Jaburg Wilk

News/Publications

Can Employers Become Liable for Employee Debts?

Categories: Collections, Employment, Article

Arizona-based employers ask us, “Can we be held liable for the debts of our employees?” The short answer is maybe. However, the risk lessens if the employer follows some best practices. For many employers, they do not know much about their employees’ finances. Unless the position or the employer required a credit report as a condition of employment, or continuing employment, personal finances are typically not the employer’s concern. However, when an Arizona employer is served with a Writ of Garnishment of Earnings, they are thrust into an active role with one of the employee’s creditors. The creditor now wants to garnish the employee’s wages, and the employer must do the work to get the creditor paid.

What Is a Writ of Garnishment?

When an Arizona employer is served with a writ of garnishment, generally it means the employee has an outstanding civil judgment entered against them. A creditor sued the employee and the court entered a judgment against the employee for a certain amount of money. This could be a debt of the employee or a debt incurred by a former spouse of the employee, that this employee is equally liable for.

Serving an employer with a writ of garnishment means that the creditor thinks the employee works there, and the creditor is attempting to “attach” to the employee’s wages. The creditor wants the employer to start sending the creditor a portion of the employee’s wages.

What Happens When an Arizona Business Is Served with a Writ of Garnishment?

When an Arizona employer is served with a Writ of Garnishment of Earnings (“the garnishment”), the employer normally receives a daunting 50-page packet full of legalese. It can be confusing. The garnishment packet should contain instructions as to how to answer the garnishment, but sometimes the instructions are omitted or can still be unclear.

A.R.S. § 12-1598.06 requires an employer to answer the garnishment within ten days from service of the garnishment. This means when the employer is served with the garnishment, the clock starts ticking. There should be an answer form within the garnishment packet, but if not, employers can either access the applicable forms here or engage an employment or collection law attorney to assist them.

If the employee still works for the employer, the employer must answer the writ of garnishment and identify (1) when the employee’s next two paydays are, and (2) the applicable pay-period (weekly, biweekly, etc.). As soon as the writ of garnishment is served, the employer must begin withholding 25% of the employee’s non-exempt wages. The employer does not send those wages to the creditor until it receives what’s called an “Order of Continuing Lien.” The Order must be signed by a judge.

What if the Employee No Longer Is Employed?

Sometimes a creditor has outdated or inaccurate information. Maybe the employee no longer works nor never worked for the employer. Unfortunately, the employer still must answer the garnishment. If the employee is no longer employed, all the employer needs to do is fill out the answer form indicating that the person does not, or did not, work for at the company. Sign, notarize, and file the answer form. The employer will need to file the Answer with the Court (the name of the Court will be included in the Garnishment Packet), and mail copies to the creditor and the employee.

If the employee did work for the employer but recently quit, the employer should determine when their next payday is. If wages are owed within 60 days after being served with the garnishment, then the employer may need to withhold 25% of the employee’s final paycheck(s) which could include things like payout of earned vacation time.

Why Is Answering the Writ of Garnishment an Employer’s Problem?

Dealing with writs of garnishment can be annoying and time-consuming. But if the employer ignores the writ, the consequences can be severe. Just because the employee doesn’t work there, the employer doesn’t have time or resources to deal with it, the employee says that it isn’t their debt OR for any other reason – the employer may have a judgment entered against them for the total amount owed by the employee.

Arizona law, A.R.S. § 12-1598.13(H) allows the judgment creditor to pursue a judgment against the employer. The law requires a hearing where all parties should have an opportunity to be heard. The court should give the employer adequate notice of the hearing, but the employer should also monitor the docket or engage an attorney to ensure appearance at the hearing. If the employer misses the hearing, this statute allows the court to render judgment against the employer in the full amount of the judgment owed by the employee. This becomes a valid and enforceable judgment, and the creditor may begin enforcement proceedings against the employer.

Best Practices

Best practice is to always answer the garnishment, provide copies to the employee, and begin withholding wages. This is not a step-by-step guide on how to answer a writ of garnishment; rather it is an overview of the process and the employer’s responsibilities. This article only covers employer’s responsibilities if they are located, or are doing business, in Arizona. Employers should seek legal guidance if they do not routinely process wage garnishments.


About the Author: Corrinne “Cori” Viola is an attorney at the Phoenix law firm of Jaburg Wilk. She assists clients with employment related issues.