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Does a garnishee order apply to termination payments?

There can be consequences for an employer who fails to comply.
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Does a garnishee order apply to termination payments?

Does a garnishee order apply to termination payments?

8 June 2021

Can we deduct amounts from an employee's termination pay if a garnishee order is in place?

Q We recently received an order from a local court to garnishee the wages of an employee. When we deducted the first payment, the employee resigned without notice. While the employee’s modern award seems to allow the company to withhold any wages earned by the employee because he failed to provide the required period of notice, we are not sure whether the garnishee order applies to the employee’s termination pay, including annual leave pay. The court has advised that failure to comply with the garnishee order may result in the company having to make good the amount for failing to comply with the order.

Does the garnishee order override the requirements under the applicable modern award and the Fair Work Act?

A The employer should comply with the garnishee order. There can be consequences for an employer who fails to comply with a garnishee order.


What is a garnishee order?

This is an order issued by a court requiring the party to whom the order is addressed to make payments in satisfaction of a judgment debt to the judgment creditor. Some courts refer to garnishees as ‘money redirection orders’. Garnishee orders are frequently made on employers when the judgment creditor knows the judgment debtor's employment details. All states and the Commonwealth have laws that relate to garnishee orders, and there are limits on how much of an employee’s wage can be subjected to one.


Failure to comply

Failure to comply with a garnishee order may leave an employer liable for amounts due under the order. For example, the Civil Procedure Act 2005 [NSW] (s124(1)) provides that if a garnishee fails to comply with a garnishee order, the judgment creditor may apply by notice of motion for judgment against the garnishee for the amount of the debt, wage or salary, or for the unpaid amount of the judgment debt (whatever is the lesser). Payment pursuant to such a judgment counts as a payment by the garnishee to the judgment debtor.


Fair Work Act – permitted deductions

The Fair Work Act (s324(1)(d)) states that an employer may “deduct from an amount payable to an employee if the deduction is authorised under a law of the Commonwealth, a state or a territory, or an order of a court.”

A garnishee order issued by a local court would be regarded as ‘an order of a court’ and a permitted deduction under the Fair Work Act. This provision would also permit the employer to deduct from all monies payable to an employee when issued by a Commonwealth, a state, or a territory agency.


Child support deductions

The Commonwealth Department of Human Services may require an employer to make deductions from an employee’s wages subsequent to a notice issued regarding child support deductions from an employee’s wages. If so, the employer is legally required to deduct child support payments from an employee or contractor’s salary or wages.

If the employer fails to make the necessary deductions required by a child support order the Department of Human Services can take legal action.


Recovery of Commonwealth government payments

The Commonwealth also has the power to issue a notice to an employer to garnishee an employee’s wages under the Social Security Act 1991 [Cth] (s.1233). This may occur where an employee has received excess or wrongly obtained payments from the Commonwealth, such as Centrelink payments or social security payments, and has failed to make a particular payment in accordance with an arrangement to repay the debt.

The bottom line: Employers should comply with a garnishee order issued by a court including deductions from amounts that otherwise would be payable to an employee on termination of employment.

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