Workers who hide tips risk losing employment rights
Hospitality workers who fail to declare their tips to the tax authorities cannot rely on basic employment rights and protection from unfair dismissal, lawyers have warned.
A café worker who brought a case against his former employer had his complaint of unfair dismissal thrown out after the employment tribunal found he had failed to declare regular tips to HM Revenue and Customs (HMRC).
Gary Lawlor, a manager who worked at Coia’s Café in Glasgow between 2004-14, was among workers at the café who had an informal arrangement with bosses to declare less in tips than they actually received.
The employment tribunal said the employment contract was therefore “tainted by illegality” and could not offer protection to the worker.
Employment lawyer Brian Napier QC explained to The Herald: “There’s a legal rule which basically says if a contract is illegal or tainted by illegality then it cannot be relied on.
“For example, people who are working illegally might be presented with an argument that they cannot proceed with any claim they may try to make under employment legislation.
“In this case it’s tax evasion, and while people perhaps take a more lenient view of workers not declaring tips, it’s still tax evasion and it’s pretty likely to result in this argument at a tribunal.
“If you break the law in this way, then you know one of the risks is that you could be done by HMRC, but this is a hidden risk that you might not realise.
“You’re not just putting yourself at risk of being chased for tax evasion, you might also be unable to exercise employment rights if you’re breaking the law in how you carry out your work.”
Employment consultant Julie Barnett represented Coia’s Cafe in proceedings and claimed they were “completely unaware of the wider implications of this practise in terms of its impact on employee contracts”.