DISCLAIMER: This article does not create an attorney-client relationship between the author and the reader.  The answer of the author on the issue is just an expression of his general opinion based on Philippine law and hence does not constitute legal advice.

The hotels, restaurants, and similar establishments are allowed by law to collect service charge from customers. Are managers get share in the distribution of the service charge? Let’s use the coffee shop business in my first article to discuss this legal issue.

The newly established coffee shop is planning to collect service charge.  The plan is to distribute the service charge to all the employees including the managers. A representative of the owners has been asked to explain on why the managers are included in the planned distribution.  The representative has contended that, based on inquiry, some coffee shops and restaurants include managers in the sharing.

Is the plan to include managers in the sharing, correct?

The plan to include the managers in the distribution of service charge is not correct. The contention of the representative to include the managers in the sharing of service charge because some coffee shops and restaurants practice the same, based on inquiry, is misplaced.  The inquiry is not accurate.

R.A. 11360, an Act amending the provision of the Labor Code on service charge collected by hotels, restaurants, and similar establishments, provides “x x x All service charges collected by hotels, restaurants and similar establishments shall be distributed completely and equally among the covered workers except managerial employees x x x”

By the express prohibition of R.A. 11360, managers of hotels, restaurants, and similar establishments are excluded in the distribution of the service charge.  Likewise, Book 2, Rule 6, Section 2, Implementing Rules of the Labor Code of the Philippines excludes managerial employees from the coverage.

The law defines managerial employees as those persons vested with powers or prerogatives to lay down and execute management policies or hire, transfer, suspend, pay-off, recall, discharge, assign or discipline employees or to effectively recommend such managerial actions.

On the contention that it has been the practice of some in the industry to include managers is unavailing.  Practice of the law to the contrary does not render the law ineffective.  Article 7 of the Civil Code is clear that their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary.

You may read my next article for more discussion about service charge.  The article discusses the coverage and its taxability on the part of the recipient.

(March 30, 2024)