Payroll Briefs

How to Avoid Wage Garnishment Default Judgments During COVID-19

May 13, 2020

During the COVID-19 pandemic, employers must continue to run all aspects of their business as usual. Amongst managing employees working remotely and coping with an unexpected downturn in income, many things could get lost in the uncertainty. One thing that should be kept at the top of your list, however, is properly processing wage garnishments. Failure to result in doing so could hold you liable for your employee’s entire debt, which would only add to the financial burden many businesses are currently facing. Business owners should be prepared in the event that collections lawyers come seeking a default judgment. Here are three strategies to remain in compliance with garnishments and safeguard your business:

1. Anticipate Garnishments

Instead of expecting garnishments to slow down or stop completely due to the COVID-19 crisis, be fully prepared in case they don’t. Agencies may send electronic notices for child support or court-issued garnishments, so be on the lookout for these. When the crisis dies down and staffing levels return to normal, there will be an influx of garnishments, so it’s better to stay on top of them now than fall behind later.

2. Create a Streamlined Garnishment Process

Having a step-by-step system in place to address garnishments and fix any bottlenecks of COVID-19-related disturbances is an effective way to show you’re doing your due diligence as an employer. Document each step of your system in-depth so nothing can fall through the cracks. Leveraging a payroll software, like DM Payroll Solutions, with a garnishment management tool can ensure proper deductions are made for garnishments.

3. Know the Types of Wage Withholdings

As the COVID-19 pandemic continues, different kinds of wage withholdings may now have special rules. Be sure to familiarize yourself with these:

  • Child Support – The U.S. Department of Health and Human Services’ Office of Child Support Enforcement confirmed that child support orders are currently still in effect. It will be utilizing its Electronic Income Withholding Orders (e-IWO) system, so you may want to enroll in the system as soon as possible to ensure you don’t miss anything.
  • Federal Student Loan Garnishments – These have been put on hold by a U.S. Department of Education directive and then further by the CARES Act, authorizing suspension of federal student loan garnishments (but not private student loan garnishments) through September 30, 2020. Private collections agencies have also been ordered to halt proactive collection activities.
  • Tax Levies – While tax levies usually depend on the jurisdiction, the Internal Revenue Service recently advised that levies created by field revenue officers as well as new automatic levies are suspended. The status of pre-existing levies is currently unknown.
  • Creditor Garnishments – Creditor garnishments are also governed by jurisdiction. Certain courts have given orders allowing judges to issue stays for writs, while other courts have yet to provide information.

As we continue to navigate the COVID-19 pandemic, employers need to be prepared to handle wage garnishments to avoid default judgments. By carrying out the processing of garnishments as usual, having a system in place and understanding the current rules for wage withholdings, employers will have a reduced risk of improperly handling wage garnishments now and in the years to come. If you need a software system to assist in managing your wage garnishments, contact DM Payroll Solutions today.