Manager claims forced resignation after questioning 'tips' policy

Restaurant didn’t share gratuities with staff, leaving manager frustrated

Manager claims forced resignation after questioning 'tips' policy

As an employer, dealing with tips can be complicated, especially in the hospitality industry.

Tips or extra gratuity money is a voluntary payment that customers give in recognition of exceptional service. Depending on the type of business, the tip amount can vary.

Generally, company policies are put in place to determine the distribution of tips to ensure a fair and equitable system.

In this decision from the Fair Work Commission, an employee questioned the management’s policy of retaining the tips, and claimed she suffered for it.

Background of the case

The employee has worked as the employer’s restaurant and bar manager since March 2021.

According to records, there had been a “long-standing” company policy where the employer retained staff tips. So the manager raised her tip concerns with the HR adviser, who subsequently raised them with the CEO.

After doing so, she then recalled that the CEO’s “tone and words” made her feel “belittled and embarrassed,” adding that she felt “she had no authority to make small decisions in the area she was employed to manage.” She teared up in front of another staff member and “had to walk away as she was visibly upset.”

Later, she questioned the company policy’s ethics and legality, submitting that she “did not receive an answer to whether their policy of retaining all the restaurant tips (both cash and credit card) was ‘legal and ethical.’”

She said that the HR adviser told her in an email that: “The tip issue is complicated because of the tax laws, and I am seeking further advice.”

On another occasion, she claimed that the HR adviser told her in person that “they were looking at potentially having to put a sign in the restaurant to declare to guests that [the establishment] retains all of the tips received by patrons,” and “also looking at writing this into the staff employment contracts moving forward.”

The manager argued that this policy “flagged to her that something was not legal in the way the tip monies were being retained by the business,” adding that “in her 20-plus years’ experience working in hospitality, she had not encountered a business that retains the gratuity money left by patrons.”

Pending investigation of the policy, the working relationship between the parties deteriorated further. She then raised bullying and harassment concerns by management.

The manager said the CEO would often “ghost” her when he walked past her leading up to her resignation, saying that the latter “would not even look up at her and would not say anything to her.”

She allegedly resigned due to the employer’s alleged conduct.

Meanwhile, the employer argued that such conduct was part of a “reasonable management action” and was not designed to induce the manager’s forced resignation. It maintained that “tip retention was already a company practice even before the worker was hired.”

“The tips were collected and kept in account to be used to support staff events and not treated as company income,” the employer argued.

Was there unfair dismissal?

The meaning of dismissal

The Fair Work Commission explained that for it to be treated as “forced resignation,” the employer’s acts “must directly or consequentially result in termination.”

The commission considered the “probability” of the employer’s conduct leaving the manager “no effective or real choice but to resign.” It said the manager’s “dissatisfaction” with the management’s actions or decisions “cannot be construed as having contributed to resignation.”

It noted that the manager could not provide evidence “that the employer’s actions compelled the worker’s resignation.”

“Other options [were] available to the worker aside from resignation,” the FWC said. Thus, it said that the manager was not unfairly dismissed under the FW Act. The manager’s application was then dismissed.

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