It’s the payroll department’s biggest headache: how to determine whether to comply with a new writ of garnishment for an employee who is already paying child support. A recent Wyoming Supreme Court opinion brings a little bit of clarity to the situation.
Divorce Obligations
Bruce and Tanya Knell were divorced in 2015. Under the divorce decree, Bruce was ordered to pay $1,393 per month in child support. He was also ordered to pay Tanya $541,873 for her share of the family business.
Bruce was an employee of the family business, Knell Enterprises. He had Knell Enterprises deduct the child support payments from his $4,000 monthly gross salary and send them to the Wyoming Department of Family Services (DFS) Disbursement Unit. But although he was making his child support payments as required by the divorce decree, he apparently wasn’t paying his ex-wife for her share of the business.
In March 2018, Tanya asked a court to issue a writ of continuing garnishment to require Knell Enterprises to deduct additional money from Bruce’s paycheck to satisfy the remaining balance on the business.
Bruce objected to the writ of continuing garnishment, arguing the child support payments already claimed approximately 42% of his monthly earnings, and the amount that could be deducted from his pay was capped by law. The trial court rejected his objection and ordered Knell Enterprises to comply with the garnishment by deducting $418.75 per month from his pay. Bruce appealed to the Wyoming Supreme Court.
Do Voluntary Child Support Payments Count Against CCPA Limits?
The supreme court sided with Bruce. The court noted Wyoming law and the federal Consumer Credit Protection Act (CCPA) cap the amount of an employee’s earnings that can be garnished.
In summary, those laws limit creditor garnishments to 25% of an employee’s disposable earnings (gross earnings minus deductions required by law) and support obligations to 50% or 60% of disposable earnings, depending on the circumstances. Support orders have priority over other garnishments, and if a support order exceeds 25% of the employee’s wages, the creditor garnishment cannot be enforced.
When the Knells were divorced, the court didn’t enter an income withholding order for the child support. Instead, Bruce voluntarily caused Knell Enterprises to withhold the child support from his paycheck and pay it to DFS. So did Bruce’s voluntary child support payments qualify as a garnishment for the purpose of applying the CCPA?
The CCPA defines “garnishment” as any legal or equitable procedure through which an employee’s earnings are required to be reduced for payment of any debt. Applying that definition, the court decided there was no meaningful distinction between the voluntary payroll deduction Bruce implemented and a garnishment for child support.
Bruce was required to pay child support by the divorce decree, and if he didn’t pay it, Wyoming law allows an income withholding order to be entered against him. The decree itself, with or without an income withholding order, requires the same dedication of earnings that would result from a garnishment or withholding order. As a result, Bruce’s voluntary payments of child support were counted toward the CCPA’s limits on amounts that can be withheld from disposable earnings.
To hold otherwise, the court reasoned, would lead to the absurd result that a person who voluntarily complies with a divorce decree would be treated worse under the law than a person who is delinquent on child support payments and subject to a court order.
Bruce’s voluntary child support payments exceeded 25% of his disposable earnings, so he wasn’t subject to any further garnishments. Bruce Henry Knell, Jr. v. Tanya Louise Knell,2019 WY 74 (Wyo., 2019).
Bottom Line
Child support is child support, whether the employee voluntarily directs his employer to pay it or whether the employer pays it under a court order or garnishment. If you agree to make voluntary child support deductions from an employee’s paycheck, be sure to get a copy of the divorce decree or other court order establishing the amount and frequency of the payments, and confirm that your payroll system treats the voluntary payments like any other child support obligation.
Brad Cave is a partner at Holland & Hart LLP and an editor of Wyoming Employment Law Letter. He may be reached at bcave@hollandhart.com.