If the UK introduced a piece of employment law to require all employees to be nice to each other in the workplace, then you would instantly and rightly dismiss it out of hand. What a ridiculous idea – how can you define what it is to be “nice” and without that, how can you determine whether someone has fallen off the straight and narrow or not? In whose eyes must the employee be nice? Measured by what standards? With what exceptions for those times when being nice is really just a burden too far? And if you accept that a basic principle of good law is that you know how to comply with it, where would this one leave you? No, with such a vacuum at its heart, that law could never work.

So welcome, everybody, to the government’s latest attempt to legislate by adjective. Hot on the heels of the completely undefined “predictable” which underpins the new Workers (Predictable Terms and Conditions) Act 2023 comes the Employment (Allocation of Tips) Act 2023, in force from October this year. This piece of naked electioneering requires that tips be distributed “fairly” but gives no indication of what that actually means. As a result, the new Act potentially represents Christmas come early for unhappy and often short-service workers in the hospitality and leisure sectors.

Of course, now we have also seen the statutory Code of Practice to fill in the gaps in the Act and trailing along behind that will be some non-statutory guidance to fill in the gaps in the Code. In some administrative respects the new Code is a useful read. From what we have seen so far, however, it will be of little to no help to employers in answering that key question – what is “fair”? The Code is about process as much as about achieving substantive fairness. Essentially all we are given is a collection of “overarching principles” which employers may use to inform their thinking, including type of work done, basic pay levels, hours worked in the relevant period, individual and/or team performance, length of service and customer intention where known.

All fairly obvious stuff so far and it is hard to think that many employers in these sectors do not consider those factors already. However, there is no indication in the Code of any particular weighting which must be applied to each of those considerations to make the final output “fair”. If I am engaged in the kitchens at a restaurant, I do work which is mostly invisible to the paying customer, but which is hot, pressured, a bit shouty and periodically really quite dangerous. Will it feel fair to me that my employer considers its priority in the allocation of tips to be the public face of its services, i.e. those of my colleagues who swan about in the cool and calm of front-of-house? And if I am a waiter, running hither and yon and catching undeserved flak from unreasonable customers because the food has come out of the kitchen late, burnt to a crisp or still twitching, will I not resent any comparable distribution of tips to those who hide in the safety and anonymity of the kitchen and have not done 20,000 steps by the end of their shift? Whatever the employer does, it will be unfair in someone’s eyes.

So whose eyes should carry the day? It cannot be the Employment Tribunal charged with enforcing all this, since it cannot know everything that weighed upon the employer’s decision that day or that month, and it is in any case not allowed to substitute its judgement for that of the employer. Ultimately the view that matters must be that of the employer. That has always been the case, but the question is how far its discretion will be clipped by these new rules. What do they require it to do that it did not do before?

There are two main answers to this, one definite and one possible:

1. More admin, definitely – the new Act imposes requirements on employers to have a written tips allocation policy and to maintain records of who got what. Workers have rights to access these records in relation to their own numbers as a proportion of the total gratuities received by the employer each month. As a defensive measure rather than a statutory obligation, employers will also want to make a note of why. A handful of bullet points for and against particular teams or individuals should make an allocation more or less unchallengeable if we are operating on the ordinary principles governing the exercise of contractual discretions by employers (being that if the discretion is not exercised irrationally, perversely, maliciously or capriciously, it is probably valid). That will be the case even if the outcome of that discretion may work harshly or unfairly on one or more employees.
2. However, as it stands, the requirement for “fairness” means that we are not dealing with ordinary principles, or not necessarily so, and in that sense a requirement for positive fairness would indeed seem to be a step onwards from the current position. Merely because the exercise of a discretion is contractually valid will not automatically make it fair.

There is a possible solution or this, to be lifted from the law relating to unfair dismissal. That allows an employer to dismiss fairly if the termination falls within the “range of reasonable responses”, meaning that it is only if no reasonable employer would have dismissed on those grounds that major difficulties arise. In other words, move the key question away from the legal void which is “fair” and towards the more familiar “reasonable” – or to be more precise, “not unreasonable”. An allocation of tips which no reasonable employer would have made (i.e. which is perverse, irrational or malicious, etc.) is a far more appropriate threshold. It would provide employers with a proper degree of discretion and flexibility having regard to the particular circumstances they face at the time, and it would minimise the chances of time-consuming grievances around the fairness of a few quid one way or another. It is probably too late to add anything to that effect even in the non-statutory guidance, but whether or not that is right, the addition of some expectation-management wording to that effect in your tips allocation policy could still serve you well at a later point.