A recent incident in June 2019 regarding Mexican dining chain Wahaca, which saw the restaurant forced into withdrawing its practice of deducting pay from staff after customers leave without paying, highlights the legal risks associated with making deductions in these circumstances.
In light of the incident, it is vitally important that employers understand where the law stands on this issue; this will help them not only avoid unpleasant action against them, but also allow them to better uphold their reputation when things do go wrong.
The law states that no deductions may be made to an employee’s pay without express authorisation. Any deduction has to be authorised under the terms of their contract, or by prior written agreement. The employer would also need to show that the event justifying a deduction took place, so, in this situation, that the employee was negligent and that this enabled the customers to leave without paying.
To take matters further, there are extra provisions in place that protect retail employees. Employers cannot deduct more than 10% of employee wages on the basis of cash shortages or stock deficiencies. The law is clear on this point.
But it is not just the law that businesses need to bear in mind. Another notable feature of this incident was how Wahaca’s staff policy came into public awareness through social media and the ire it drew. It is important to consider the issue from this more nuanced social media perspective as well.
This incident illustrates the importance, when creating or reviewing staff policies, to consider how the document will be viewed by a range of stakeholders. Even if they are technically lawful, policies that draw negative responses from the end-customer may ultimately damage the organisation’s public profile and brand quality.
Businesses need to be as acutely aware of the reputational risk as to the legal; in the long run it can be just as damaging, if not more so.
Patrick Glencross is senior associate at Cripps Pemberton Greenish