The owners of a pub restaurant operated an optional service charge whereby 12.5% was added to customers' bills and they could decide whether to pay it or not. The claimants in Migliaccio v Samuel Smith (Southern), who were waiters at the restaurant, divided the tips between them. Their 2005 contracts of employment referred to the gratuity arrangements. In 2009 a new contract of employment was issued. By then the employers had accepted that tips did not count towards the national minimum wage and therefore the claimants' basic pay was increased to comply. There was no mention of tips in the new contracts but the optional service charge and the division of tips between the waiters continued as before.
In 2011 the employer made it clear that tips would no longer be counted towards pensionable salary. In 2013, after a downturn in business and the resignation of the chef (because he was unhappy with his pay), the employer decided to remove the optional gratuity addition from the bills of customers and to widen the pool of those sharing any gratuities that were received to include kitchen staff, who were to receive 20% of the pot. This left the claimants significantly out of pocket and they resigned claiming constructive unfair dismissal.
The EAT upheld the tribunal's dismissal of their claims. The distribution of gratuities had, prior to 2009, been contractual, but once the new contracts were issued in 2009, with all references to tips removed, it was too unpredictable and uncertain to constitute a contractual term and amounted instead to a non-binding arrangement. The claimants had accepted the change and it had been reinforced by the alteration to the definition of pensionable pay in 2011 (again, apparently accepted by the claimants). The upshot was that the claimants were unable to show any breach of contract and could not therefore claim constructive dismissal.