Determining The Process for Terminated Employees with Garnishment Orders

January, 13 2025

A wage garnishment is a means of collection when someone owes a debt. An employer will be ordered to withhold money from an employee's paycheck and pay it to whom the debt is owed. Wage garnishments can originate from an employer to its own employee, but most wage garnishments are court-ordered based upon debt being owed to a government agency.

Most wage garnishments are received through a legal order by the court or a government agency. Wage garnishments may be required for unpaid taxes, overdue child support, outstanding medical bills, and more. The court will send the order to the employer through the address that has been registered with the government. Prior to this letter, the employee had already received numerous others, like a court notice, and would later get one stating garnishment; hence the company doesn't have the mandate to communicate it to the employee.

Key Challenges in Garnishments and Proper Processing for Terminated Employees

Some of the most essential issues involve understanding the obligation the organization is subject to once employment has ended. Some garnishments may continue despite any termination of an employment relationship, such as in respect of wages found due from the final paycheck. Finally, after termination, terminated employees' personal information should reach creditors or authorities to prevent actual liabilities.

Another common challenge is the understanding of different state and federal laws. Garnishments and proper processing vary greatly based on the type of debt and the jurisdiction. Employers need to be informed of these legal nuances to avoid unintentional violations.

Step-by-Step Process for Garnishments and Proper Processing

To properly manage garnishments for terminated employees, it is important to have a clear and systematic process in place:

1. Review Garnishment Orders

Review the garnishment documentation carefully to identify specific obligations after termination. Orders may outline whether deductions apply to the final paycheck or require further reporting to the issuing agency.

2. Notify the Issuing Agency or Creditor

Notify the agency or creditor responsible for the garnishment immediately upon termination. Include the date of termination and the amount deducted from the last paycheck, if applicable.

3. Make Deductions on the Final Paycheck

If need be, make sure garnishments are carried out and appropriately deducted from the final paycheck. Recheck all calculations in order to prevent understatement or overstatement in a possible claim or penalty sanction.

4. Record All Steps Taken

Record all communications, deductions, and notices about the garnishment in as much detail as possible. Proper documentation will come in handy when there is a dispute or an audit.

5. Update Internal Systems

The terminated employee's information must be updated in all internal systems, such as payroll and HR records, to reflect the termination of the employment relationship and the garnishment responsibilities.

Legal and Ethical Considerations

Compliance with Federal and State Rules on Garnishment

Employers should, at all times, be in compliance with federal and state rules regarding garnishments. While the CCPA limits the amounts that can be garnished against an employee's wages, that limit must even be observed upon a final paycheck. Ethical Steps

On termination, employers ought to be reasonable and fair, and their intentions should be candid.

The employers should know at least a little about the garnishments and be prepared in advance for their occurrence. Engage a professional to ensure your plan and procedures are compliant with applicable laws. Although the garnishment of wages appears rather daunting as you incorporate these things into your payroll functions, do not make an adjustment like everyone thinks if a writ of garnishment issues on one of your employees. All you must do is what you read about here, which would put you straight on track in obeying the courts as they request, thus withholding that particular employee's wage according to proper figures.