Migliaccio & Ors v Smith (Southern) (Unfair Dismissal: Constructive dismissal)

A contractual entitlement to gratuities may be removed by a later written contract which fixes a revised basic wage and omits the former gratuity provision. Continuing to distribute gratuities under an arrangement, and using them to calculate holiday pay, does not necessarily preserve a contractual entitlement to them as pay for work done.

Where the Employment Tribunal was entitled to find that gratuities had ceased to be part of the contractual wage bargain, their later unilateral redistribution did not amount to a repudiatory breach. The employees were therefore not constructively dismissed.

The claimants were long-serving waiting staff at the respondent’s pub restaurant. A 2005 contract stated that payment of gratuity would continue, but a 2009 contract increased the basic hourly wage to the national minimum wage and omitted gratuities. Gratuities nevertheless continued to be distributed to waiting staff until 2013.

In 2013 the respondent removed the optional service charge and required that gratuities be shared with kitchen staff. After their grievance failed, the claimants resigned and alleged constructive unfair dismissal. The Employment Tribunal dismissed the claims. The central issue on appeal was whether gratuities remained a contractual part of the claimants’ pay after the 2009 contract.

1. Appeal dismissed. The Employment Judge was entitled to find that, from 2009, gratuities no longer formed part of the claimants’ contractual remuneration.

2. For the purposes of the appeal, the Employment Appeal Tribunal assumed in the claimants’ favour that the 2005 provision concerning gratuities was an express contractual term and was sufficiently certain for incorporation. The decisive question was instead whether that entitlement survived the 2009 contract.

3. The 2009 contract deliberately omitted gratuities while increasing the contractual hourly wage to the then national minimum wage. The claimants accepted that alteration. The later exclusion of gratuities from pensionable pay in 2011, without objection, further supported the finding that gratuities were no longer contractual pay.

4. Oral assurances that the previous distribution would continue, and the use of tips when calculating holiday pay, were consistent with a continuing non-contractual arrangement. They did not require the conclusion that gratuities remained payable under the contractual wage bargain. Since the express wage term did not include gratuities, no inconsistent term could be implied.

5. There was consequently no breach of contract when the respondent changed the gratuity arrangement in 2013. The resignations were not constructive dismissals, so the unfair dismissal claims failed.

• Employment Appeal Tribunal: Appeal dismissed; the Employment Judge’s dismissal of the constructive unfair dismissal complaints was upheld.
• London (Central) Employment Tribunal: Employment Judge Wade dismissed the complaints by judgment dated 21 February 2014, with reasons promulgated on 31 March 2014.