HR Compliance

3 Guidelines for Executing Wage Garnishments for Tipped Employees

By

Tiffany Hill

| Sep 30, 2015

Executing a wage garnishment for a tipped employee can be pretty straightforward. At first.

But try looking for a hard, fast rule about whether or not to include tipped income in those calculations and you’ll start to encounter words like “most,” “generally” and “sometimes.” The ambiguity begins.

General guidelines

Three questions lie at the heart of the confusion surrounding whether tipped income is even eligible for garnishment. Cases from New Jersey and Tennessee address these questions and form the basis for these general ground rules:

Question 1: Are tips included in wage garnishment calculations?

General Ground Rule: Most of the time, they are not. Here’s why: “Bona fide tips” pass directly from a guest to an employee. Management is not involved in the transaction and has no control over the collection or distribution of the money. Because the manager never touches the tip, it should not be included in garnishment calculations.

Question 2: What about tips left on credit cards?

General Ground Rule: If a manager collects credit card tips and pays them to employees at the end of their shift, that manager has technically exercised a fair amount of control over the redistribution of funds. Credit card tips handled in this fashion could be subject to garnishment.

However, when credit card tips are remitted immediately to the employee, in cash, those tips are not eligible for garnishment.

Question 3: What are the rules surrounding the tip pool?

General Ground Rule: Both the New Jersey and Tennessee rulings said that tip pool tip-outs could be subject to garnishment because management oversees the collection and redistribution of monies.

Legal liability

In the midst of all of these potential exceptions, one thing is for certain: When employers miscalculate wage garnishments, they can find themselves on the receiving end of legal action and potentially be responsible for the entire amount of the garnishment, plus interest and attorneys’ fees. Understanding how state and federal laws define tips in the wage garnishment process is crucial to accurately calculating garnishments and mitigating risk.

About the Author

Tiffany Hill

Tiffany Hill is an experienced employment and labor law attorney who currently serves as Paycom’s HR Legal Advisor. She maintains professional memberships in the Oklahoma, Ohio and Louisiana Bar Associations and is an active member with the Society for Human Resource Management and the National Association of Professional Women. In addition to her Juris Doctorate, Tiffany holds degrees in Civil Law and Political Science. In her spare time, Tiffany enjoys spending time with her three young sons and cultivating aspiring leaders through mentorship programs.

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