National Minimum Wage (Protection of Employee Tips) Bill 2017

Print page
Dáil Private Members Business
National Minimum Wage (Protection of Employee Tips) Bill 2017
- Second Stage
Scheduled: Tuesday, 18th June 2019 @ 8pm  
Speech for Minister Regina Doherty, T.D.
Minister for Employment Affairs and Social Protection
Check against delivery
I opposed this Bill last week in the Seanad and I am opposing it again here today.
This is not because I don’t want to help low paid workers. My record on that speaks for itself.
It is not because there is nothing good in this Bill. There is.
It is not for political reasons. I will work with anybody who is trying to achieve additional protections for workers.
The reason why I am opposing this Bill is because it is too flawed – it is fundamentally flawed. And this is not just me, a Government Minister and politician, saying so. I am guided by the independent Low Pay Commission on this.
The Government had not opposed this Bill in the early stages of its passage through the Seanad because I asked the Low Pay Commission to examine tipping practices and report back with its findings. When those findings were examined closely, it became clear that this Bill had taken the wrong direction and it wasn’t something that could be fixed by a few amendments. A different approach was needed.
So I am taking a different approach. One that I believe will be workable and enforceable.
So who are the Low Pay Commission? The Commission is an independent body representing a wide range of interests and perspectives. When they were conducting their examination of tipping practices, the Commission engaged in a targeted consultation with political parties, Trade Unions, employer and employee representative groups, experts in employment law and State bodies such as the Revenue Commissioners and the Workplace Relations Commission. They also examined current tipping practices in other jurisdictions.
And what did the Low Pay Commission find? The Commission found, as set out in its 2018 report that:
  • Legislation or regulation should not be introduced in this area as it could be unworkable and unenforceable.
  • It also found there could be unintended negative consequences for low paid workers such as the reclassification of service charges, leading to a potential reduction in their take home pay.
  • The Commission stated that because tips are paid in a variety of different sectors and contexts, this type of ‘one-size-fits-all’ approach in the Private Members’ Bill is not recommended.
I want to note some specific points that were made in the submissions that were made to the Commission during its examination.
  • The Revenue Commissioners noted that if tips are issued through the employer, PAYE, Universal Social Charge and PRSI (including Employer PRSI) must be applied. This is what is meant when we say this Bill has tax implications.
In Ontario, Canada, the ‘Protecting Employees Tips Act 2015’ contains a number of provisions similar to those in this Bill. There is, to my knowledge, currently no study regarding the effectiveness of this Canadian provincial legislation, but there is at least some anecdotal evidence to suggest that employees’ take-home pay was reduced as a result of their legislation.
  • The Green Party argued that it would be extremely unlikely that the State could provide the level of inspection and enforcement required to make the Bill effective.
  • The Workplace Relations Commission, which, if this Bill goes through, would have the role of inspection and enforcement, stated this legislation would be unenforceable.
The WRC’s Adjudication Officers rely heavily on paper based evidence. Tips, by their very nature, do not attract records, receipts and paperwork. In the absence of paper records, an Adjudication Officer in the WRC would have to consider the credibility of those giving evidence and judge who they considered to be telling the truth. There would be no official paper record, unless a formal system of recording and distributing tips was introduced. This is no easy task. It was a key reason why the Low Pay Commission concluded that the administrative and compliance costs involved in regulating this area would not be justified.
  • On that point, it was Fianna Fáil who submitted their opinion to the Low Pay Commission that we shouldn’t create more bureaucracy in an area that doesn’t warrant it.
The WRC also sees a problem with the Bill’s proposed ‘Troncs schemes’. This is because, in the employment rights sphere, claims must be taken by employees against employers. However, when a tronc exists, the responsibility for the collection and distribution of tips shifts away from the employer. And as a Troncmaster is not an employer, no claim could be taken against them if they didn’t distribute the tips fairly.
In that context, Revenue confirmed that if a “troncmaster” is involved in the distribution of tips, they would in fact be required to register as an employer and make tax deductions accordingly.
Furthermore, the WRC noted that the entirety of Section 4 of the Private Members’ Bill, which provides for ‘offences’, would be impossible to enforce. They said that for Section 4 to be viable, the Bill would require an explicit statutory obligation on employers to keep a record, for a specified period, of all gratuities received, and in all forms (cash and non-cash), similar to the record keeping obligations in other employment law statutes. This is not in the Bill and, if it were, we would be talking about an extraordinary level of bureaucratic burden.
So, I want to make this point clearly – it is not about me finding fault with this Bill. It is informed and interested parties, including the very body that would be charged with enforcement. It is the Low Pay Commission, the Workplace Relations Commission, the Revenue Commissioners and even Fianna Fáil and the Greens who have raised issues around legislating in this manner.
There are other problems with this Bill that should not be underestimated. For example, it proposes to amend one section of the National Minimum Wage Act in a way that fails to distinguish between tips and service charges, despite the fact that another part of the National Minimum Wage Act makes an important distinction between them in relation to the calculation of a person’s minimum wage. This brings a contradiction into that Act that would make it unworkable.
The Bill also provides ‘the Minister’ with regulation-making powers in relation to the introduction of ‘Tronc schemes’. But it’s actually completely unclear from the Bill just who and how those schemes should operate. There is no detail, and no ‘policies and principles’ set out.
The Bill says there should be employee involvement in the tronc schemes, but does not say whether employers should also be involved or which of them should be in control.
The Bill provides that a “collective agreement” in relation to tips should prevail over any provision of the Bill that conflicts with it, but fails to set any parameters around what is envisaged by this, and who might be a party to it. Many of the workers in this sector do not have Trade Union representation anyway.
There are implications too for low paid workers, some of whom benefit from certain social welfare means-tested schemes, if tips are pooled into Tronc schemes and distributed that way.
I and my Departmental officials have met, together and separately, with industry stakeholders such as the Restaurants, Vintners and Hotels Associations, as well as representative groups such as ‘One Galway’. We have listened carefully to concerns expressed by hospitality workers, university students, secondary students, Trade Unionists and commentators.
It will take a consensus to solve this problem - a consensus that the Commission found to be absent. I was glad to find that some of the key stakeholders are amenable to reaching a voluntary agreement in relation to tipping as an alternative to heavy regulation. I have not minced my words with them around the need to move on this.
What I am seeking to do is to regulate only to the extent necessary to make progress for the workers concerned and to avoid all the pitfalls the Low Pay Commission has warned about that would act against the interests of those workers.
So, I wish to take a balanced, considered approach.
And I think it’s important to note that none of the proposals put forward will be a ‘silver bullet’ for workers in this sector who have described to me their struggles in terms of paying rent, education fees, car insurance, utility bills etc. There are broader issues at play. But what I can do, as Minister for Employment Affairs and Social Protection, is to build on the advances I have already made with the Employment (Miscellaneous Provisions) Act to help low paid workers and workers in precarious employment.
What I intend to do is:
1.    To amend the Payment of Wages Act to ensure that tips and gratuities cannot be used to ‘make-up’ or satisfy a person’s contractual wages; and
2.    To provide for a requirement on employers to clearly display, for the benefit of workers and customers, their policy on how tips, gratuities and service charges are distributed.
I believe that by confining the scope of the new legislation in this way, I will support workers and avoid the downsides described by the Low Pay Commission.          This is about doing what’s possible, not what’s populist.
If I can place tips and gratuities firmly outside calculation of a person’s contractual wages and bring transparency to how tips are distributed, I believe this will go a long way to assisting the people we all want to assist.
My measures will tackle head-on the main issues hospitality workers have asked me to solve. The first is to ensure their employers cannot take their tips in order to make up, rather than supplement, their wages. The other main issue is a lack of transparency in some establishments around how tips are distributed.
I believe transparency can have a very strong and positive impact on how people behave. We know what the right thing to do is and I am encouraging employers to do it.
I will bring clarity to what we mean by “tips, gratuities and service charges”. These terms are not defined anywhere in the statute book. They are only referred to, to a limited extent, in the Appendix to the National Minimum Wage Act.
An important point to note is: that Act allows “the amount of any service charge distributed to the employee through the payroll” to form part of the calculation of a person’s minimum wage, but it excludes non-cash tips and gratuities from this calculation.
In that context, the legislature has already made a distinction between tips and gratuities on the one hand, and service charges on the other.
In contrast to tips, service charges are transparent, accounted for and under the control of the employer. They form part of the business revenue and can cover a range of overheads including wages. This Private Members’ Bill has simply ignored that fact and merged the three concepts into one.
I can ask my Department to consider further whether service charges might be provided for in a different way in due course. But for now, I intend to improve upon the status quo, and I must do it in a way that does not “drive a cart and four horses” through the well-established and well-functioning National Minimum Wage Act.
This Bill is at the wrong starting point. It seeks to amend the wrong Act. It cannot be fixed with just a few changes here or there. We have to start over.
I have already received approval from Cabinet to proceed generally with my proposals and the Heads of Bill have been circulated to other Departments in anticipation of formal drafting in the Office of the Parliamentary Counsel.
I wish to conclude by saying that the conclusions of the Low Pay Commission’s 2018 Report were unanimous and strong. The Commission, which consulted widely and has representation across a range of stakeholders - including ordinary workers - has advised strongly against introducing heavy regulation or primary legislation in this area.
I think it is unwise to ignore the Commission’s findings.
Just like I did with the Employment Act of 2018 when I restricted zero hours contracts and introduced banded hours contracts, I will continue to try to make any advances I can in relation to the employment rights of low paid and precarious workers.
The approach taken with this Private Members Bill is, I regret to say, not coherent with the Act it seeks to amend. It would cause the National Minimum Wage Act to not work. For that reason, and for all the other reasons I have outlined, I cannot support it.
Finally, I wish the House to note that in accordance with Dáil Standing Orders 178 and 179, I have asked that a Money Message would be required in relation to this Private Members’ Bill.
This Bill, if enacted, would cause significant additional expenditure to be incurred by the Workplace Relations Commission. There are over ten thousand business establishments nationwide in the hospitality sector that would fall within the scope of this Bill. If the WRC were to fulfil its inspection and compliance obligations in relation to even a portion of them, this would be a significant additional burden on a State funded body.
In addition, this Bill would create new offences. The costs associated with the prosecution of criminal offences give rise to an appropriation of public moneys and this necessitates a Money Message in this case.
It would be remiss of me not to raise this issue in the House tonight.
Thank you.
Last modified:18/06/2019