14.2.1.4.3 Tips
14.2.1.4.3 Tips
The wages of serving staff at restaurants are likely to amount to less than thirty times the minimum wage and therefore be completely protected from garnishment, as long as tips are not considered part of their “earnings.”46 A Department of Labor handbook states that tips paid directly to an employee by a customer are not considered earnings within the meaning of the CCPA.47 The same rule applies to tips that are transferred free and clear to a worker at the direction of a credit customer who adds a tip to the bill. The handbook points out that garnishment is designed to reach earnings held by the employer and that such tips never pass to the employer. On the other hand, if a restaurant or other employer adds a fee to a bill, and then pays this amount to the employee, the compensation passes from the employer to the employee and amounts to earnings under the CCPA.48
A Maryland decision reaches a different conclusion, holding that tips paid directly to a worker constitute wages for purposes of the state wage garnishment law and therefore must be added to the wages paid by the employer to determine whether the worker’s earnings exceed the threshold protected from garnishment.49 The opinion does not address the effect of the CCPA, which would likely have preempted this less protective provision of state law.50 A New Jersey decision adopts the rationale of the Department of Labor and holds that, if tips are paid in cash to the worker or charged on a credit card and immediately remitted to the worker, the tips are not subject to wage garnishment.51
Footnotes
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46 See § 14.2.1.5.1, infra (calculation of amount protected).
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47 U.S. Dep’t of Labor, Wage & Hour Div., Field Operations Handbook Ch. 16, § 16a07, available at www.dol.gov. See Capital One Bank v. Sullivan, 347 P.3d 307 (Okla. Civ. App. 2015) (adopting Department of Labor position; also holding that employer’s processing of credit card tips is insufficient exercise of control to subject them to garnishment); Erlanger Med. Ctr. v. Strong, 382 S.W.3d 349 (Tenn. Ct. App. 2012) (tips paid directly to employee, including those charged on customers’ plastic, may not be counted in calculating disposable income for garnishment).
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48 See also In re Holmes, 414 B.R. 868 (Bankr. S.D. Fla. 2009) (when bartender employer added a percentage “service charge” to customers’ bills and passed it on to employee in paycheck, service charge was exempt earnings under Florida law).
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49 Shanks v. Lowe, 774 A.2d 411 (Md. 2001).
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50 See Big M, Inc. v. Tex. Roadhouse Holding, L.L.C., 1 A.3d 718 (N.J. Super. Ct. App. Div. 2010) (CCPA preempts state law that might subject tips to wage garnishment). See generally § 14.2.4, infra.
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51 Big M, Inc. v. Tex. Roadhouse Holding, L.L.C., 1 A.3d 718 (N.J. Super. Ct. App. Div. 2010).