This alert is intended for employers with employees working in the state of California who are subject to both a creditor garnishment and a local minimum wage.
If you have employees working in the state of California who are subject to both a creditor garnishment and a local minimum wage, action is required by you, as soon as possible, and in advance of processing all payroll beginning with July 2016 dates.
California Senate Bill No. 501 is effective July 1, 2016 and will make the following changes to creditor garnishment deductions for California employees.
“706.050. (A) Except as otherwise provided in this chapter, the maximum amount of disposable earnings of an individual judgement debtor for any workweek that is subject to
an earnings withholding order shall not exceed the
lesser of the following:
(1) Twenty-five percent of the individual’s disposable earnings for that week.
(2) Fifty percent of the amount by which the individual’s disposable earnings for that week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable.”
If a judgement debtor works in a location where the local minimum hourly wage is greater than the state minimum hourly wage, the local minimum hourly wage in effect at the time the earnings are payable shall be used for the calculation.
We recommended that you review creditor garnishments and local minimum wage requirements for California employees. Your legal counsel can advise you as to whether creditor garnishments may need to be modified to comply with California law and if workers are subject to local minimum wage laws.
To comply with the new disposable wage calculation requirements, for California employees with a creditor garnishment who are subject to a local minimum wage, it will be necessary to set up the locality name and rate in the ADP system.
You can verify which employees are set up with creditor garnishments by reviewing the WGPS Wage Garnishment Verification Report in the Employee Lien Information Section. A 'Lien Type' of ‘G’ identifies a creditor garnishment.
Based on the above changes, California employees with a creditor garnishment that has not been satisfied may see a decrease or increase in their creditor garnishment deduction amount.
For employees that are not subject to a local minimum wage and a creditor garnishment, no action is required.
For additional information please click here.
Please contact your dedicated payroll service team if you have affected employees.