Garnishments: Executing Wage Garnishments for Tipped Employees

General Guidelines
The confusion surrounding whether tipped income is eligible for garnishment hinges on three key questions. Cases from New Jersey and Tennessee provide clarity and establish these general ground rules:

Question 1: Are tips included in wage garnishment calculations?

General Ground Rule: Typically, they are not. The rationale is that "Direct Tips (or Bona fide tips)" go directly from the guest to the employee, without management's involvement in collecting or distributing the money. Since the manager never handles 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, the manager has exerted control over the funds. In this case, credit card tips could be subject to garnishment. However, if credit card tips are immediately given to the employee in cash, they are not eligible for garnishment.

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

General Ground Rule: According to rulings from New Jersey and Tennessee, tips redistributed through a tip pool can be subject to garnishment because management oversees the collection and redistribution of these funds.

Legal Liability
Amid these exceptions, one certainty remains: Employers who miscalculate wage garnishments can face legal action and may be liable for the entire garnishment amount, plus interest and attorneys' fees. Understanding state and federal laws regarding tips in the wage garnishment process is essential for accurate calculations and mitigating legal risks.