Wisconsin Legislature Expressly Authorizes Electronic Tip Declarations

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Like the federal Fair Labor Standards Act, Wisconsin law allows hospitality employers to pay certain tipped employees less than the minimum wage with the understanding that the tips they receive will cover the difference. More specifically, Wisconsin law allows employers to claim a tip credit of up to $4.92 per hour for employees who “customarily and regularly receive tips.” Among other things, Wisconsin law requires employers to have a “signed tip declaration” in order to claim the credit. Wisconsin Administrative Code § DWD 272.03(2)(b)(1) states the following:

When the employer elects to take tip credit the employer must have a tip declaration signed by the tipped employee each pay period and show on the payroll records that any required social security or taxes have been withheld each pay period to show that when adding the tips received to the wages paid by the employer, no less than the minimum rate was received by the employee. When the employer’s time and payroll records do not contain these requirements, no tip credit shall be allowed.

Based on the express language of the code, there has been debate about what constitutes a “signed tip declaration” and—more specifically—whether an electronic signature could suffice. Many Wisconsin employers had required employees to electronically complete and sign tip declarations through their point-of-sale systems. The Wisconsin Department of Workforce Development (DWD), which is responsible for enforcing the state’s tip declaration requirements, had never formally interpreted the signature requirement to be limited to “wet ink” signatures. Moreover, Chapter 137 of the Wisconsin Statutes, which governs electronic transactions and records, provides in part that “if a law requires a signature, an electronic signature satisfies that requirement in that law.” Nonetheless, lawsuits filed against employers for unpaid wages had claimed that electronic tip declarations did not satisfy the signature requirement and therefore barred employers from claiming a tip credit.

Effective April 24, 2021, Wisconsin has modernized its tipped credit law to expressly provide for electronic verification of an employee’s tip declaration. The legislature added language to Wis. Stat. § 104.045(1)—Wisconsin’s tip credit statute—that specifically “allow[s] an employer to require a tipped employee to use an electronic signature or other electronic means that uniquely identifies the employee to acknowledge the counting of tips or similar gratuities.” (Emphasis added.) Moreover, the new law specifically incorporates by reference Chapter 137’s definition of “electronic signature,” ensuring that an employee can validly and conclusively execute a tip declaration without a “wet ink” signature.

This amendment corresponds with what many employers were already doing, and it may provide some relief to employers with electronic tip declaration processes. The DWD’s implementing regulations under § DWD 272.03(2) have not been correspondingly amended.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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