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<Garnishee notices and employee consent >

Garnishee notices and employee consent

By Yosie Saint-Cyr, LL.B., Managing Editor, HRinfodesk.com---Canadian Payroll and Employment Law News, October 2011

If you receive a garnishee notice for an employee, do you need the employee's written permission before you deduct the required amount from wages? As can be seen from the poll results compiled below, 558 respondents out of a total of 654 (85 percent) say no, an employer that receives a garnishment order doesn't have to notify the employee. Those respondents are correct. Employers have an obligation to respond to and comply with a garnishee notice in the time prescribed by the notice. In law, they do not have an obligation to advise/inform their employees that they are doing so.

A garnishment is a legal proceeding used to collect on a judgment or debt. A garnishment entails that money is withheld from an individual and remitted to another party, such as the government or a creditor.

I found one of the comments to the poll very interesting. It stated:

The question as it stands is too broad. If the garnishee comes from the government then the answer is yes. However, if it is from a private collection agency, the answer is very different.

So let's examine why this comment is not accurate.

What is a garnishee notice?

A garnishee notice occurs when an employer receives an order from the courts to garnish an employee's wages. Typically, the employer receives the writ of garnishment after a judgment has been rendered against the employee. This means that a creditor has sued the employee and a judge has agreed that the employee owes the debt. The employer subtracts the amount of the wage garnishment from the employee's weekly, bi-weekly or monthly paycheques. The garnishment continues until the debt is satisfied. In the writ, the employee is generally referred to as the “debtor”, and the employer may be called the “garnishee”.

Employers are legally required to comply with the requirements of garnishment and support/maintenance orders, whether the order is from the government, a collection agency or a private creditor or individual, as long as the garnishment is affirmed in an order, usually from the courts or the government, requiring the employer to comply. In most jurisdictions, this involves deducting the amount (or percentage) set out in the order and remitting it to the proper authority within a specified time frame. Employers may not suspend or dismiss an employee solely because a garnishment order has been made against the employee.

Employers must give garnishee notices prompt attention since those that fail to fulfil their obligations could face legal consequences.

The employee usually receives his or her own copy of the garnishment order at the same time as the employer.

Each province and territory has its own legislation governing garnishments, wage assignments and support orders. The law limits the amount of wages a creditor or court can garnish from a debtor.

What can be deducted from an employee's paycheque?

  • Deductions required by federal or provincial law such as taxes, employment insurance premiums and Canada pension plan contributions
  • Deductions authorized by a court order or a child support garnishment order
  • Specific amounts authorized in writing by the employee; this authorization must be voluntary

Even with written consent, an employer can't deduct amounts for property damage or loss of money if any other person or employee had access to the property of lost money.

The applicable laws for each jurisdiction are discussed in the Library section of HRinfodesk.

Employers may also receive court orders directing them to deduct and remit the specified amounts from an employee's wages for unpaid family support or alimony payments from a provincial/territorial Maintenance Enforcement Office/Program. However, in Quebec, support orders are administered by Revenu Québec.

Another form of garnishment arises under the Income Tax Act when employees owe outstanding amounts for taxes, related interest and penalties. These garnishments are enforced by the Canada Revenue Agency (CRA), and in Quebec, by Revenu Québec as well. When the government intends to garnish an employee's salary or a contractor's fee arising, for example, under the Income Tax Act, they can do so directly through the offices of the CRA by sending a Requirement to Pay Notice to the employer.

As an employer, if you receive a government notice to garnish an employee's wages, you are required by law to comply and you are not allowed to punish or fire the employee because of the garnishment. If an employee's wages are being garnished it is because they owe a debt, and usually you will be required to pay a portion of the employee's wages to the government until the debt is paid, at which time you will be notified to stop garnishing the wages.

The garnishment order binds all money the employer owes the employee until the debt is fully paid or released.

The employer must immediately remit the specified amount to the CRA if the money owed to the employee is payable at that time. In other cases, the employer must remit the sum as the money becomes payable to the employee.

Employers that do not comply with their obligations will become liable for the amount the employee owes the CRA.

However, the story is completely different if we are talking about a wage assignment. I think that might be what the commentator was thinking of when mentioning collection agencies.

What is a wage assignment?

A wage assignment is a voluntary transfer of earned wages by an employee to another party for the payment of purchases or debts. In this situation, an employer withholds an amount from each paycheque of the employee and sends it directly to the creditor or other party. However, this form of arrangement is prohibited in some provinces or territories under various Employment Standards Acts, Wage Acts or Wage Earners Protection Acts.

In wage assignments, the creditor does not have a court order but a valid contract or agreement (a written employee authorization) with the debtor/employee allowing for the deductions from wages.

Employers often get direct requests from creditors, which state that an employee has voluntarily signed an assignment of his or her wages on the creditor's behalf. These types of assignment are not deductions under employment standards known as garnishments by court order or child maintenance support. Furthermore, the employer must verify if they are allowed in the employee's province (or territory) of employment and under what conditions, before acting on them.

For example, voluntary wage assignment is illegal in Ontario. However, in British Columbia, under the Employment Standards Act, an employee may request in writing that the employer pay part of his or her wages to a third party.

A wage assignment allowed under the law is not a garnishment order, and you do need an employee's written consent.