Restaurant Tipping Policies ‘Are A Question Of Contract’

Controversy grows regarding major restaurant chains not passing tips to workers

Specialist employment lawyers have outlined that the decision of restaurants to allow staff to keep tips from customers is “a question of contract”, as controversy grows regarding major chains reportedly not passing gratuities to workers.

The chain “Bill’s” has been put under the spotlight following reports that service charges added to customer bills and any tips left on tables for waiting staff were being held by the company rather than being passed on to staff.

Concerns regarding the policy have also come after similar issues were raised regarding the “Cote” chain of restaurants, with claims that the company misled diners regarding the policy of using service charges to subsidise wages.

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According to Irwin Mitchell’s specialist Employment Law team, whilst the issue can be a contentious one which raises opinions from customers and staff alike, ultimately it comes down to whether an employer has agreed with staff from the outset regarding how such funds are handled.

Expert Opinion

“Whether an employee is entitled to keep any tips or gratuities that are paid is a question of contract between the employer and the employee. The employer’s practice should ideally be clearly set out in the contract of employment and explained to new starters when they commence employment.

“Many employers in the service and catering industry have a policy of pooling tips or gratuities to be divided amongst both ‘front of house’, and ‘back of house’ staff, in a practice known as ‘tronc’. Some employers withhold a percentage of the total tronc for the business, and there is nothing unlawful in this providing the employer is clear on their policy with both staff and customers.

“National Minimum Wage legislation prevents employers from being able to count service charges, tips and gratuities processed through their payrolls towards the payment of the national minimum wage.

“Where employees are contractually entitled to these additional payments, they may sometimes count as ‘wages’ for the purposes of the unlawful deduction of wages legislation, giving rise to a claim from the employee if payment is unlawfully withheld.

“The Government does have a Code of Best Practice for employers on services charges, tips, gratuities, and cover charges, which encourages transparency with both customers and employees, but this is entirely voluntary.

“However, employers must ensure that they comply with the legal requirements of the Consumer Protection from Unfair Trading Regulations, which state that information provided about service charges, tips, gratuities and cover charges must not be misleading.

“Any employer who did require their employees to be dishonest with customers as to their practices would place those employees in a very difficult position. It could also be considered as a breach of the implied contractual term of mutual trust and confidence, potentially risking a claim of constructive unfair dismissal.”

Padma Tadi – Irwin Mitchell

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