© 2022 American Payroll Institute, Inc. State and Local Minimum Wage Increases Might Impact Creditor Garnishment Limits As state and local minimum wage rates increase at different times during the year, employers should remember the changes will impact the maximum amounts subject to garnishment in locations where the state or local minimum wage rate is used to calculate the maximum amount that can be garnished under state law. While the amount subject to creditor garnishment under the Consumer Credit Protection Act (CCPA) is keyed to the federal minimum hourly wage, some state creditor garnishment laws use the state or local minimum wage when calculating the exempt amount. The 11 states that currently use state or local minimum wage rates to determine the maximum amount that can be deducted from an employee’s weekly wages are: California, Colorado, Connecticut, Illinois, Maine, Massachusetts, Minnesota, New York, South Dakota, Virginia, and Washington. Federal maximum withholding amount Under the CCPA, the maximum amount of an employee’s disposable earnings that can be garnished to repay a debt is the lesser of: (1) 25% of the employee’s disposable earnings for the week or (2) the amount by which the employee’s disposable earnings for the week exceed 30 times the federal minimum hourly wage ($7.25 an hour). State maximum withholding amount calculations State maximum withholding amounts are calculated using formulas that follow a similar pattern, with varying percentages and minimum wage multipliers. The general pattern is: the maximum amount that can be deducted from weekly wages is the lesser of: (1) _% of disposable earnings or (2) _% of amount by which disposable earning for the week exceed _ times the state or local minimum wage (at the work location at the time when wages are payable). The first table that follows provides state limits on creditor garnishments in the states with formulas that use the state or local minimum wage rates. California is the only state (so far) that uses a local minimum wage when applicable, based on the employee's work location when wages are payable. The second chart provides local minimum wage rates in California only, as there are many. Creditor Garnishment Limits Based on State or Local Minimum Wage Rates State Percentage of Weekly Disposable Earnings Percentage of Amount by Which Disposable Earnings for Week Exceed State or Local Minimum Wage Formula State or Local Minimum Wage Rate CA 25% of weekly disposable earnings or 50% of amount by which disposable earnings for week exceed 40 x state or local minimum wage $15.00 (large employers: 26 or more employees) $14.00 (small employers: 25 or fewer employees) or local minimum wage (see separate table) CO 20% of weekly disposable earnings or amount by which weekly disposable earnings exceed 40 x state minimum wage. $12.56 CT 25% of weekly disposable earnings or amount by which disposable earnings exceed 40 x state minimum wage $13.00 (eff. 7-1-22, $14.00) IL 15% of weekly disposable earnings or amount by which disposable earnings for week exceed 45 x state minimum wage $12.00 ME 25% of weekly disposable earnings or amount by which disposable earnings for week exceed 40 x state minimum wage $12.75 MA 15% of weekly disposable earnings or amount by which disposable earnings for week exceed 50 x state minimum wage $14.25 MN* *rev. 4-12-22 25% of disposable earnings or amount by which debtor’s disposable earnings exceed 40 x state minimum wage $10.33* (large employers: gross revenue of $500,000 or more) $8.42* (small employers: gross revenue of less than $500,000) March 7, 2022 Volume 24 Issue 5
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