Involuntary and Voluntary Pay Deductions: North Dakota
Federal law and guidance on this subject should be reviewed together with this section.
Authors: Joel Fremstad and Lynn Block, Fremstad Law
Summary
This guide provides compliance guidance for HR and payroll professionals in North Dakota regarding withholding for child support and creditor garnishment orders, tax levies and voluntary wage assignments.
Involuntary Pay Deductions
Involuntary pay deductions are deductions an employer is required to make by order of an agency or court to satisfy an employee's unpaid debt, such as for child support, creditor garnishments and tax levies. North Dakota law includes employer requirements regarding these involuntary deductions.
Child Support Withholding
The following requirements apply to North Dakota employers that receive a child support withholding order against an employee's wages.
When to Begin Withholding
An employer must begin withholding for child support no later than the first payday that occurs after the employer is served with an income withholding order (IWO).
In addition, employers are required to submit the following employee information in response to a request from the state child support agency:
- The amount of any income currently paid to the employee, calculated on a monthly basis;
- The total amount of income paid to the employee in the 12 months preceding the month in which the request is received;
- Information regarding any health insurance that may be made available to the employee's children through the employer;
- The Social Security number under which payment of any income by the employer to the employee is reported;
- The employee's address; and
- The date of last payment and any forwarding address if the employee has been terminated.
An employer is required to provide this information within 180 days of receiving a request from the state. Any failure to comply is punishable as contempt of court. Contempt proceedings are commenced within 90 days after the employer's failure to act.
Priority of Multiple Withholding Orders
If more than one IWO is issued against the same employee, the employer must prorate withholding among all the orders up the maximum permitted, with obligations satisfied in the following order of priority:
- Current child support;
- Arrears;
- Health insurance premiums.
If an employee is subject to multiple types of income withholding orders, the general rule is that child support must be satisfied first before all other wage garnishments. Federal tax levies must be satisfied second, then state tax levies, and creditor garnishments come last.
Interstate Income Withholding Orders
An employer that receives a child support withholding order from another state must provide the employee with a copy of the order immediately.
The employer must treat an out-of-state income withholding order as if it had been issued in North Dakota and withhold and distribute the funds as directed by the withholding order regarding:
- The duration and amount of periodic payments of current child support;
- The person designated to receive the payments;
- The address to which the payments should be forwarded;
- Medical support;
- The amount of any periodic payments, fees and costs for the support enforcement agency, the issuing court and attorney fees; and
- The amount of arrears and interest on the arrears.
The employer must follow the law of the employee's work state regarding:
- The employer's fee for processing the income withholding order;
- The maximum amount permitted to be withheld from the employee's disposable earnings;
- The times within which the employer must implement withholding and forward the amount withheld to the payee; and
- The priority rules for honoring multiple income withholding orders against the same employee.
+N.D. Cent. Code, § 14-12.2-33.1, +N.D. Cent. Code, § 14-12.2-33.2.
How Much to Withhold
The amount to be withheld, including amounts to cover expenses involved in transmitting payment, may not exceed 50% of the employee's disposable income. Any payment of an amount less than the ordered amount must be accompanied by a written calculation disclosing the employee's income and disposable income that is payable by the employer.
If the IWO includes a requirement to withhold for the reasonable cost of healthcare insurance and the amount ordered exceeds 50% of the employee's disposable income, either alone or when added to the total of any withholding required by the order, no more than 50% of the employee's disposable income may be withheld.
Employers may also deduct a fee of $3 per month from an employee's income to cover expenses involved in transmitting the payment.
For child support withholding purposes, North Dakota law defines income as any form of payment, regardless of source, owed to an individual who is subject to child support withholding, including any earned, unearned, taxable or nontaxable income, workforce safety and insurance benefits, disability benefits, unemployment compensation benefits, annuity and retirement benefits. It does not include state public assistance benefits.
Disposable income is defined as gross income minus any deductions required by law, such as federal and state income taxes and Social Security and Medicare taxes.
Remittance Requirements
Payments must be remitted within seven business days after payday, together with a report of the date of withholding, to the North Dakota State Disbursement Unit (SDU), which collects and disburses child support. Employers may submit one payment to the SDU for all child support withholding orders the employer administers within North Dakota.
Employers with more than 24 employees and more than four IWOs are required to remit the withheld funds electronically. Those with fewer than five IWOs may opt out of electronic payment by submitting a written request. In addition, the child support agency may waive the requirement to remit funds electronically upon proof of good cause. Employers that fail to remit payments electronically without a waiver are deemed to have failed to remit the payments entirely.
Employers that fail or refuse to withhold or remit withheld child support are personally liable for the amount not withheld or remitted, plus costs, interest and reasonable attorney fees. After seven days, late fees apply against employers that fail to withhold. The maximum charge is $75 per business day that the payment is late.
Employers that fail or refuse to withhold or remit withheld amounts for more than 14 business days after the date an employee is paid may be ordered to pay up to $200 in damages in addition to the amount of income that should have been withheld or remitted, costs, interest, late fees, and reasonable attorney fees.
North Dakota law prohibits an employer from taking adverse employment action against an employee because they are subject to an IWO or is involved in a court or agency proceeding for the collection of child support. An employer that violates this law may be liable to the employee for all resulting damages, plus interest, costs and reasonable attorney fees. Employers can be required to make full restitution to the aggrieved employee, including reinstatement and back pay.
Terminated Employees
If an employee subject to an IWO is terminated, the employer must send a termination notice to the entity that issued the IWO within seven business days after the date of termination.
+N.D. Cent. Code, § 14-09-08.16, +N.D. Cent. Code, § 14-09-09.3, +N.D. Cent. Code, § 14-09-09.6, +N.D. Cent. Code, § 14-09-09.10, +N.D. Cent. Code, § 14-09-09.16, +N.D. Cent. Code, § 14-09-34.
Creditor Garnishment Withholding
The following requirements apply to North Dakota employers that receive a creditor garnishment withholding order against an employee's wages.
When to Begin Withholding
Employers are required to start withholding within 10 days after they receive a writ of garnishment against an employee's wages.
Note that a garnishment is invalid if the employee did not receive a notice of the order from the creditor or court at least 10 days before the issuance of a garnishment.
An employer may receive a garnishment disclosure form requiring it to provide certain information about the employee who is subject to the garnishment.
Priority of Multiple Withholding Orders
If there are multiple garnishment orders against an employee, they should be satisfied in the order in which received. If an employee is subject to multiple types of income withholding orders, the general rule is that child support must be satisfied first before all other wage garnishments. Federal tax levies must be satisfied second, then state tax levies, and creditor garnishments come last.
How Much to Withhold
The maximum aggregate disposable earnings subject to garnishment in any workweek may not exceed the lesser of the following amounts:
- 25% of disposable earnings for that week; or
- The amount by which disposable earnings for that week exceed 40 times the federal minimum hourly wage.
The maximum amount must be reduced by $20 for each dependent family member residing with the employee.
For the purposes of creditor garnishment withholding, earnings is defined as compensation payable for personal service whether called wages, salary, commission, bonus or otherwise, and includes periodic payments under a pension or retirement program (including military retirement pay). It does not include Social Security benefits or veterans' disability pension benefits, except when the benefits are subject to garnishment to enforce an order for the support of a dependent child.
Disposable earnings is defined as that part of the earnings remaining after deductions required by law are made.
The employee has 10 days to provide the employer with a list they have signed under penalty of perjury of the names and Social Security numbers of any dependents who reside with the employee. If the employee fails to provide the list, it is presumed that the employee claims no dependents. The employee may provide the list at a later date, in which case the exemptions claimed will be in effect for amounts subject to garnishment after the date the list is provided.
These restrictions do not apply if any of the following are in effect against the employee:
- A court order for the support of any person;
- A court order of bankruptcy under chapter XIII of the Bankruptcy Act; or
- A debt due for any state or federal tax.
The maximum amount of an employee's aggregate disposable earnings withheld for any workweek that is subject to garnishment to enforce an order for the support of any person may not exceed:
- 50%, if the employee is supporting a spouse or dependent child other than a spouse or child whose support is being ordered; or
- 60%, if the employee is not supporting a spouse or dependent child other than the spouse or child whose support has been ordered.
These percentages may be increased to 55% and 65%, respectively, if and to the extent that the earnings are subject to garnishment to enforce a support order covering a period prior to the 12-week period which ends with the beginning of the specified work week.
Remittance Requirements
Generally, payments should be made within 14 days after the end of each pay period during which withholding occurred. The employer should send the withheld amounts directly to the creditor or their designated representative as indicated in the garnishment order.
Terminated Employees
If an employee subject to a garnishment order terminates employment, the employer must notify both the creditor and any relevant court. The employer should provide information on any remaining balance owed under the garnishment order so that creditors can take appropriate action if necessary (e.g., pursuing collection through other means).
Employers are prohibited from terminating an employee because they are subject to a creditor garnishment. If the employer violates this prohibition, the employee may, within 90 days of the termination, file a civil lawsuit to recover twice the wages lost due to the violation and for an order requiring reinstatement to the employee's former position.
+N.D. Cent. Code, § 28-25-11, +N.D. Cent. Code, § 32-09.1-01, +N.D. Cent. Code, § 32-09.1-03, +N.D. Cent. Code, § 32-09.1-04, +N.D. Cent. Code, § 32-09.1-07, +N.D. Cent. Code, § 32-09.1-10, +N.D. Cent. Code, § 32-09.1-18.
Tax Levy Withholding
If an employee has unpaid state taxes or another state liability, North Dakota law permits the state to garnish the employee's wages to collect the unpaid amount.
When to Begin Withholding
An employer must begin withholding from an employee's wages upon receiving a valid notice of levy from the North Dakota Office of State Tax Commissioner, and promptly remitting the amount withheld, within 10 days after receiving the notice.
Priority of Multiple Withholding Orders
When there are multiple tax levies against an employee, North Dakota law generally prioritizes them based on the order in which they were received. If an employee is subject to multiple types of income withholding orders, the general rule is that child support must be satisfied first before all other wage garnishments. Federal tax levies must be satisfied second, then state tax levies, and creditor garnishments come last.
How Much to Withhold
For state tax levies, employers can withhold up to 25% of an employee's disposable earnings (i.e., generally, the amount remaining after legally mandated deductions).
+N.D. Cent. Code, § 54-23.4-01 through +N.D. Cent. Code, § 54-23.4-04.
Voluntary Pay Deductions
Voluntary pay deductions are deductions that an employee asks their employer to make on their behalf, such as wage assignments. North Dakota law regulates voluntary wage assignments.
Wage Assignments
A voluntary wage assignment is an agreement between an employee and a creditor that allows the employer to withhold a portion of the employee's wages to satisfy a debt. In North Dakota, employers are generally required to comply with an employee's request to withhold from their wages to satisfy a voluntary wage assignment if it is in writing and signed by the employee. The amount withheld cannot exceed 25% of the employee's disposable earnings (i.e., generally, the amount remaining after legally mandated deductions). +N.D. Cent. Code, § 32-09.1-01.
Future Developments
There are no future developments.