What happens when an employer gets a notice for an Income Withholding Order for Support?
If you are an employer you already know that you are an unpaid worker for the federal and state governments. Your uncompensated responsibilities include tax collection, funding unemployment insurance, implementing targeted social policies (minimum wage, sick leave, anti-discrimination in all its myriad forms), health insurance provider, illegal immigration enforcement and the list goes on and on. But even then, the government has yet another job for you; court ordered judgement collections against your employees. If a court decides that one of your employees owes money to the state, they put the obligation on you (the employer) to take it from the employee’s paycheck and in turn, pay them. Why are you (the employer) in the middle of it? Because it’s much easier for the government to threaten a responsible business owner than chase down a dead beat dad (or mom).
These wage garnishments can spring from many places including civil judgements, unpaid taxes and court orders related to alimony and child support. The most common by far is for child support orders.
Business Owner Bob’s Story
Let’s create a scenario for our company president, Bob who owns a mower repair business in Atlanta. Business is brisk and he is thankful to be past the recession and be busy once again. One of Bob’s best workers and the one he relies on most is Anthony. One day Bob gets a letter from the nice folks at the Georgia Department of Human Services. The letter begins with:
Dear Employer or Payor;
Enclosed is an Income Withholding Order of Support. You are hereby notified that pursuant to O.C.C.A 19-6-33 you have the rights and responsibilities set forth below with regard to the attached Income Withholding Order of Support in which is Anthony is ordered to pay child support. …
The letter and forms goes on for seven pages of legal talk and forms. See the whole letter here…
So Bob looks the letter over to find out what he has to do, how much money he has to withhold from Anthony’s paycheck each week and who to send it to. Bob reviews paragraph 1 of the letter which states:
You are required to deduct from each payment to the Employee/obligor the amount specified by the court in the attached Income Withholding Order for Support. The total deduction on any one occasion may not exceed the maximum allowable under the federal Consumer Credit Protection Action, 15 U.S.C. Section 1673(b), as applicable to the Employee/obligors income (50 per centum of disposable income where the employee is supporting a second family, 60 per centum where there is no second family being supported, and an additional 5 per centum of either limit if the arrearage is equal to 12 weeks or more in support payment). If the amount to be deducted would otherwise exceed the limits, you are to reduce the amount deducted accordingly.
Bob is not excited to get this letter. It means more HR related stuff to deal with that does not add one cent to his income. Bob’s first reaction is to blow it off – it’s just more government mumbo jumbo. He thinks “I have 25 customers with yards 2 feet tall that are screaming about getting their mowers repaired… I do not have time for this crap!” Then he reads the section 4 where the letter states:
If you willfully fail to deduct the proper amount from the employee/obligor’s income, you are liable for the amount you should have deducted, plus costs, interest and reasonable attorney’s fees.
This part gets Bob’s attention. If he blows this off, it could get very, very expensive and cost even more time and energy in the long run. Ok, so Bob reads and re-reads the letter. He scratches his head and thinks… “Does this mean I have to withhold 60% of Anthony’s paycheck?” Later in the letter he finds the actual dollar amount the state of Georgia has determined that Bob must withhold. Since Bob pays his workers weekly, the weekly amount he must withhold has been calculated by the state at $135.08. Bob thinks he will simply tell his bookkeeper to make the weekly deduction on Anthony’s check and send it to the court.
Bob notes that the 60% of pay rule only applies if Anthony doesn’t take home enough money (after taxes and other withholdings) in that work week to cover the full court order amount – ($135.08/.6%)=$225.13. In other words if Anthony takes home less than $225, Bob must reduce the amount withheld accordingly. Bob notes that he will need to reduce Anthony’s withholding amount when his business does its seasonal slow-down and he is forced to reduce Anthony’s work hours. Bob is overjoyed at one more thing to keep track of. Although Bob may not realize it, he should be glad that this is the only garnishment order for Anthony. If the IRS and others are also coming after his check, it can get very messy about who has first priority for the money.
After getting the letter, Bob’s bookkeeper implements the withholding for Anthony’s next paycheck. Upon receiving his check, Anthony is an unhappy camper when he sees the deduction. He storms in to Bob’s office and wants to know where his money went. Bob calmly explains about the court order and that the State of Georgia can do this to fathers who don’t provide financial support for their children. After listening to ten minutes of Anthony venting about his bad judges and his crazy ex-wife, Bob calmly explains there is nothing he can do about it. In his anger, Anthony says “I quit, and I am going to work for your competitor down the street, Fred’s Mower Repair!” Bob is irritated to be losing a good worker but at least he won’t have to hassle with this court order withholding stuff anymore.
One More Thing
The week after Anthony quits, Bob remembers something else in that letter from the State. Section 7 stated:
You are required to notify the Obligee (as named in the Income Withholding Order for Support) in writing by first class mail at the Obligee’s address when you no longer provide income to the Employee/obligor. At that time you must provide the employee/obligor’s last known address and the name and address of the Employee/obligor’s new employer/payor, if known. Willful violation of this provision subjects you to a civil penalty of up to $250 for the first violation and up to $500 for each subsequent violation. If the IV-D agency (Division fo Child Support Services) is enforcing the order, you shall make these notifications to the agency instead of the obligee.
Good thing Bob remembered that. Since Anthony quit, this provision requires that Bob must write a letter to the state notifying them where Anthony lives and who he works for now. Otherwise Bob may get fined by the state. Oh the joys of being an employer!
How a PEO Helps
Although our scenario for Bob is just an example, the terms of the court order are not. If Bob would have joined a Professional Employer Organization, he would not have had to spend his time with any of this. In a co-employment (PEO) relationship the PEO is the named employer who would have received the Support Order and would have been responsible for its enforcement. PEOs are experts at not just handling payroll processes and third party remittances, but also dealing with the governmental obligation that come with being the employer of record. If you are a business owner, don’t be Bob, join a PEO.