After Wahaca recently found itself in hot water over its walk-out policy, many employers are considering best practice. Malcolm Gregory provides guidance on how to handle wage deductions legally and fairly
The problem
After being ‘outed' on Twitter for its walk-out policy, restaurant chain Wahaca agreed that a waiter will not have to foot the bill after diners left the restaurant without paying. The tweet sparked a public outcry following a number of comments from restaurant workers, who claimed that it was common practice for restaurants to make deductions from the wages of waiting staff.
The law
Under section 13(1) of the Employment Rights Act 1996, an employer may not make a deduction from an employee's wages unless:
• It is required or authorised to be made by a statutory provision or a relevant provision in the employee's contract (this would cover things like tax and national insurance); or
• The employee has previously consented in writing to the deduction.
Section 18 of the Employment Rights Act 1996 gives extra protection to retail employees, including waiting staff, by providing that deductions made for cash or stock shortages must not exceed 10% of the gross amount of the wages payable to the worker on a particular payday.
Expert advice
It is common practice for contracts of employment to contain a standard clause that allows employers to make deductions from salary for any money owed to them by the employee.
Such clauses in a contract that are signed by the employee would be adequate to enable the employer to make a deduction from wages. However, the employer must be able to demonstrate that an event justifying the deduction has occurred.
In cases of ‘dining and dashing', the restaurant would have to show there was both a contractual duty on the employee to be alert to the potential for customers to leave without paying and that the employee had failed in that duty or been negligent. While restaurants may be able to show that the employee had a contractual duty, it is likely to be very difficult to show that they had been negligent in that duty.
As it turned out in this case, Wahaca had only initially intended to deduct £3 from the employee's salary based on the £40 bill, and not the whole sum. Wahaca referred to the incident being caused by "an internal communications" issue, which has now been resolved. The story is a perfect case in point of the power of social media and how just one tweet can cause such adverse PR implications.
To-do checklist
• Do have a contractual right to deduct sums from employees' contracts.
• Do make sure that you exercise any such clause reasonably.
• It is unlikely to be reasonable to deduct sums from employees in the case of a ‘dine and dash', unless there is clear evidence of negligence or evidence that the employee was complicit in the offence.
• Do make sure that employees understand any contractual terms or policies in place that refer to situations when deductions from salaries can be made.
• Consider discussing with employees that it is generally not appropriate for them to share their employment terms with customers.
Beware
If deductions are made to employees' salaries in situations where it may not be lawful, the employee could bring a claim in the employment tribunal for one or a series of continuing deductions from salary. The employee could also resign and bring a claim for constructive dismissal if they have been employed for over two years.
Contact
Malcolm Gregory is an employment partner in the leisure and hospitality team at Royds Withy King
malcolm.gregory@roydswithyking.com
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