I own a company in Michigan, today I was served a garnishment order for someone who works for my company as an independent contractor (1099-MISC, meeting all state/irs critera for independent contractor). They pay me a % of their daily work, this amount changes from day to day / week to week. My question is: Even though they are self-employed am I required to withhold part of their pay? My second question: How do I respond to this court order?
A garnishment can intercept any funds owed to a Defendant. If you don't have a company lawyer to go to, this might be a good time to find one. You are considered the Garnishee Defendant. If you fail to properly file the Garnishee Disclosure, the Plaintiff could request a default judgment against your company for the amount of the judgment. This is a harsh penalty for failure to respond and follow the garnishment. The link to the court form you need to file is below. The other answers to your posting aren't from Michigan lawyers. This one is. Make this a priority.
You must obery bot the court order and your states requirements for the witholding of the wages...they are not wages per se but you may be obligated to turn all of the funds you have that are payable to that person if the order requires that result. cannot authoritatively comment on the order because I have not read it.
The amounts that can be taken from your wages to satisfy a garnishment depend on how much you make. Also, this number will change in July 2010, so I am going to give you the new numbers, which in many States will equal or be less then the current minimum wage in your State.
The law that controls garnishments is the federal “Consumer Credit Protection Act” 15 USC §§ 1671-1677. It protects a portion of the wages based on the following schedule that is tied to the federal minimum wage. On July 23, 2009 the minimum wage increases to $7.25 per hour. (You can use this number to estimate the current amount protected).
The amount of disposable income that cannot be garnished on or after that date is $217.50, or 30 hours at the Federal minimum wage for the week in question.
Only the amount over that can begin to be garnished. It is your employers’ duty to determine the appropriate amount of the garnishment, and not just rely on an order from a court.
Only the amount over $217.50 can be subject to the garnishment when total compensation is less than $290.00. If disposable earnings are more than $290.00 in any given week up to 25% of the wages can be garnished under federal standards. However State restrictions on garnishment should be checked in every case, as they may provide greater protection.
Conversely in many Sates Child Support payments or arrears are subject to higher maximum withholding standards.
In New York the maximum amount recoverable is ten percent (10%) of gross income, or the federal maximum, whichever is less.
If the debtor is subject to garnishment for alimony, support or maintenance, the combined garnishments cannot exceed twenty-five percent (25%) of disposable earnings, but can be as high as 65% for child support.
Income executions are prioritized by order of delivery to the Sheriff, but garnishments for alimony support or maintenance always take priority.
The execution is a two-stage process. First, the sheriff serves the execution on the debtor at his or her residence. If the debtor does not begin making payments within twenty (20) days, the sheriff levies on the employer.
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Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship. The opinions expressed herein are those of the author only and the fact that he has worked as an Assistant District Attorney; State Supreme Court Clerk; Special Assistant United States Attorney (Hawaii); Assistant Cornell University Counsel or Judge Advocate, United States Marine Corps should not be relied upon to assume that these statements reflect the policy of these organizations.
If you receive a garnishment summons, you must comply. You are required to withhold from the money that you owe the person being garnished. If the person contracts with you, then you must withhold everything that you owe that person. If the person works for you even on an independent contractor basis, you must withhold based on federal law which is 25% of take home pay or amounts over 30 times minimum wage, whichever is less.
If you are unsure, consult with an employment law attorney for assistance. The local court that issued the summons also may have information to assist you.
[I am a Virginia-licensed attorney. This communication is intended as general information and not specific legal advice, and this communication does not create an attorney-client relationship.]
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In Nevada, if an employer fails to comply with a wage garnishment order, they can be held personally responsible for the debt. I appreciate that the person is not your employee, but why would you take any chances?
You should have a company attorney who can help you, and if you don't, you are at a great place to look for one. Whether you have a loophole that can allow you to brush this offer is a highly technical question that will vary throughout the US.
Hope this perspective helps & good luck!
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