Wage Garnishment Actions – For Employers
When notified by the Federal Government, employee Wage Garnishment is mandatory!
Under Federal law, non-compliance with the Administrative Wage Garnishment (AWG) Order makes you liable for any amount that you should have withheld but failed to do so.
The Department may sue you in Federal court to recover those sums, together with attorney’s fees, costs, and, in the court’s discretion, punitive damages! Under that same law** you may not discharge, refuse to employ, or take disciplinary action against an individual just because that individual is subject to Administrative Wage Garnishment (AWG). That individual may sue you if you take such action and, if he or she prevails, the court will award attorney’s fees and, in its discretion, may order, among other things, reinstatement, punitive damages, and back pay.
Termination of the employee’s employment after you receive the Order does not terminate your liability for amounts you were supposed to have withheld.
Action steps for administrative wage garnishment for student loans in default
WARNING! The Federal Administrative Wage Garnishment Law supersedes all State laws governing wage garnishment.
1. Immediately read the Administrative Wage Garnishment Order and verify the employee’s name, address, and social security number.
2. Complete and return the Wage Withholding Acknowledgment form immediately (liability for withholding begins when you receive the Order, not when you submit the form).
If you are no longer obligated to pay the employee, submit the Acknowledgment form, including the employee’s last known address and, if known, the name and address of the new employer, if any.
If your obligation to pay the employee ends at any time after receiving the Order, you must still withhold the proper amounts from earned income up to the termination date and then submit the Change of Employment form.
3. Calculate and deduct the amount to be withheld from the employee’s first pay period after receiving the Order.
a. Identify the debtor’s gross earnings for the pay period. (earnings include wages, salary, commissions, bonuses).
b. Identify amounts to exclude from withholding such as state and federal income tax, Federal FICA, or OASI tax (Social Security). Do not include deductions for savings bonds, employee contribution to retirement plans or health insurance, and so forth.
c. Calculate disposable earnings by subtracting excluded amounts (step b) from the debtor’s gross earnings (step a).
d. Compute the withholding by multiplying the disposable earnings (step c) by .15 (percent). Round off the figure to a flat dollar amount but do not exceed 10 percent of the disposable pay.
4. Deduct the proper amount of withholding.
5. Send the check, payable to the U.S. Department of Education, according to the instructions on the Order. Although you must deduct each pay period, you can send payments once each month.
Wage Garnishment Priorities
Generally, garnishments must be satisfied in the order they are issued, up to the maximum amount subject to that kind of garnishment order.
Federal student loan garnishments remain in effect until the debt is paid in full, or you receive a “Release from the Order of Withholding.”
Child support garnishment or IRS levy take precedence over withholding for student loan debts, regardless of when they begin. If you receive a garnishment order for child support or IRS levy after you have received the AWG Order, contact the DoE at 404/562-6013 for guidance.
Deduct child support and IRS levies from gross wages along with other deductions required by law. Base your 15 percent calculation on the remaining disposable pay.
NOTE 1: Some employees may have multiple garnishments; thus, the Consumer Credit Protection Act limits the total amount of wage withholding to 25 percent. (50-60 percent for child support). So, as a general rule, you may not withhold more than this limit for student loan debts.
NOTE 2: Employees receive many notices that withholding will occur before employers receive the withhold Order. They also receive an opportunity to contest the withholding and information about their rights and responsibilities plus the chance to avoid garnishment by entering into a voluntary repayment agreement.
The DoE has worked hard to minimize any direct impact the program might have on an employer’s business operations. Employers with questions should review the Administrative Wage Garnishment Procedures.