Posted by Malcolm Gregory, Partner
Is it legal for restaurant owners to make deductions from the salaries of employees when customers leave without paying?
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, which covers things like tax and NI; or
• the employee has previously consented in writing to the deduction.
It is lawful for employers to include clauses in their employment contracts to allow for deductions to be made from employees wages as long as it doesn’t breach other legislation such as the National Minimum Wage thresholds. It is therefore common place for employment contracts to contain wording giving the employer the contractual right to make deductions from salary for money owed by the employee to the company.
Whilst these clauses are sufficient to allow employers to make a deduction from wages, the employer must also be able to demonstrate that an event justifying the deduction has occurred. Therefore, in cases of ‘dining and dashing’ the employer would have to show that the employee had a contractual duty to be vigilant and had failed in that duty or been negligent resulting in losses suffered by the restaurant.
It would not follow just from the fact that diners had managed to leave without paying the bill that the employee was in breach of duty or negligent and therefore liable.
Furthermore, retail employees including waiting staff are given extra protection by section 18 of the Employment Rights Act 1996. This provides that deductions made from retail employees for cash or stock shortages must not exceed 10% of the gross amount of the wages payable to the worker on a particular payday. This does not mean that the entire amount cannot be deducted over a series of paydays, just that the entire amount cannot be deducted in one go.
Malcolm Gregory is an Employment Partner in the Leisure and Hospitality team at Royds Withy King. He can be reached on:
01793 847 777 Email us
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