Tag Archives: Matthew Sorensen

Are Your Employees’ Tips Subject To Garnishment?

By Matthew Sorensen

Wage garnishment can pose a number of potential problems for hospitality businesses.  This is particularly true where the employee whose pay is subject to garnishment receives tips. 

 

Garnishment is a legal procedure in which an employee’s earnings must be withheld by an employer for the payment of a debt under a court order.  When faced with a garnishment order involving a tipped employee, the employer must determine whether all or part of the employee’s tips must be included in the amounts withheld under the garnishment order.  This question turns on whether or not the employee’s tips may be characterized as “earnings” under the applicable garnishment statute.  A mistake by the employer could lead to significant liability.  Many state and federal laws concerning garnishment contain provisions that allow for direct employer liability for failing to timely respond to or follow a garnishment order.  On the other hand, federal and state wage and hour rules can create liability for wrongfully withholding an employee’s tips.  A recent Tennessee Appellate court ruling provides some additional guidance in this area that will likely have broader application to hospitality businesses around the country. 

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