Erlanger Medical Center v. Angela Strong a/k/a Granger, Shoney's North Georgia, LLC, Garnishee , 2012 Tenn. App. LEXIS 192 ( 2012 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
January 30, 2012 Session
ERLANGER MEDICAL CENTER v. ANGELA STRONG A/K/A
GRANGER, SHONEY’S NORTH GEORGIA, LLC, GARNISHEE
Appeal from the Circuit Court for Hamilton County
No. 10C1499 Jeffrey Hollingsworth, Judge
No. E2011-01376-COA-R3-CV-FILED-MARCH 26, 2012
This appeal concerns a garnishment action. Erlanger Medical Center (“Erlanger”) obtained
a judgment against Angela Strong (“Strong”), an employee, by the time of trial, of Shoney’s
North Georgia, LLC (“the Garnishee”). Erlanger sought to garnish Strong’s wages. Erlanger
argued that Strong’s tips should be included in the calculation of her disposable earnings for
the purposes of garnishment. The Garnishee disagreed, arguing, among other things, that
federal law and labor policy stood for the proposition that tips were not to be included as
wages for garnishment purposes. The Circuit Court for Hamilton County (“the Trial Court”)
held that tips were, in fact, to be treated as wages subject to the calculation for garnishment
purposes. The Garnishee appeals. We hold that tips are not to be included in the calculation
of disposable wages for the purposes of garnishment. We reverse the Trial Court’s judgment.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed;
Case Remanded
D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which H ERSCHEL P . F RANKS,
P.J., and C HARLES D . S USANO, J R., J., joined.
Christopher D. Markel and Adam S. Major, Chattanooga, Tennessee, for the appellant,
Shoney’s North Georgia, LLC.
Gary E. Lester, Chattanooga, Tennessee, for the appellee, Erlanger Medical Center.
OPINION
Background
The facts of this case are undisputed. The parties submitted a Stipulation of
Material Facts in the Trial Court which states:
Come now the parties, by and through counsel, and submit the
following Stipulation of Material Facts for purposes of trial in the above-
captioned matter:
1. On November 16, 2009, Plaintiff obtained a judgment in the
amount of $537.33, plus court costs and interest, from the General Sessions
Court of Hamilton County against Angela Strong a/k/a [Angela] Granger
(hereinafter referred to as “Ms. Strong”) under the action styled Erlanger
Medical Center v. Angela Strong a/k/a Granger, Case Number 09GS13117.
2. Plaintiff obtained a Writ of Garnishment issued by the Hamilton
County General Sessions Court on or about August 12, 2010 for execution
upon the Garnishee.
3. The Garnishee is the employer of Angela Strong a/k/a Angela
Granger, who works as a waitress at Garnishee’s restaurant located in
Chattanooga, Tennessee.
4. A dispute has arisen between Plaintiff and the Garnishee as to
whether tips received by Defendant while employed by the Garnishee should
be included with “wages” earned by Defendant for the purpose of calculating
disposable income for garnishments.
5. The Garnishee takes a “tip credit” against its minimum wage
obligation pursuant to 29 U.S.C. § 203(m) which is currently in the amount of
$5.12 per hour which when added to the cash wages paid to Defendant in the
amount of $2.13 equals the minimum wage of $7.25 per hour.
6. The Garnishee withholds both Federal Withholding and FICA
Taxes based upon the total of all reported tip income and wages of Defendant
from wages (exclusive of tips)
(internal citations omitted).
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After a trial, the Trial Court entered its Memorandum Order holding that tips
should, in fact, be included in the calculation of disposable earnings. The Trial Court stated
in its order:
Plaintiff, Erlanger Medical Center (“Erlanger”) obtained a judgment
against Angela Strong. Ms. Strong works as a waitress for Shoney’s North
Georgia, LLC (“Shoney’s”). Erlanger served Shoney’s with a Writ of
Garnishment in the collection of its judgment. Shoney’s, as the Garnishee,
contends that the tips paid to Ms. Strong by her customers should not be
included in determining her “earnings” and “disposable earnings” under the
garnishment statute. See T.C.A. § 26-2-102. Shoney’s argument is that the
tips, which are paid directly to Ms. Strong by her customers, never come under
the control of Shoney’s and, therefore, cannot be considered in determining the
amount Shoney’s should pay in compliance with the garnishment.
Erlanger argues that, even though the tips never come under the control
of Shoney’s, that money should still be used in calculating the earnings and
disposable earnings subject to garnishment and the 25% limit imposed by
T.C.A. § 26-2-106.
T.C.A. § 26-2-102(1) defines “earnings” as:
“. . .the compensation paid or payable for personal
services, whether denominated as wages, salary,
commission, bonus, or otherwise. . .”
T.C.A. § 26-2-102(2) defines “disposable earnings” as:
“. . .that part of the earnings of an individual
remaining after the deduction from those earnings
of any amounts required by law to be withheld;”
T.C.A. § 26-2-106 states that no more than twenty-five percent (25%)
of disposable earnings may be withheld for garnishment.
The tips collected by Ms. Strong clearly fall within the definition of
earnings and disposable earnings. Shoney’s relies upon the Federal Wage
Garnishment Law, in which the definition of these terms is identical. Shoney’s
specifically relies on a section of the federal law Field Operation Handbook,
which states that tips are not to be included in calculating earnings and
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disposable earnings. The handbook does not carry the force of law and is
contrary to the plain language of the statute. The fact that the tips are never in
control of the garnishee is relevant to the question of whether the garnishee
should be required to pay more than what is under its control. It is certainly
not the intent of the law that the garnishee, in this case, Shoney’s, spend its
own money in payment of the debt of its employee. However, that is not
Erlanger’s argument nor is it the holding of this Court.
This Court holds that, in this case, Shoney’s, in calculating Ms. Strong’s
earnings and disposable earnings for purposes of garnishment, will use the
amount of the tips collected by Ms. Strong from her customers. Then,
Shoney’s must pay twenty-five percent (25%) of Ms. Strong’s disposable
income in compliance with the garnishment.
Therefore, it is Ordered that the amount to be garnished from Ms.
Strong’s pay will be calculated by including her tips in the determination of
her earnings and disposable earnings.
In July 2011, the Trial Court entered an order awarding a judgment of $473.21 against the
Garnishee in favor of Erlanger. The Garnishee appeals.
Discussion
Though not stated exactly as such, the Garnishee raises one issue on appeal:
whether the Trial Court erred in holding that tips reported by the Garnishee’s employees are
to be included in the calculation of disposable earnings for the purposes of garnishment.
The sole issue on appeal being a legal one, our review is conducted “under a
pure de novo standard of review, according no deference to the conclusions of law made by
the lower courts.” Southern Constructors, Inc. v. Loudon County Bd. Of Educ., 58 S.W.3d
706, 710 (Tenn. 2001).
We begin by reviewing Tennessee law with respect to garnishment. Tenn.
Code Ann. § 26-2-102 provides:
As used in this part unless the context otherwise requires:
(1) “Earnings” means the 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;
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(2) “Disposable earnings” means that part of the earnings of an individual
remaining after the deduction from those earnings of any amounts required by
law to be withheld; and
(3) “Garnishment” means any legal or equitable procedure through which the
earnings of an individual are required to be withheld for payment of any debt.
Tenn. Code Ann. § 26-2-102 (2000). See also 15 U.S.C.A. § 1672.
Regarding the proportion of disposable earnings that are exempt from
garnishment, Tenn. Code Ann. § 26-2-106 provides:
(a) The maximum part of the aggregate disposable earnings of an individual
for any workweek which is subjected to garnishment may not exceed:
(1) Twenty-five percent (25%) of the disposable earnings for that week; or
(2) The amount by which the disposable earnings for that week exceed thirty
(30) times the federal minimum hourly wage at the time the earnings for any
pay period become due and payable, whichever is less.
(b) In the case of earnings for any pay period other than a week, an equivalent
amount shall be in effect.
(c) The debtor shall pay the costs of any and all garnishments on each debt on
which suit is brought.
Tenn. Code Ann. § 26-2-106 (Supp. 2011). See also 15 U.S.C.A. § 1673.
The U.S. Department of Labor Field Operations Handbook, dated February 9,
2001, which interprets the Federal Consumer Credit Protection Act, states with regard to tips
and garnishment:
(a) Bona fide tips are not subject to the provisions of the CCPA. A
garnishment is inherently a procedural device designed to reach and
sequester earnings held by the garnishee (usually the employer). Tips
paid directly to an employee by a customer are not “earnings” within
the meaning of sec 302 of the CCPA, since they do not pass to the
employer. This includes gratuities transferred free and clear to an
employee at the direction of credit customers who add tips to the bill.
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(b) Service charges added to a customer’s bill constitute “earnings” within
the meaning of sec 302 when passed on to the employee. As such, they
are subject to the provisions of the CCPA. The following examples
demonstrate the point:
(1) A restaurant charges a customer 15% of the check, as a service
charge, and in turn pays this amount to the server (debtor).
Since this is an automatic charge, there is no gratuity by the
customer. The compensation passed from the employer
(garnishee) to the server.
(2) The employment agreement is such that the customer’s tips
belong to the employer and must be credited or turned over to
the employer.
Additionally, the U.S. Department of Labor Fact Sheet #30, revised July 2009, states: “Tips
are generally not considered earnings for the purposes of the wage garnishment law.”
Initially, we observe that there is a dearth of authorities in Tennessee law that
address the issue on appeal. Regarding the statutory definitions of earnings, Tennessee and
Federal law are essentially identical. Neither Tennessee nor Federal law explicitly include
tips in their definitions of earnings in the context of garnishment.
The Garnishee points to a case from New Jersey with similar facts to this case.
Regarding deference to federal administrative agencies, and examining the same U.S.
Department of Labor Handbook language that was presented to the Trial Court in this case,
the Superior Court of New Jersey, Appellate Division, stated:
Admittedly, the DOL Handbook and Letter WH-95 are not regulations
that enjoy the force of law. Christensen v. Harris County, 529 U.S. 576, 587,
120 S. Ct. 1655, 1662-63, 146 L. Ed. 2d 621, 631-32 (2000). We do, however,
owe limited deference to the interpretation afforded by a federal administrative
agency to the statute it enforces and the program it administers. In Estate of
F.K. v. Division of Medical Assistance & Health Services, 374 N.J.Super. 126,
141-42, 863 A.2d 1065 (App. Div.), certif. denied, 184 N.J. 209, 876 A.2d 283(2005), we explained:
A federal administrative agency's interpretation [of a
federal statute] warrants some deference when expressed less
formally than a regulation, as long as that agency has a
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delegated authority to administer the statute and the views are
made in pursuance of official duty, based upon more specialized
experience and broader investigations and information than is
likely to come before a judge. Skidmore v. Swift & Co., 323
U.S. 134, 140, 65 S. Ct. 161, 164, 89 L. Ed. 124, 129 (1944). The
weight of such a judgment in a particular case depends on “the
thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later pronouncements,
and all those factors which give it the power to persuade, if
lacking power to control.” Ibid. Thus, if an agency has been
granted administrative authority for a statute, its interpretation,
despite arising in an informal context, will be given deference
as long as it is consistent with prior agency pronouncements and
is consistent with the plain language and purposes of the
enabling legislation. Cleary v. Waldman, 167 F.3d 801, 808 (3d
Cir.), cert. denied, 528 U.S. 870, 120 S. Ct. 170, 145 L. Ed. 2d 144(1999).
We, therefore, afford Letter WH-95 and the DOL Handbook “respectful
consideration and deference.” Id. at 142, 863 A.2d 1065.
Notably, the DOL Handbook directly excludes from garnishment both
tips paid directly to an employee by a customer and tips charged to credit cards
that briefly pass through the employer before remittance to the employee.
Thus, the practice utilized by defendant in which it remits tips charged on
credit cards directly to the employee at the end of a work shift insulates these
tips from a wage garnishment.
Big M, Inc. v. Texas Roadhouse Holding, LLC, 415 N.J. Super. 130, 136-37 (App. Div.
2010).
We find the New Jersey court’s analysis of deference to federal administrative
agencies to be persuasive.1 The Handbook makes it clear that tips, subject to certain
exceptions which are irrelevant in this appeal, are not earnings for purposes of garnishment
1
Erlanger points to the cases of United Guar. Residential Ins. Co. v. Dimmick, 916 P.2d 638 (Colo.
App. 1996) and Shanks v. Lowe, 364 Md. 538 (Md. 2001) which conclude that tips are to be included in the
definition of earnings in the context of garnishment. However, the Colorado opinion was decided before the
issuance of the February 2001 version of the U.S. Department of Labor Handbook cited in the instant case,
and the Maryland opinion, released shortly after February 2001, does not address the Handbook.
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as they do not pass to the employer. With its logical and adequately explained reasoning, we
afford deference to this U.S. Department of Labor Handbook provision and its implications
for this appeal. We hold that tips are not to be included in the calculation of disposable
earnings for the purposes of garnishment. We reverse the judgment of the Trial Court.
Conclusion
The judgment of the Trial Court is reversed, and this cause is remanded to the
Trial Court for proceedings consistent with this Opinion. The costs on appeal are assessed
against the Appellee, Erlanger Medical Center.
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D. MICHAEL SWINEY, JUDGE
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