MADISON, Wis., July 11 -- The Wisconsin Labor and Industry Review Commission issued the following Unemployment Insurance decision:
     LINDA L DIRKSE, Employee
     HOST INTL INC, Employer
     UNEMPLOYMENT INSURANCE DECISION Hearing No. 08602339MW
     The employee worked approximately two months, most recently as a bartender, for the employer, a food service business. Her last day of work was on or about July 30, 2007 (week 31), and she initiated a claim for unemployment insurance benefits on January 16, 2008 (week 3).
     The issue to be decided is the total amount of wages, as defined under Wis. Stat. Sect. 108.02(26), that the employee was paid by all employers during the base period of January 1, 2007 through December 31, 2007.
     The employee earned no wages during the fourth calendar quarter of 2006 or the first calendar quarter of 2007. During the second calendar quarter of 2007 she earned wages in the amount of $1315.40 and cash tips of $687.46. During the third calendar quarter of 2007 she earned wages in the amount of $1904.34, and cash tips of $1439.92. During that calendar quarter she was also paid worker's compensation (temporary total disability) in the amount of $3356.17. During the fourth calendar quarter of 2007 the employee was paid no wages or tips, but did receive temporary total disability of $1678.08. The employee attempted to report all of her tips to the employer, but her supervisors directed her not to report the cash tips, advising her that tax liability for all of her tips was a matter between her and the Internal Revenue Service. The employee received the temporary total disability payments as the result of an injury she sustained while working for the employer.
     Wis. Stat. Sect. Sect. 108.02(4) and (4m), provide in relevant part:
     (4) BASE PERIOD. "Base period" means the period that is used to compute an employee's benefit rights under s. 108.06 consisting of:
     (a) The first 4 of the 5 most recently completed quarters preceding the employee's benefit year; or
     (b) If an employee does not qualify to receive any benefits using the period described in par. (a), the period consisting of the 4 most recently completed quarters preceding the employee's benefit year.
     (4m) BASE PERIOD WAGES. "Base period wages" means
     (a) All earnings for wage-earning service which are paid to an employee during his or her base period as a result of employment for an employer; ...
     (d) For an employee who, as a result of employment for an employer, receives temporary total disability or temporary partial disability payments under ch. 102 or under any federal law which provides for payments on account of a work-related injury or illness analogous to those provided under ch. 102, all payments that the employee would have been paid during his or her base period as a result of employment for an employer, but not exceeding the amount that, when combined with other wages, the employee would have earned but for the injury or illness ...
     The payments that the employee received from the employer for her services in the second and third quarters of 2007, amounted to a total of $3219.74, and constituted wages pursuant to Wis. Stat. Sect. 108.02(26)(b)1.
     The administrative law judge found that the temporary total disability payments the employee received in the final two quarters of 2007 should be counted as wages. However, the department correctly points out in its petition that Wis. Stat. Sect. 108.02(4m)(d), provides that in weeks in which an employee receives temporary disability as a result of employment for an employer, "... all payments that the employee would have been paid during his or her base period as a result of employment for an employer," are to be counted as wages. Therefore, as requested by the department, the administrative law judge's decision in this regard will be set aside. The matter will be remanded to the department for calculation of the wages that the employee would have been paid during her base period, subject to the limitations of Wis. Stat. Sect. 108.02(4m)(d).
     The final question is whether or not the employee's tips constitute wages for benefit purposes. Wis. Stat. Sect. 108.02(26)(b)3., provides that wages include:
     "The value of tips that are received while performing services which constitute employment, and that are included in a written statement furnished to an employer under 26 USC 6053(a)."
     The administrative law judge included the employee's tips as base period wages, noting that the only reason the employee did not report all of her tips to the employer was the employer's specific instruction not to do so. The employee's credit card tips were automatically reported to the employer via credit card charge receipts. After totaling these credit card tips, the employer would pay out an equivalent amount to the employee in her paychecks. The employer instructed the employee not to report to it the cash tips she received, but only to report them to the IRS.
     In its petition, the department argues that the above statute must be read literally, and because the employee allegedly did not make written statements to the employer detailing her tips, they should not be included as wages. The commission is not aware of any Unemployment Insurance rule or advisory opinion that addresses the particular circumstance of an employer refusing to accept reporting of tips. Nor do the IRS regulations for 26 USC 6053 (found in 26 CFR 31.6053), address such circumstance. However, the federal regulations do allow for electronic reporting of tips, which is in fact what occurred when the credit card tips were enumerated by the employer from the charge receipts. The commission finds that the credit card charge receipts constituted written statements of the employee's credit card tips to the employer. The commission further finds that the employee made de facto written statements to the employer of her cash tips, because she made every reasonable effort to do this, but the employer refused to accept her statements. To find that the employee did not provide the employer with written statements of her tips would be to distort the reality of what occurred, and to reward the employer's failure to follow the tax laws applicable to it.
     The commission will therefore set aside the administrative law judge's decision, and remand the matter to the department for recalculation of the employee's base period wages in accordance with the above findings, and pursuant to Wis. Stat. Sect. 108.02(4m).
     DECISION
     The decision of the administrative law judge is set aside. The matter is remanded to the department for recalculation of the employee's base period wages, in accordance with the above commission findings, and pursuant to Wis. Stat. Sect. 108.02(4m).
     Dated and mailed July 11, 2008
     dirksli . urr : 185 : 6 : UW 900 : UW 965 : BR 346
     /s/ James T. Flynn, Chairperson
     /s/ Robert Glaser, Commissioner
     /s/ Ann L. Crump, Commissioner
     cc: Daniel J. Larocque.
     HTS stav 080723-1697956 HTOvermaA


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