The tipping of hospitality workers by customers is an increasingly common custom in Australia. Tips are a substantial (though unquantified) part of the income of hospitality workers. Such workers are often casual and vulnerable young employees. Tipping occurs in a tripartite relationship between the business operator, the customer and the worker. It is almost completely unregulated by the labour law instruments of awards and enterprise agreements. This is a ‘regulatory space’ where labour law and consumer protection law may potentially intersect.
Who owns tips? While customers may reasonably assume that service workers will receive all the tips they leave, either individually or as a share of a common fund (the tips jar), the legal ownership of tips is uncertain. English case law indicates that it is the business operator/employer who owns tips, as tips are monies received by employees as an aspect of their employment. However if the employer sets up a system for sharing tips between employees which involves an independently administered fund (the 'tronc'), tips are then owned beneficially by the employees. Express or implied terms may also operate to provide that employees are entitled to tips, either individually or jointly. The legal incidents of the customer-server relationship are even less clear.
The legal position regarding tips is unsatisfactory and runs contrary to customers’ expectations. In this paper we will explore common tipping practices in Australia, the legal ownership of tips, and the potential for regulatory intervention.