A wage levy, sometimes referred to as a garnishment, is a legal action used to take up to 25 percent of a debtor’s wages to pay a debt.

The wage levy notice to an employer includes a disclosure form on which the employer calculates how much “additional withholding” will be taken from the debtor’s wages. Employers have the option of completing either a paper version of the disclosure included with the wage levy notice or the online version at eFile Minnesota.

A debtor’s wages may vary each payroll period which affects the amounts of a levy payments.

If the debtor is not currently earning wages because they are terminated, laid off or on a leave of absence, and the employer cannot comply with a wage levy, the Minnesota Department of Revenue will ask the employer to return an alternate disclosure form with information about the termination or layoff date, the debtor’s new employer, if known, and the debtor’s last known address and phone number.

If the employer does not respond to a levy or refuses to cooperate, the Minnesota Department of Revenue can hold the employer liable for the employee’s debt and add a penalty for failing to honor a levy.

As stipulated in Minn. Stat. §270C.69 subd. 2 and Minn. Stat. §571.927, an employer may not terminate or otherwise discipline an employee as a result of a wage levy. Title III of the federal Consumer Credit Protection Act also prohibits an employer from discharging an employee because his or her earnings have been subject to garnishment for any one debt, regardless of the number of levies made or proceedings brought to collect it. Title III does not, however, protect an employee from discharge if the employee’s earnings have been subject to garnishment for a second or subsequent debt. Note: Do not intercede between an employer and a debtor. If a debtor complains that a levy resulted in termination, inform the debtor that there are state and federal laws that pertain to such a matter, and refer the debtor to this Collection Manual for the links (above) to those statutes.

Exemption Claim

Sent to the debtor with the Demand for Payment and Intent to Levy Wages letter is an Exemption Claim Form. The debtor uses it to claim the wage levy exemptions provided by Minn. Stat. §550.37 and the Tomczyk 295 B.R. 894 court case.

The Minnesota Department of Revenue is not allowed to issue a wage levy if we know a debtor qualifies for an exemption.

Levy Reduction

Once the levy begins, it is too late to accept a debtor’s request to make voluntary payments to stop the levy. However, if the debtor demonstrates that the levy will cause significant financial hardship, the Minnesota Department of Revenue will consider a wage levy reduction. Any collector with authority to issue a wage levy also has authority to reduce the levy.

New Debts

After a wage levy begins, if the debtor has a new debt, the Minnesota Department of Revenue must give due process for the new debt while the wage levy continues. If the debtor does not pay the new debt in full, the Minnesota Department of Revenue will issue a new levy to the employer once the first levy is satisfied.

Levy Release

The department will release a wage levy when:

  • The debtor is exempt from levy per Minn. Stat. §550.37 and the Tomczyk 295 B.R. 894 court case.
  • The debt is paid in full.
  • If there is an adverse interest or a set off that prevents a payment to the Minnesota Department of Revenue.
  • The debtor no longer works for the employer.
  • The debtor files bankruptcy.

Adverse interests are other levies and/or garnishments against the debtor that reduce the amount that a wage levy can take. See priority of levies above for more information.

For an employer to claim a setoff, the request for a loan against futures wages must have been made by the employee at least 30 days prior to the state’s notification of a wage levy or it will not be valid.

Contact an attorney in this area