What does wage garnishment mean in employment law?

What does wage garnishment mean in employment law

What does wage garnishment mean in employment law?

When a creditor asks the court to obtain debt, either in assets or property, from a debtor, that is referred to as a garnishing order.

Wage garnishment is the same process but the debt that is owed is paid from a percentage of the employee’s wages. The court will ask the employer to keep a certain amount of the employee’s (debtor) wages so they can pay what is owed to the creditor. In this case, the employer is the garnishee, who pays the creditor what is owed by the employee (debtor). Put more simply, the employer would take a portion of the employees’ paycheck and give that money to the creditor to make sure the debt is repaid.

In Ontario, according to the Ontario Wages Act, only 50% of an employee’s gross pay can be taken by a creditor. It is also against the law to dismiss an employee based on the debt they owe to a creditor. The employer would need to follow the procedure of the garnishment order without engaging in consequences against the employee.

To give an example, if an employee recently bought a house and pays $1500 each month to their mortgage servicer and has failed to pay for four consecutive months, that mortgage servicer (creditor) would seek permission from the court to collect this payment. The court would notify the garnishee (or employer) to deduct the $6000 dollars from the employee’s wages, withholding 50% of their gross income from each pay until the debt has been fully paid.

A garnishing order is helpful when the debtor will not pay the money that is owed to the creditor. Going through the court system puts pressure on the debtor to provide the unpaid compensation. However, there are two instances where the creditor does not need to go through the court system to retrieve what is owed. These instances are if the creditor is the Canada Revenue Agency (CRA) or if an employee’s wages are signed into a loan with a Credit Union.

If you are an employee who has received a garnishment order or owe money to a creditor, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.