Lump-Sum Payments and Garnishments Guidance Provided by Department of Labor

Overview: The Wage-Hour Division of the United States Department of Labor (DOL) has issued an opinion letter addressing whether certain lump sums paid to employees by employers are considered earnings and therefore subject to garnishment under the Consumer Credit Protection Act (CCPA).

Importantly, opinion letters are based on a specific set of circumstances and do not constitute law, but they do provide insight as to how the DOL would generally view the matter.

Effective Date: April 12, 2018

Details: In its opinion letter, the DOL stated that whether lump-sum payments are subject to garnishment is dependent on if the lump-sum amounts are paid by the employer in exchange for personal services performed by the employees. If the lump-sum payment is made in exchange for personal services rendered, then, similar to payments received periodically, it will be subject to the CCPA’s garnishment limitations as described in the WHD Fact Sheet #30 issued in 2016. Conversely, lump-sum payments that are unrelated to personal services rendered are not earnings under the CCPA. Fact Sheet #30 states as follows:

The CCPA defines earnings as compensation for personal services, which includes:

• wages,
• salaries,
• commissions,
• bonuses, or
• other compensation—including periodic payments from a pension or retirement program, or payments from an employment-based disability payment program.

• Commissions
• Discretionary and nondiscretionary bonuses
• Productivity or performance bonuses
• Profit sharing
• Referral or sign-on bonuses
• Moving or relocation incentive payments
• Attendance awards
• Safety awards
• Cash service awards
• Retroactive merit increases
• Payment for working during a holiday
• Termination pay and
• Severance pay

• Workers compensation
• Wrongful termination
• Buybacks of company stock