Your employee, Debbie Deadbeat, doesn’t pay her debts and gets slapped with a judgment. Before you know it, a process server comes to your office and serves you with a continuing writ of garnishment of Debbie’s salary and wages. First: What is a Writ? Second: What should you do about it?
A Writ is essentially a command from the court. In this case, a Writ of Garnishment is a command to withhold a portion of the employee’s pay to cover a debt the employee owes to someone else. When you receive a writ of garnishment, you have 20 days for your lawyer to file a written response to the writ with the court that issued it. (Hopefully, you already have a process in place so that court documents get appropriate attention and don’t languish on someone’s desk.)
The response will tell the parties and the court 1) how often the employee is paid, 2) how much is paid and withheld and 3) how much you are going to withhold during each pay period pursuant to the writ. You are entitled to receive $100.00 from the court for having to do that. Because wage garnishment is typically done by a continuing writ, you are also entitled to deduct a small amount each time you withhold wages ($5.00 for the first time and $2.00 for each subsequent pay period). After the response is filed, you have to hold the deducted wages until the Court sends you an order telling you what to do with them.
What if you don’t respond or withhold the money? Believe it or not, the Court could require you to pay Debbie’s debt. Generally, the amount that you’d be required to pay is limited to the amount that you would have owed Debbie (not the full the amount that Debbie owes her creditor, unless it’s less than you owe her). So it’s important never ever to ignore a writ when you receive one.
So you certainly don’t want to be held responsible for all or any part of Debbie’s debt – but if you withhold all of Debbie’s pay, how will she and her family survive and pay their basic expenses? There are limits on the garnishment of wages so that the debtor or debtor’s family doesn’t become a public charge or an object of charity. The amount that you are required to withhold will vary whether the debt is for the credit card that Debbie used to pay for all of her fabulous designer shoes, or something less frivolous – like unpaid child support or back taxes.
The writ you received says on its face that federal law limits the amount to be withheld from the employee’s salary or wages. The federal Consumer Credit Protection Act (“CCPA”) limits the amount of “disposable earnings” (that is, earnings after legally required deductions) that can be garnished for creditors. Under the CCPA, “disposable earnings” is restricted only to periodic payments of compensation for labor and personal services. Florida law also provides an exemption of wages from garnishment for those who are the head of a family. In the event that wages are garnishable, there are caps (including the CCPA’s) on the amount of wages that can be garnished. To be subject to either the head of family exemption or the limitation on the amounts to be garnished, the amounts paid to the employee as wages must be in “a sum certain” (whether that’s a set amount or an amount that’s derived from a formula), and must be “for personal services or labor.”
But what about that nice bonus you were about to give Debbie? That’s where things get a bit murky. Not all income that comes from an employment relationship counts as “wages” or “earnings.” In Florida and around the country, courts have found that an income tax refund, deferred compensation, severance payments and even discretionary bonuses are not subject to the head of family exemption or cap on the amount that can be garnished from wages.
So what should you do about Debbie’s bonus? Generally speaking, if the bonus you are giving her is based on a formula according to the work that she performs, and is governed by a formula, policy or agreement, then the bonus is most likely “wages” and subject to the cap. On the other hand, if you are planning to give her an unpredictable bonus that is strictly discretionary, and not based on the work that she does, then that bonus may not qualify for the Florida statutory exemption or the CCPA limitation and you may be required to garnish one hundred percent of it to pay her creditor. Of course, Debbie’s lawyer, the creditor’s lawyer and even the court that issued the writ will probably have different ideas as to whether an exemption or the cap should be applied.
At this point, you can’t believe Debbie is causing you so much trouble! Careful – federal law protects Debbie from being fired because her earnings have been subject to garnishment for a single debt, even if there are multiple writs issued to collect that debt. Florida also has a prohibition on termination for writs seeking alimony or child support.
Writs of garnishment present numerous issues for an employer. If you have any doubt as to how a writ or an employee who is subject to one should be handled, or you are given conflicting information or instructions from the employee or the creditor, you should consult with experienced counsel.