Service Charge in restaurant

The_Minister

I was thinking of this the other day.

Would it be possible for a restaurant to put in place a service charge and retain the monies to defray their wages bill?

It would be sneaky and dishonesy, but I'm not sure it'd be illegal.

EDIT: I've also heard of some places keeping tips by credit card.

Marcusm

Not sure how it's dishonest, it's how many restaurants with service charges operate - it's even in guidance on calculating minimum wage. Only a small number of restaurants make an explicit statement that all service charges go to staff. What do you think happens elsewhere?

hullaballoo

Personally, I see nothing wrong with it. Obviously, if I see it, I don't leave a tip. It is more honest than just charging more for the food. There is a growing trend in the US of restaurants paying their staff more and refusing to accept tips - stating clearly that the prices have been increased in order to properly remunerate staff.

It's different here where restaurants are mostly now relying on the economy to justify paying minimum wage to almost all staff. Some are even taking tips from the staff to cover "breakages" etc. It's very difficult working in restaurants here at the moment, unless you're very lucky and happen to work where they pay well and let the staff keep money that belongs to them.

Cody Pomeray

Whether it is right or wrong matters not in the least. Is it legal.

The payment of wages act as amended defines wages as

“wages”, in relation to an employee, means any sums payable to the employee by the employer in connection with his employment, including—
(a) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and

The question then turns on "other emoulument, referable to his employment", and whether this includes a service charge.

There are persuasive authorities on this from English law.

They say that gratuities or voluntary service charge paid in cash are the property of the waiting staff. A restaurant has no claim on these. That part of the service charge which is paid by cheque or card is, in the first instance, the property of the restaurant. HOWEVER, the employer only hold this money in trust for the members of "the tronc".

In the above circumstances, what you describe would be illegal.

However, some restuarants may not have a tronc and appointed troncmaster to manage tax/ distribution, and payments may be made directly from the employer. That is a likely distinguishing factor, the relevance of which is unknown.

RCC v Annabel's [2009] EWCA Civ 361
Wrottesley v. Regent Street Florida Restaurant [1951] 2 KB 277

Peregrinus

Cody Pomeray wrote: »

. . . They say that gratuities or voluntary service charge paid in cash are the property of the waiting staff. A restaurant has no claim on these. That part of the service charge which is paid by cheque or card is, in the first instance, the property of the restaurant. HOWEVER, the employer only hold this money in trust for the members of "the tronc".

In the above circumstances, what you describe would be illegal.

I think it would be legal, actually. It's gratuities and voluntary service charges which belong to the waiting staff. If the restaurant uniformly applies a 10% service charge to all bills, and this is stated on the menu, and payment is not optional, that's neither a gratuity nor a voluntary service charge.

Cody Pomeray

Yes it might be legal, I should have been more clear that I was only talking about voluntary service charges or tips.

That said, I don't know any authority on the compulsory service charge. I don't think it necessarily follows as a matter of logic that compulsory service charges can remain the property of the restaurant, though it is more likely than other types of service charge.

Compulsory service charges are pretty unusual (in Dublin, and Ireland); there are very few restaurants who can get away with them in the first place.