Demonstrates the difficulty that can arise in trying to garnish wages for purposes of satisfying a judgment. Big M, Inc., had a judgment against Tiffany Kraus who worked as a server at Texas Roadhouse. Tiffany primarily received tips and gratuities as her income. Big M, Inc., served a wage garnishment for $672.22 against her employer Texas Roadhouse. Texas Roadhouse responded by providing to the plaintiff a single payment of $4.21. The plaintiff obtained a judgment against Texas Roadhouse in the amount of the balance of $668.01 plus costs for failing to honor the wage garnishment. The defendant appealed, saying that tips and gratuities are not wages and therefore not subject to the wage garnishment. The issue was what constituted "wages" for purposes of the applicable New Jersey wage garnishment statute.

Big M, Inc. v. Texas Roadhouse Holding, LLC 1 A.3d 718 (N.J. Super. 2010) In its answer and at trial, defendant asserted that it remitted the amount of money allowed by statute. It further asserted that tips and gratuities provided to employees, such as Kraus, were not wages and not subject to garnishment. At trial, Joseph Russo, the managing partner of the restaurant where Kraus was employed, stated that Kraus was paid $2.13 an hour and also received tips and gratuities. The restaurant does not pool tips. Tips placed on credit cards are paid immediately to waiters and waitresses, and tips charged on credit cards and immediately paid to employees are not subject to garnishment pursuant to federal law. In response to a question posed by the trial judge, Russo stated that the p. 495employee's W-2 wages included tips and gratuities but reiterated that "bona fide tips are not considered garnishable by law." The trial judge distinguished tips left on a table in cash from tips charged to a credit card. Stating that he knew of no case that held that tips placed on credit cards are not subject to garnishment, the judge entered a judgment for $668.01 plus costs and statutory attorneys' fees. We review a legal ruling by the trial judge.... N.J.S.A. 2A:17-50 subjects "wages, debts, earnings, salary, income from trust funds, or profits of the judgment debtor" to garnishment. Although we have located no case law in this state that addresses the issue of whether tips and gratuities are subject to garnishment, and the legislative history offers little insight, commentators have observed that the execution statutes in this state generally apply when monies due to the judgment debtor are "in the hands of a third-party garnishee" such as a judgment debtor's employer. Pressler, Current N.J. Court Rules, comment 1.6 on R. 4:59-1(a) (2010);... Federal law, however, provides significantly more guidance on this issue. Congress has enacted statutes that regulate the collection of debts. Title III of the Consumer Credit Protection Act (CCPA), 15 U.S.C.A. 1671 to 1677, was adopted to foster commerce and for uniformity of bankruptcy laws throughout the nation. See 15 U.S.C.A. 1671. To that end, the CCPA pre-empts state garnishment laws that allow a greater proportion of wages to be subject to garnishment than that allowed by federal law. Hodgson v. Hamilton Mun. Ct., 349 F. Supp. 1125, 1131-33 (S.D. Ohio 1972).... However, the CCPA "does not annul, alter, or affect, or exempt any person from complying with, the laws of any State prohibiting garnishments or providing for more limited garnishments" than allowed under federal law. 15 U.S.C.A. 1677. New Jersey's law permits execution when the amount of the judgment debtor's "wages, debts, earnings, salary, income from trust funds, or profits" equal or exceed forty-eight dollars per week. N.J.S.A. 2A:17-50. Yet under the CCPA, the maximum amount of the garnishment cannot exceed twenty-five percent of the judgment debtor's disposable income, or the amount by which the disposable earnings exceed thirty times the prevailing federal minimum wage, whichever is less. 15 U.S.C.A. 1673. Therefore, "the federal restriction pre-empts New Jersey law to the extent the latter is inconsistent with the former." (citations omitted). The CCPA does not define tips or gratuities. It does define "earnings" as "compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program." 15 U.S.C.A. 1672(a). Enforcement of the CCPA has been assigned to the United States Department of Labor (DOL), 15 U.S.C.A. 1676, and the DOL has published an opinion letter and Field Operations Handbook (DOL Handbook) that addresses the issue of whether tips are p. 496included in the computation of an employee's earnings for purposes of the CCPA. DOL Opinion Letter WH-95 (Letter WH-95) dated December 9, 1970, provides that "tips are generally not considered within the meaning of the term 'earnings.' " Letter WH-95 further explains this is so "because garnishment is inherently a procedural device to reach assets in the hands of the garnishee," and that "[t]ypically, tips are paid by a third person to an employee, and do not pass through the hands of the employer." Letter WH-95 further states "[t]here may be so-called tipping situations where customer payments would constitute 'earnings' under the [CCPA] definition." For instance, if a restaurant customer is charged a certain percentage on a check and this amount is then paid to the employee, then "there is no gift by the customer, and there is compensation flowing from the [restaurant employer] to the [employee]." In summary, we hold that whether tip income is subject to a wage garnishment order depends on the control exercised by the employer over tips and gratuities left by customers. If tip income is paid in cash to an employee or charged on a credit card and immediately remitted to an employee, the tips are not considered earnings subject to a wage garnishment order. If the employer remits tips and gratuities in a manner that demonstrates control by the employer of an employee's entire compensation, such as a system in which tips are pooled and distributed in accordance with a formula to all service staff, or recorded and remitted on a periodic basis, cash tips and gratuities may be considered earnings and subject to wage garnishment. Reversed and remanded for further proceedings consistent with this opinion.

Questions:

1. What was the trial court's reason for including tips on credit cards as part of an employee's wages?

2. What facts would have to exist in order to have the tips included as wages according to the court's analysis of the issue?

3. What remedies does the plaintiff now have to enforce its judgment against Tiffany?

Answer rating: 100% (QA)

Answers 1 Reason for including tips on credit cards as part of an employees wages The trial court in... View the full answer