Depending on the state, “Wage Garnishment" can be described by different words or phrases. In New York, wage garnishment is called “Income Execution." In New Jersey, wage garnishment combines words from the previous two, going by the name of “Wage Execution." You might also find New Jersey wage pundits discussing a “Wage Attachment," but this is simply colloquial. Regardless, as Shakespeare famously said, “a rose by any other name is still a rose." The same is true for wage garnishment in New Jersey. And if you want to read the exact wording of the state statute, simply tap into the digital law books and go here: NJ Rev Stat § 2A:17-50 (2013).
Law Governing Wage Execution in New Jersey
The U.S. legal system works as a form of “federalism." This means that every kind of debt there is – whether derived from credit card spending, income taxes, child or spousal support, education loans, or otherwise – is subject to both federal and state garnishment laws. For creditors collecting debts from New Jersey debtors and employees, that means we have to look at both federal law and New Jersey state law on Wage Garnishment and Wage Execution. And because of federalism, if federal law wants to have the final word on the subject, it usually can do so. It is, in other words, the supreme law of the land.
Where Wage Execution Can Take Place in New Jersey
In New Jersey, Wage Execution follows the same general process as is followed in every other state for wage garnishment, income execution or income attachment. Though there are exceptions, usually the creditor must begin by filing a lawsuit and obtaining a Money Judgment, which makes the successful creditor a Judgement Creditor. Any Judgement Creditor can then turn have its Money Judgment turned into a Wage Execution. The Wage Execution is simply an order commanding the employer to take part of an employee’s wages and pay it to the creditor, to satisfy the Judgment (and underlying debt). Because it can only reach wages, Wage Executions cannot be used to garnishment payments to independent contractors, freelancers, or self-owned businesses.
Limits on the Amount of Wages that can be Garnished – Federal Law
Under federal law – specifically, the Consumer Credit Protection Act – the most that a normal creditor can garnish from an employee’s pay check is subject to what is called “the 25-30 Rule." Under the “25 Rule," the most the creditor can take is 25% of the employee’s “Disposable Earnings." “Disposable earnings" are gross wages less deductions allowed for things like withholding, SSI, and union dues. Private components like insurance premium deductions generally cannot be deducted to calculate “Disposable Earnings."
Under the alternative “30 Rule," the creditor can only take amounts above 30 times the federal minimum wage. Amounts up to 30 times minimum wage are exempt from garnishment. Ever since July 2009, the federal minimum wage has been $7.25 per hour for employees with medical insurance premiums being automatically taken out of their pay check, and $8.25 for employees without such premiums being automatically deducted. No matter which rule is applied, under the supreme mandate of federal law, the creditor is only entitled to garnish the lesser of the two of the two formulas.
But in New Jersey, for general debts, the debtor receives even greater protections than the federal law allows, because the federal law is written as a form of minimum protection that allows states to go a step further if it so desires, as regards most (but not all) debts.
Wage Execution Limits Unique to New Jersey
New Jersey is one of a small group of states that provides its employees with greater wage protection than the federal law mandates. Under New Jersey state law, it’s not called the “25-30 Rule," but rather, the “10-25 Rule." And while the rules sound the same, they operate quite differently.
The “10 Rule" allows the creditor to garnish no more than 10% of an employee’s income if he or she earns at or under 250% of the federal poverty level for the size family in question. Alternatively, the “25 Rule" says you can take as much as 25% of “disposable earnings," but only if the employee earns more than 250% of the federal poverty level as applied to the family in question. And if for some reason the federal protections, as peculiarly applied, provide you greater protection, then by all means that’s what you get. Creditors can only take, in other words, the lesser of the caps imposed on garnishment by federal and New Jersey state law.
Situations Where a Money Judgment is Not Required to Effect Wage Execution in New Jersey
Not all debts require a Money Judgment, i.e., the filing of a lawsuit which goes to Judgement, thereby making the Creditor a Judgment Creditor, to accomplish a wage execution. Certain debts operate administratively to achieve the same thing, without the necessity, time, delay and expense of a Money Judgment.
For public policy reasons, i.e., ease and efficiency primarily, there are a host of situations where an employee’s wages can be executed upon without the cumbersome process of first filing a lawsuit and obtaining a Money Judgment. The following are a non-exclusive list of the more common ones:
- Court-ordered child support and child support arrearages
- Alimony or spousal support that is past due
- Federal, state and local fines
- Income taxes arrearages at the federal or state level
- Property taxes due at the state level
- Defaulted student loans.
Special Treatment of Child Support and Alimony
It’s been over three decades now since all U.S. court orders for child support and alimony (or spousal support) have automatically allowed for wage garnishment of the paying spouses wages. For current support, as with consumer debts, federal law limits the amount garnished to the previously-discussed “25-30 Rule." However, where support payments are past due, that is a different story. For past due support, up to 60% of wages can be garnished unless another dependent is being supported, in which case the maximum is 50%. And if the debtor is in arrears more than twelve (12) weeks, an additional five percent (5%) can be tacked on. This means that, in the more severe cases, as much as sixty-five percent (65%) of that employee’s “disposable earnings" can be garnished for support.
Special Treatment of Student Loans and State Taxes
The U.S. Department of Education is empowered to collect student loans. If a student loan falls into default, the DoE may issue an administrative wage garnishment (remember, no Money Judgement is required). However, the most that the DoE can garnish is 15% of your “Disposable Earnings," or more than 30 times the minimum wage. You could look at this as a “15-30 Rule."
Other Debts Receiving Special Treatment
Many debts receive special treatment under federal law and are deemed exempt from any form of wage garnishment. These include:
- SSI Benefits
- Unemployment Insurance Benefits
- Veteran’s Benefits
- Certain Military Pensions
- Public Assistance Payments
- Disability Compensation
- Worker’s Comp
- Railroad and Black Lung benefits
Special Rules for Bankruptcy and Federal IRS Tax Debts
The Court in Chapter 7 bankruptcy proceedings, or the trustee in a Chapter 13 reorganizations, as a theoretical matter can reach as much as ninety percent (90%) of an employee’s “disposable earnings"…though hardship is always taken into account. Similarly, the IRS can garnish as much as seventy percent (70%) of an employee’s wages after applying a complicated formula where hardship is also taken into account.
Priority as Between Multiple Income Garnishments
When the debtor-employee faces multiple types of garnishment orders, the employer must first prioritize certain debts over others. Generally, the order of priority runs as follows: past due child support always comes first, followed next by past due federal income taxes, then defaulted student loans, bankruptcy payments, and state levies. All of these come before consumer debt, credit cards, pay day loans, even medical liens, and it is the type of debt, not the timing or order of garnishment, that controls.
Job Protection in New Jersey in the Wage Garnishment Process
It’s a hassle and administrative burden for employers to process garnishments. As a result, employers (especially smaller ones) can be tempted to find take the easier solution of simply terminating and replacing the employee with someone else who has no garnishments. Since federal law expressly prohibits taking adverse employment action for a single garnishment, such actions are unlawful in the state of New Jersey
New Jersey has unique protections against garnishment, and of course many situations can arise that present complications: multiple garnishments, different types of debts, and bankruptcies are but a few. As a result, it is often wise to hire qualified debtor-creditor, legal, and tax professionals in whatever field is presenting the challenges and issues at hand. Though the internet is a start, it is often the professional who can maximize the result you want.
New Jersey Law
NJ Rev Stat § 2A:17-50 (2013)
Title II of the Consumer Credit Protection Act, 15 U.S.C. Section 1671 to 1777 (garnishment orders).
The Federal Wage Garnishment Law, Title III of the Consumer Credit Protection Act, 15 USC 1671 et seq., https://www.dol.gov/whd/regs/statutes/garn01.pdf
United States Department of Labor, Wage and Hour Division, Federal Wage Garnishments, https://www.dol.gov/whd/garnishment/
United States Department of Labor, Summary of Major Laws of the Department of Labor, https://www.dol.gov/general/aboutdol/majorlaws
Fair Labor Standards Act, as amended, Public Law 99-150, enacted on November 13, 1985, amending the Fair Labor Standards Act, https://www.gpo.gov/fdsys/pkg/STATUTE-99/pdf/STATUTE-99-Pg787.pdf