Andrew Lo
KUCHING (Mar 26): The Malaysian Trade Union Congress (MTUC) Sarawak welcomes the Federal Court ruling that hoteliers are not entitled to utilise their employees’ service charge to satisfy their statutory obligations to pay the minimum wage or incorporate them into a clean wage structure.
Its secretary Andrew Lo noted in a unanimous judgment on Mar 24, the Federal Court dismissed the appeal by Crystal Crown Hotel & Resort Sdn Bhd against the National Union of Hotel, Bar & Restaurant Workers Peninsula Malaysia.
He said the Industrial Court had previously ruled that hotels could not incorporate and convert a portion of their employees’ service charge to form part of the minimum wages to meet the minimum wage requirement.
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“This was further affirmed by the Court of Appeal. Still dissatisfied, the Hotel appealed to the Federal Court, highest court in the land.
“Various employers’ associations including the Malaysia Employers Federation and Malaysian Hotel Associations joined in the appeal.
“These employers’ association, perhaps realising the futility of their appeal, tried to convince the Federal Court to limit the decision to only the parties i.e. Crystal Crown and its employees,” he said in a statement.
Lo said the Federal Court had strongly rebuked this and held that the decision is binding on all hotels through Malaysia.
He said the Federal Court maintained that if the quantum of one’s basic wage was less than the minimum wage stipulated under the Minimum Wage Order (MWO), employers were legally bound to increase the basic wage to meet the stipulated minimum wage.
He said the Federal Court also held that Service Charges does not and cannot fall within the definition of ‘basic wages’ as defined in the minimum wage legislation; they are monies collected from third parties and does not belong to the hotel since hotels act as a fiduciary or trustee who holds the monies until distribution to the beneficiaries who are the eligible employees.
“The Federal Court held that since the monies did not, at any point in time belong to the Crystal Crown Hotel, there was no entitlement in law for the monies to be appropriated and utilised to meet the statutory obligation under the created by the MWO.
“Wages, by their very definition, envisage monies belonging to the employer being paid to the employee under a contract of service.
“The Federal Court also held that hoteliers cannot use the Service charges collected to introduce a ‘clean wage’ restructuring or ‘top-up’ basic salaries.
“This would amount to a relabelling of service charges since a hotel would continue to charge a customer the same sum without calling it service charge yet retaining the source of the monies.
He pointed out that the Federal Court likened the top-up structure or the clean wage system as amounting to asking the employees to pay themselves from their own monies.
Lo noted that the dispute began when the hotel employees had insisted for their salaries to be aligned with the MWO and for such wages to be separated from the 10 percent service charge imposed on the billings of the hotel’s customers.
He said in Malaysia, there is no compulsory “tipping” and instead, a 10 per cent service charge is imposed on all bills paid by customers for the services rendered.
He said the rationale for the introduction of the service charge is to ensure a fairer distribution of cash-tips which would usually be given directly to front desk employees.
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