Wage garnishments may cause confusion for small business owners about their legal responsibilities. Understanding what wage garnishment is, why it happens, and how to respond can help protect your business and ensure legal compliance.

What is a Wage Garnishment?

A wage garnishment is a legal process that requires an employer to withhold a portion of an employee’s wages and send it directly to a creditor or government agency. Garnishments are typically ordered by a court or authorized by law and continue until the debt is paid or the order expires.

As an employer, you are not the party who owes the debt, but you are legally responsible for carrying out the garnishment once you receive a valid order. This usually means:

• Withholding a specified amount from the employee’s paycheck
• Sending the withheld funds to the appropriate agency or creditor
• Continuing the process for each pay period until notified otherwise

 
Employers receive wage garnishment orders because one of their employees has an outstanding legal or financial obligation. In most cases, the employee has already been notified and had an opportunity to challenge the debt.

An example of a federal wage garnishment notice can be viewed here: Wage Garnishment Notice. Note that garnishment orders from a state agency or court may look different.

Common Types of Wage Garnishments:

• Child support or alimony: These garnishments often take priority over other debts and may be issued by a court or child support agency.
• Federal or state tax debts: The IRS or state tax authorities can issue levies without a court judgment.
• Student loan defaults: Federal student loans may be garnished administratively.
• Creditor judgments: Credit card companies, medical providers, or other creditors may garnish wages after obtaining a court judgment.

 
What to do if you Receive a Wage Garnishment

If your business receives a wage garnishment order, taking immediate action is critical. Review the order carefully to confirm the employee’s identity, the issuing authority, the amount to be withheld, and any deadlines. Some orders require the employer to respond within a short time frame.

• Start withholding wages immediately. Federal and state laws limit how much can be garnished, depending on the type of debt and the employee’s earnings. Do not withhold more or less than the order mandates.
• Accurately follow the instructions on where and how to send withheld wages. Late or incorrect payments can result in penalties for the employer.
• Notify the employee. While employees are typically aware of the garnishment, it is good practice—and sometimes required—to inform the employee when withholding begins.
• Maintain accurate records by keeping copies of the garnishment order, payment records, and any related communications. Documentation will be essential to protect your business if questions or disputes about the garnishment arise.
• Do not retaliate against the employee. Federal law prohibits firing an employee because of wage garnishment, and many states offer even broader employee protections. The U.S. Department of Labor Wage and Hour Division’s Fact Sheet #30 provides additional information regarding wage garnishment protections of the Consumer Credit Protection Act.

 
If you are unsure how to interpret the order, consult your payroll provider or an attorney.

Preventing Employer Liability

While employers cannot control an employee’s financial responsibility, you can take steps to reduce risk, administrative burdens, and employer liability.

• Ensure your payroll system can accurately calculate garnishments
• Train payroll and HR staff on how to recognize and process wage garnishment orders
• Share financial literacy resources with employees
• Stay informed about state laws, as wage garnishment rules vary by state

 
Employers SHOULD NOT ask prospective employees about current wage garnishments or family circumstances that could give rise to wage garnishments in the future. For more on what not to ask prospective employees, download NFIB’s free Guide to Federal Employment Law.

Wage garnishments impose legal obligations on employers for an employee’s debt or financial irresponsibility. Understanding your responsibilities can help your business stay compliant and avoid costly penalties. When in doubt, seek legal counsel because mistakes in wage garnishment processing can become costly for your business.

For additional information on wage garnishments, contact the NFIB Legal Center at info@NFIB.org.

Updated February 26, 2026