Employee

Employer

Anonymised Parties

A Sous Chef

A Hotel

Representatives

Self-represented

Aleksandra Tiilikainen, IBEC

Act

Dispute Reference No.

Date of Receipt

Grievance seeking adjudication by the Workplace Relations Commission under section 13 of the Industrial Relations Act, 1969

IR - SC - 00001262

11/04/2023

The employee commenced working in the hotel as a junior sous chef on October 28th 2021.  He generally works 39 hours a week and up to 45 hours during busy weeks.  He is paid €17.16 per hour.  At the hearing, the management agreed that, since he started in the hotel, he has been committed and innovative in his approach to his job and he is highly regarded as a member of the kitchen team.

The employee’s grievance concerns the application of the provisions of the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 (“the 2022 Act”) to his employment. 

Since the passing of the new legislation on December 1st 2022, the employee said that he has been trying to regularise the distribution of tips in the hotel.  He said that there is no policy setting out how tips are to be distributed and that there has been no formal meeting to formulate a policy on tips.  He complained that there is no information in the form of a notice for customers, explaining how tips are distributed.

Setting out the current procedure for distributing tips, the employee said that, depending on whether they work a lunch or evening shift, the chefs are in a group of four (lunch) or five (dinner) and the group receives the equivalent in tips paid to one person in the bar / restaurant.  The employee submitted that this is unfair, because the chefs contribute to providing a service to customers and if the food isn’t of a high standard, customers won’t come in.  As a resolution of this issue, the employee said that, for the purpose of receiving tips, he wants to be treated as an individual, instead of as part of a group.

The Distribution of Tips is a Collective Issue

At the opening of the hearing, Ms Tiilikainen raised some procedural points which were resolved; however, the issue of the distribution of tips being a collective issue remained for consideration.  In her submission, Ms Tiilikainen said that any recommendation regarding the distribution of tips would affect around 35 staff members, and not just the employee.  For this reason, she said the employee’s grievance is not appropriate for consideration under section 13 of the Industrial Relations Act. 

How Tips are Managed in the Employer’s Hotel

In anticipation of the passing of the new law on December 1st 2022, the employer displayed a tips and gratuities notice at the entrance to the restaurant and on menus.  A copy of this notice was included in the employer’s book of documents at the hearing.  The notice states:

“100% of tips go directly to staff.  We appreciate your generosity.”

The hotel operates what is known as a “tronc” system (from the French “tronc des pauvres”) where tips are collected and managed by employees.  Cash tips are collected and distributed among staff at the end of each shift.  Tips added to credit / debit card payments are converted to cash and included with the cash tips at the end of each shift.  A share of the tips goes into the kitchen.  The policy on tips in the company handbook states that,

“Tips are divided by the staff at the end of each shift.”

At a meeting on January 12th 2023, the employee, the head chef and the general manager discussed the recently enacted legislation on tips and gratuities and the employee’s concerns about how tips were distributed among kitchen staff.  The general manager explained to the employee that they could not direct how much was given to the chefs in tips and he was encouraged to engage with his colleagues to address his perceived lack of fairness.  At a second meeting in April 2023, the employee again requested management to intervene to direct that more money in tips be distributed to kitchen staff.  The employee was again informed that the distribution of tips could not be influenced by management.

In her submission, Ms Tiilikainen said that the new legislation requires an employer who contemplates making a change to a policy on tips and gratuities to consult with employees in advance of any change.  It is the employer’s position that no change was required to its tips policy because employees are given all the tips received in the hotel.  For this reason, and, because all the staff were aware of the new legislation, a formal meeting with employees was not considered necessary.  

It is the employer’s position that the employee was provided with a policy in relation to tips which is included in the employee handbook and which states that “Tips are divided by the staff at the end of each shift.”  This informal policy has been the custom and practice in the hotel for some time, where employees distribute tips among themselves, with no input from management.

Tips and Gratuities Notice

Ms Tiilikainen referred to section 4E of the 2022 amendment to the Payment of Wages Act which provides as follows:

(1) An employer to which this section applies shall, in accordance with regulations made under subsection (2), display a notice (in this Act referred to as a ‘tips and gratuities notice’) stating -

(a) whether or not tips or gratuities are distributed to and amongst employees,

(b) where tips or gratuities are so distributed to and amongst employees, the manner in which they are distributed and the amounts so distributed,

(c) whether mandatory charges, or any portion of them, are distributed to and amongst employees, and if so, the manner in which they are distributed and the amounts so distributed, and

(d) such further or additional information as may be prescribed under subsection (2).

The notice posted in the hotel and on menus which states, “100% of tips go directly to staff” is acknowledged to be very brief; however, Ms Tiilikainen stated that it is in line with section 4E(1) because it is clear that 100% of tips are distributed among employees.  No mandatory charges apply to customers, so sub-section (c) is not relevant.  Ms Tiilikainen submitted that this notice complies with Statutory Instrument 545 of 2022, the Payment of Wages Act 1991 (Display of Notices) Regulations 2022.

Distribution of Tips

Ms Tiilikainen said that most of the tips received in the hotel are in cash and are not regulated by the 2022 Act.  The employer acknowledges that the management and distribution of electronic tips is not as transparent as the Regulations require and they are in the process of updating their notice and policy to bring them into line with the Regulations.

The new legislation does not prescribe how tips are to be distributed, other than they should be distributed “in a manner that is fair” (s. 4B(1)).  The employer has allowed relevant employees to distribute tips among themselves at the end of each shift, as the majority of tips are in cash and no method is required for the distribution of cash tips under the 2022 Act.  In Ms Tiilikainen’s submission, she said that a key factor in the distribution of tips is the requirement at s.4B(4)(g):

(g)  whether there is an agreement, whether formal or informal, between the employer and the employee providing for the manner in which tips or gratuities are to be distributed.

The employee is in a role that is not customer-facing and the staff have decided that, in respect of his share of tips, he should be counted with the kitchen staff as one employee.  The employer’s position is that he has not suffered any loss arising from this policy.

It is the employer’s position that this grievance has not progressed through all the stages of the company’s grievance procedure.  Ms Tiilikainen referred to several legal precedents that show that an employee is required to exhaust internal procedures before submitting a formal grievance to the WRC.

I agree that the way in which tips are distributed is a collective issue that affects all the employees in the hotel who currently receive tips, and those who are considered not eligible for tips.  I agree also that it is incumbent on an employee who experiences a grievance or a sense that they are being treated unfairly to use their employer’s procedures to find a resolution.  It is my view however, that the employee has raised important questions regarding how the provisions of the 2022 Act are applied in the hotel and that these questions merit some consideration.

The Responsibility of the Employer

The provisions of the 2022 Act apply in certain parts to tips received in cash and by electronic means.  However, section 4B is concerned specifically with the treatment of “tips or gratuities received by the employer by an electronic mode of payment.”  Section 4B(1) provides that,

(1) An employer to which this section applies shall, in a manner that is fair in the circumstances and in accordance with this Act, distribute to his or her employees any tips or gratuities received by the employer by an electronic mode of payment.

The legislation recognises that electronic tips are “received by the employer” and it is apparent that the intention of the Act is that the responsibility for the fair distribution of tips added to credit and debit cards rests with the employer.  The cashing up of credit and debit card tips and the inclusion of this money with cash tips does not meet the requirement of section 4B(1).

Written Statement of the Amount Received in Electronic Tips

Section 4B(5)(a) provides that,

(a) An employer to which this section applies shall, no later than 10 days from the date on which a distribution of tips or gratuities is made, give or cause to be given to an employee a statement in writing specifying clearly -

(i) the total amount of tips or gratuities distributed by the employer for the period to which the statement relates, and

(ii) the amount of tips or gratuities distributed to the employee to whom the statement is provided.

At the hearing, the employer acknowledged that the way in which credit and debit card tips are distributed is not as transparent as the Act requires.  To achieve the fairness required by section 4B(1), an employee must be told how much is taken in in electronic tips over a specific timeframe and the value and proportion of tips paid to them.

Consultation with Employees on the Policy Regarding the Distribution of Tips

Section 4B(7) provides that,

(7) An employer to which this section applies shall, before establishing or making a material change to its policy on the manner in which tips or gratuities shall be distributed amongst employees, or on the way in which mandatory charges shall be treated, consult with those employees.

The employer argued that there is no obligation on them to consult with employees on the distribution of tips, because the policy that has been in place through custom and practice in the hotel has not changed since the passing of the 2022 Act.  I disagree with this argument.  Section 4B(1) requires the employer to distribute credit and debit card tips in a fair manner and “in accordance with this Act.”  This means that, following the enactment of the 2022 amendment, an employer to whom the legislation applies must establish a policy for the distribution of electronic tips.  Before establishing such a policy, section 4B(7) requires the employer to consult with employees.

The employer’s policy on tips and gratuities is concise in its single sentence:

“Tips are divided by staff at the end of each shift.”

It is my view that the 2022 Act requires more than this, and I would encourage the employer to develop a policy that, as a starting point, includes the following information:

1.              The job title of the person responsible for managing electronic tips and communicating the amount received in tips to employees;

2.              The frequency of the calculation and distribution of electronic tips;

3.              The employees eligible for electronic tips and the proportion of tips to be given to each category of employees.

Tips and Gratuities Notice

Section 4E(1) of the 2022 Act, concerning a tips and gratuities notice, makes no distinction between tips received in cash or electronic form and provides as follows:

(1) An employer to which this section applies shall, in accordance with regulations made under subsection (2), display a notice (in this Act referred to as a ‘tips and gratuities notice’) stating -

(a) whether or not tips or gratuities are distributed to and amongst employees,

(b) where tips or gratuities are so distributed to and amongst employees, the manner in which they are distributed and the amounts so distributed,

(c) whether mandatory charges, or any portion of them, are distributed to and amongst employees, and if so, the manner in which they are distributed and the amounts so distributed, and

(d) such further or additional information as may be prescribed under subsection (2).

The employer’s notice to customers which states that “100% of tips go directly to staff” falls short of what is required by sub-section (b) above, which, by any reasonable interpretation means that customers must be informed how frequently tips are distributed to staff, if they are paid in cash or through wages and the proportion of the tips given to each category of employees.

Sub-section 2 referred to above has been legislated for in Statutory Instrument 545 of 2022, the Payment of Wages Act 1991 (Display of Notices) Regulations 2022 (SI 545/2022).  Section 4 of the statutory instrument is clear regarding the positioning of a notice in a form that can be easily read in two locations on the premises and where consumers pay for a service.  Section 4(c) governs how the notice should inform customers about how the employer manages electronic and cash tips.  It provides that a tips and gratuities notice must contain,

…in addition to the matters referred to in section 4E(1) of the Principal Act -

(i) a statement to the effect that the Principal Act requires the employer to distribute to his or her employees any tips or gratuities received by the employer by an electronic mode of payment, and

(ii) a statement of the employer’s policy on tips or gratuities made to, or left for, employees in a form other than an electronic mode of payment.

I disagree with the employer’s position that its notice to the effect that “100% of tips go directly to staff” adequately complies with the requirements of section 4E of the 2022 Act or with the provisions of section 4 of SI 545/2022.  It is apparent also from section 4(c)(ii) above that the Act is not unconcerned with the regulation of tips received in cash.

I recommend that the employer gives some consideration to the shortcomings I have identified in their application of the provisions of the 2022 Act.  I further recommend that, if the employee’s grievances remain unresolved after three months from the date of the issuing of this Recommendation, that he uses the employer’s grievance procedure to seek a resolution at local level.  It remains open to him, if no resolution is found, to submit a complaint under the Payment of Wages Act 1991.    

Tips and gratuities