bane of Employers

While most of us believe that the “Great Recession” is finally at an end, millions of Americans are still experiencing the pressures of employee debt. Every state in the United States has legislation creating the opportunity for an organization to “legally collect the financial obligations owed by an employee through our legal system” (for example, in the State of Illinois, Collection of Child Support – 750 ILCS 28/50, et seq.; Wage Assignment Act – 740 ILCS 170/01, et seq.; and Wage Garnishment – 735 ILCS 5/12-701, et seq.). In point of fact, there is a tremendous increase in the number of garnishments (legal recovery of a debt through the seizure of an employee’s pay) that has been on a drastic increase. It is estimated that in calendar 2013, close to 10% of the workers in the continental United States have had their wages garnished and the highest rate of garnishment covers employees between the ages of 30-50, the peak years of child rearing, divorce, and debt load. Garnishments are filed for all possible debts, the two (2) highest being child support and student debt and “other debt” (i.e., credit cards, mortgages, etc.).
Employers are caught in the middle with their obligations to ensure that employees are paid correctly under all wage payment laws (i.e., Fair Labor Standards Act, Illinois Wage Payment and Collection Act, etc.) and the employer’s obligations to creditors under garnishment proceedings/requirements. Every employer must be aware of garnishment proceedings/requirements and take appropriate action to protect itself from being enmeshed in these problems. Here are a few of the very important things every employer must do:
1. If an employer receives a garnishment, that garnishment is issued through a court proceeding. Even if an employer believes that it has no obligation to collect on the garnishment (i.e., the involved employee no longer works for the employer), the employer must still file an answer to that garnishment and explain the reason or circumstances as to why the garnishment will not be processed by the employer and no moneys deducted and sent to the Court. If an employer does not file an answer to each and every garnishment, it is possible that the employee’s debt will become the debt of the employer through the entry of a default judgment.
2. Garnishments come in all types of varieties – single payment or continuing payment. Learn what the garnishment is – single payment or continuing payment. For a single payment, the employer is responsible to deduct the amount indicated in the court order and that is the end of the employer’s responsibility. For a continuing garnishment, these can run for a period of time, in some cases, for 180 calendar days, and require continuing multiple deductions from pay and multiple court filings.
3. The Consumer Credit Protection Act and many other state laws prohibit employers from discharging an employee based on a single garnishment or from multiple garnishments for a single indebtedness. It is an absolute necessity for the involved employer to know the state law requirements and comply with them.
4. For certain indebtedness that is the underlying basis for the garnishment, the “disposable earnings” (wages minus legally required withholdings) may be subject to a different deduction limitation. In most garnishments, the “disposable earnings” subject to deduction in a work week or pay period will be the lesser of 25% of the “disposable earnings” or the amount by which “disposable earnings” exceed thirty (30) times of the required minimum wage. On the other hand, for cases of child support or alimony back payments, 50% of the employee’s “disposable earnings” may be garnished. It is extremely important to know what the indebtedness is to determine the percentage of “disposable earnings” subject to garnishment.
5. Have a specific procedure handled by specific people who are responsible for dealing with the garnishments and are knowledgeable as to how to deal with them. Have a specific procedure and training in place to notify managers or supervisors that garnishments should be sent to an identified person. Do not allow garnishments to linger in someone’s inbox – that type of action will cause a lot of unnecessary problems, including the possibility that the “employee’s debt” will become the “debt of the employer!”

Questions? Contact Walter J. Liszka at the Chicago office at  or by phone at (312) 629-9300. 

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