What is an Earnings Withholding Order

An earnings withholding order is a legal document, issued by a court, stating that an employer is required to garnish an employee’s wages. The withholding order happens after a creditor has obtained a judgment against the employee. The order requires an employer to withhold a portion of the employee’s earned wages and forward that money to the levying officer, who will send it to the creditor.

BREAKING DOWN Earnings Withholding Order

The earnings withholding order will typically show vital information to help identify the reason for the order. The employer can use this information to contact the court and verify that the earnings withholding order is valid.

This information includes:

  • The court or jurisdiction's name and address
  • Levying officer’s name and address
  • If applicable, the employee’s attorney’s name and address
  • Plaintiff or petitioner’s name
  • The defendant or respondent’s, who is the employee, name and address
  • Court case number
  • Date of order issue or received

The order states the total amount the employee owes under the judgment and tells the employer when to begin garnishing wages and how much to garnish from each paycheck. The employer must continue to garnish the employee’s wages until reaching full payment of the judgment amount. Also, the levying officer may send the employer a notice of early termination.

California and some other states use the term earnings withholding order to mean the same thing as a wage garnishment order. Garnishment refers to a legal process that instructs a third party, such as an employer, to deduct payments directly from a debtor’s wages or bank account.

Earnings Withholding Orders Follow Guidelines on Garnishment Amounts

The Consumer Credit Protection Act stipulates the amount of income that can be garnished from an individual's wages and states have some leeway in what they allow. However, these Protection Act limits do not apply to unpaid tax debt, child support, bankruptcy orders, student loans or voluntary wage allocations. Also, If an individual faces financial hardship due to wage garnishment, they may be eligible to file a claim to reduce the garnishment amount.

State laws on earnings withholding vary, but generally, the amount eligible for garnishment depends on the employee’s disposable income. Disposable income is the salary which remains after deducting federal and state income taxes, social security tax and state disability tax. Deductions for health benefits, retirement savings and court-ordered spousal or child support is not subtracted before determining disposable income.

The employee’s disposable earnings are then used to determine garnishment limits. For example, in California in 2018, an employee with monthly disposable earnings of $942.50 or less may not have any wages garnished, one with $942.51 to $1,256 monthly disposable income of could have the excess of $942.50 garnished, and the employee with monthly disposable earnings of over $1,256.01 can have up to 25% of total disposable earnings garnished.

The federal government uses a slightly different method to calculate disposable income for wage garnishment purposes. In addition to income taxes, the government subtracts health insurance premiums and involuntary retirement plan contributions from gross income when calculating disposable income for wage garnishment. 

Sometimes, the government garnishes an income earner's wages for payment of back taxes or delinquent child support. It uses disposable income as a starting point to determine how much to seize from the earner's paycheck. As of 2016, the amount garnished may not exceed 25% of a person's disposable income or the amount by which a person's weekly income exceeds 30 times the federal minimum wage, whichever is less.

Many states limit the types of debt which can be withheld from a paycheck, typically only tax-related debt, child support, federally guaranteed student loan debt and court fines and restitution may be withheld. Also, it is against federal law to fire an employee whose wages have been garnished.