[US] Harrods faces legal action for not passing £1 dining charge along to staff

The iconic London department store Harrods is facing legal action over its addition of a £1-a-head cover charge to diners’ bills, which the company does not pass on to workers, The Guardian reports.

The test case could see change at several other upscale restaurants.

Legislation from October 2024 requires business owners to hand over all tips and service charges to staff. Some restaurants, including those at Harrods, add a mandatory cover charge together with an optional service charge and only give the latter to their workers.

An employment tribunal case involving 29 Harrods restaurant workers and backed by the United Voices of the World (UVW) union will reportedly be heard this September. The workers contend that the cover charge functions in practice as a service charge and should thus be distributed among them and not kept by Harrods.

Their case is the first legal challenge in the UK to test what qualifies as a tip under the Employment (Allocation of Tips) Act 2023. Under the legislation, restaurants, cafes and hotels must ensure all tips, gratuities and service charges paid by customers are allocated fairly to their workers.

Harrods, which employs more than 330 people in its dining establishments, gives the 12.5 per cent optional service charge to workers but does not distribute the compulsory £1-a-head cover charge. 

The charge was introduced at its restaurants and cafes in London before the law changed. Other central London restaurants which levy a cover charge include the Ivy, the Delaunay and the Wolseley.

Workers claim that Harrods’ restaurant managers have discretion to remove the cover charge on request, so that it functions like a tip. Harrods denies this.

Petros Elia - general secretary of UVW - said, “If Harrods has introduced a new charge that walks and talks like a service charge, then it should be treated like one, and paid fairly and transparently to waiters and chefs. Instead, we are once again seeing what can only be described as Scrooge behaviour from a company that can more than afford to do the right thing.”

Harrods reportedly said that its compulsory cover charge was “in line with other high-demand luxury dining destinations” and “entirely separate to the discretionary 12.5% service charge”, adding that it had paid all of the service charge directly to staff since January 2022, more than two years before the Employment (Allocation of Tips) Act came into force. The service charge is calculated on the bill, including the cover charge, so staff receive a 12.5 per cent share of the cover charge

A Harrods spokesperson said, “Harrods’ approach to pay within our restaurant division is informed by ongoing, collaborative and direct dialogue with colleagues.”

The company gives details of the cover charge and service charge in policy documents. It stated that UVW was not a union that Harrods recognises and had not played a direct role in the development of its policies.

“We will continue to engage directly with our colleagues on all issues related to pay and benefits, to ensure they remain industry-leading and guided by our values and colleague commitments,” the Harrods spokesperson said.

Source: The Guardian

(Quotes via original reporting)

The iconic London department store Harrods is facing legal action over its addition of a £1-a-head cover charge to diners’ bills, which the company does not pass on to workers, The Guardian reports.

The test case could see change at several other upscale restaurants.

Legislation from October 2024 requires business owners to hand over all tips and service charges to staff. Some restaurants, including those at Harrods, add a mandatory cover charge together with an optional service charge and only give the latter to their workers.

An employment tribunal case involving 29 Harrods restaurant workers and backed by the United Voices of the World (UVW) union will reportedly be heard this September. The workers contend that the cover charge functions in practice as a service charge and should thus be distributed among them and not kept by Harrods.

Their case is the first legal challenge in the UK to test what qualifies as a tip under the Employment (Allocation of Tips) Act 2023. Under the legislation, restaurants, cafes and hotels must ensure all tips, gratuities and service charges paid by customers are allocated fairly to their workers.

Harrods, which employs more than 330 people in its dining establishments, gives the 12.5 per cent optional service charge to workers but does not distribute the compulsory £1-a-head cover charge. 

The charge was introduced at its restaurants and cafes in London before the law changed. Other central London restaurants which levy a cover charge include the Ivy, the Delaunay and the Wolseley.

Workers claim that Harrods’ restaurant managers have discretion to remove the cover charge on request, so that it functions like a tip. Harrods denies this.

Petros Elia - general secretary of UVW - said, “If Harrods has introduced a new charge that walks and talks like a service charge, then it should be treated like one, and paid fairly and transparently to waiters and chefs. Instead, we are once again seeing what can only be described as Scrooge behaviour from a company that can more than afford to do the right thing.”

Harrods reportedly said that its compulsory cover charge was “in line with other high-demand luxury dining destinations” and “entirely separate to the discretionary 12.5% service charge”, adding that it had paid all of the service charge directly to staff since January 2022, more than two years before the Employment (Allocation of Tips) Act came into force. The service charge is calculated on the bill, including the cover charge, so staff receive a 12.5 per cent share of the cover charge

A Harrods spokesperson said, “Harrods’ approach to pay within our restaurant division is informed by ongoing, collaborative and direct dialogue with colleagues.”

The company gives details of the cover charge and service charge in policy documents. It stated that UVW was not a union that Harrods recognises and had not played a direct role in the development of its policies.

“We will continue to engage directly with our colleagues on all issues related to pay and benefits, to ensure they remain industry-leading and guided by our values and colleague commitments,” the Harrods spokesperson said.

Source: The Guardian

(Quotes via original reporting)