Did you know… you must deduct garnishee orders; or you may be liable!

Did you know… you must deduct garnishee orders; or you may be liable!

As an employer you may have experienced a judgment debtor court order known as a garnishee directed to your business for one of your employees.

When this happens, you are obligated to make deductions from that employee’s wages and pay that amount directly to the third party as instalments in accordance with a court order. Depending on the wage of the employee and the debt, this process can take some time before the debt is satisfied. The court-ordered garnishee order does not expire until the debt is satisfied.

Akyra has had clients in this situation and it is really important that, as business owners, you are aware you must follow the garnishee order to the letter to ensure you are not held liable by the courts for any discrepancies.

So... what happens when your business receives an order to garnishee the wages of an employee; you deduct the first payment and the employee then resigned without notice. Award terms and conditions allow you to withhold a specified wage from the employee’s termination pay because of a failure to provide the required period of notice; noting this deduction can only be taken from termination wages and not accrued leave entitlements.

What do you then do in relation to the garnishee order... do you apply the deductions to the employee’s termination pay, including annual leave pay under the applicable modern award and the Fair Work Act or not?

The answer is that you continue to comply with the garnishee order; regardless of whether it is termination wages. The reason is that failure to comply with the garnishee order may result in your company having to make good the amount for failing to comply with the order.

What exactly is a garnishee order?

A garnishee order is an order of the court which allows a judgment creditor to recover or ‘garnish’ monies to satisfy a debt incurred by the judgment debtor. This order issued by a court requires the third party (you as the employer) to whom the order is addressed to make payments to satisfy a judgment debt to the judgment creditor.

Some courts refer to garnishees as ‘money redirection orders’. Whatever their name, orders are made on employers when the judgment creditor knows the judgment debtor's employment details. All states and the Commonwealth have laws that relate to garnishee orders; there are limits on how much of an employee’s wage can be subjected to one.

Failure to comply

Failure to comply with a garnishee order can leave you as the employer liable for amounts due under the order. For example, the Civil Procedure Act 2005 [NSW] (s124(1)) provides that, if a garnishee fails to comply with a garnishee order, the judgment creditor may apply by notice of motion for judgment against the garnishee for the debt, wage or salary, or for the unpaid amount of the judgment debt (whatever is the lesser). This payment under these circumstances counts as a payment by the garnishee to the judgment debtor. 

Fair Work Act – permitted deductions

The Fair Work Act (s324(1)(d)) states an employer may “deduct from an amount payable to an employee if the deduction is authorised under a law of the Commonwealth, a state or a territory, or an order of a court.”

A garnishee order is ‘an order of a court’ and so is a permitted deduction under the Fair Work Act which, in turn, allows the employer to deduct from all monies payable to an employee on termination.

Child support deductions

The Commonwealth Department of Human Services may require an employer to make deductions from an employee’s wages subsequent to a notice issued regarding child support deductions. If so, the employer is legally required to deduct child support payments from the specified wages / salary of that employee or contractor.

If the employer fails to make the necessary deductions required by a child support order, the Department of Human Services can take legal action.

Recovery of Commonwealth government payments

The Commonwealth also has the power to issue a notice to an employer to garnishee an employee’s wages under the Social Security Act 1991 [Cth] (s.1233). This occurs where an employee has received excess or wrongly obtained payments from the Commonwealth (e.g. Centrelink payments or social security payments) and has failed to make a particular payment in accordance with an arrangement to repay the debt.

The next steps…

Essentially, you must comply with a garnishee order issued by a court including deductions from amounts that otherwise would be payable to an employee on termination of employment.

If you require any assistance with ensuring you are following the directions of the garnishee order correctly, please contact Akyra for advice and assistance. 

We can provide you with guidance or advice on all your industry and businesses specific, human resource management requirements.

Contact us now to book a time to discuss your areas of potential HR concern, thereafter we will provide a way forward where it might be needed.

Call us on 07 3204 8830, for an obligation-free conversation or to discuss any queries you may have.

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Disclaimer – Reliance on Content

The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

Source: https://workplaceinfo.com.au 7/06/2021

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