A campaign launched by The Independent last week aims to highlight the treatment of waiters and waitresses working in some of the biggest name high-street restaurant chains. In an article entitled “Revealed: how the restaurant chains pocket your tips” The Independent exposed a series of unfair practices in the restaurant industry. The article showed how some restaurant workers are not paid their tips in addition to a standard wage; instead, tips given by customers in the belief that they are rewarding good service are used to top up wages to the legal minimum wage. Other restaurant workers receive no tips, and workers in one Covent Garden restaurant in London reported receiving no basic wages at all, and instead are being paid entirely by the tips that they receive. According to the article, the restaurants are simply exploiting a loophole in the law, but the feeling that they are also exploiting their workers is difficult to shake.

Working conditions in the hospitality industry have long been criticised as being below expected standards. In the US, the union UNITE HERE have organised a high profile Hotel Workers Rising campaign aimed at raising the wages of workers throughout the States. In the UK, the TUC recently published findings from the Commission on Vulnerable Employment, which focused on low wage service work. But there has been no specific focus on improving wages or working conditions in the restaurant trade.

An increasing number of workers within the hospitality industry are vulnerable migrant workers. Many work behind the scenes as kitchen attendants, cleaners, pot-washers or night porters. In May this year, the Justice 4 Cleaners campaign in the City of London, successfully raised the issues of wages for cleaners employed by cleaning contractors to work in some of the City of London’s largest and most affluent high-rises. The Independent’s story suggests campaigners may have to broaden their focus from cleaners to all low wage service workers.

In Impactt’s experience, where working conditions are not transparent and there is no pressure to improve, there is widespread non-compliance with expected standards and, in some cases, legal requirements. Many workers in this industry are young workers who are working over the legal maximum for evening or night hours. Migrant workers are particularly susceptible to working excessive hours during the peak season, in order to send remittances home, cover for reduced incomes during the low season, or simply to make ends meet.

Impactt welcomes Trade Union and media attention on the conditions of workers in the hospitality industry. Restaurant-goers should be prompted to ask questions about what their tips are funding, showing their unwillingness to be complicit in the underpayment of waiting staff, and ensuring that restaurants and hotels are held accountable for conditions at the ‘fork face’.  

• Wages for sportswear workers are still well below a local living wage.
• In some cases, workers are not even receiving the legal minimum wage, despite working 12-13 hours a day.

This very much echoes the results of Impactt’s report Progress not Perfection which found that workers were not receiving the legal minimum wage at 60% of the factories we visited.

The report critiques the activities of sportswear brands like Nike and adidas on introducing “lean” manufacturing systems as a way of improving wages and reducing working hours.  The problem is that managers are tempted to hang on to increased profits from efficiency gains, rather than handing them over to workers in the form of higher pay.  Purchasers are also keen to get a slice of the cake asking for better prices from more efficient factories.

We at Impactt agree that this is a big problem.  One of our productivity experts in China comments:

“The report tells the truth about lean manufacture.  Even if a factory makes massive improvements in efficiency, it does not guarantee that the managers will share the benefits with workers. Some well-managed factories only pay workers the legal minimum wages, not what we consider to be living wages.  We have some concerns about the outcomes of productivity improvement.  Sometimes it seems we are helping factories get more money through increasing their productivity, but we do not have the power to request managers share the benefits with workers.”  

In the battle to increase wages, productivity improvements are a necessary tool, but they are not alone sufficient to make a difference for workers.  Where workers are able to bargain collectively, workers themselves can speak up for their share of the benefits.  But in the vast majority of the world’s workplaces, workers do not have the power to do this.  Instead, we are forced to rely on the goodwill of management.  But where management is genuinely committed to providing a better deal for workers, productivity measures (together with training better managers and supervisors and the development of routes for workers to express their views) are vital in supporting better wages and reducing working hours.

The Cases

The latest decision follows a long line of rulings weakening the bargaining power of unions across Europe. Recent rulings by the ECJ have involved both the export of cheap labour from Eastern European member-states to Western member-states by companies based in countries with lower labour standards, and the attempted relocation of a company to an accession state in order to reduce costs.

In December, the ECJ delivered a judgment on the Viking Ferry case. Viking operated a ferry company between Estonia and Finland, which at the time was making a loss. When the company sought to register the company in Estonia to take advantage of cheaper Estonian labour, international unions of seamen took action against Viking in order to attempt to prevent the move. The ECJ ruled that the action by the unions was unlawful as it restricted the right of employers to relocate within the EU.

Another recent case was the Laval case. Laval was a Latvian construction company which won a contract to build a school in Sweden. It later refused to sign up to collective bargaining agreements which would have forced it to pay wages that were above the legal minimum for the sector in Sweden. Laval went into liquidation after Swedish unions blockaded the school, and caused Laval to lose the contract.

Again the ECJ held that the company was working within its economic rights, and was not required to adhere to wage rules that went above and beyond the legal minimum.

Last week the ECJ ruled in a case against the Lower Saxony authority, whose procurement rules specified that a company should pay workers locally negotiated minimum wages. A Polish subcontractor brought the case to the European Court, after having a contract terminated because they were found to be paying workers less than the wage imposed by the local authority.

The firm argued that these rules discriminated against Polish companies and breached EU law on the provision of services in other member states. There are also suggestions that the practice may breach the Posted Worker Directive, which holds that where states have in place laws or mandatory collective agreements on terms and conditions of employment, they must ensure that these apply to workers temporarily posted to their territory.

What We Think

These rulings form a worrying trend.  Our research shows that the statutory minimum wage can only be said to be a living wage in 26% of countries across the world.  The position is better in Europe, but still only 48% of European countries’ minimum wages are deemed to provide a living wage for workers.  It is clear that there is a need for more protection of workers’ incomes than statutory minimum wages can provide.

These rulings suggest that companies from accession states can undercut local firms by using their own workers and paying them at the minimum rate possible in the host country. Surely this must be discriminatory, when local workers would be paid more for the same job?  Is this not a European ‘race to the bottom’?