They rubbished union claims they were illegally withholding workers' gratuities.

"The employees are encouraged to use good judgment and not to be persuaded to believe false statements and rumours.'' The Hotel Employers of Bermuda (HEB) advertisement appears on Friday.

But this week the president of the Bermuda Industrial Union mounted a withering response.

Mr. Ottiwell Simmons said it was cheaper for the HEB to cough up for an ad than pay workers $250,000 for withheld 1992 gratuities.

"No message from the HEB will clear their name and make them innocent,'' he stormed.

"The only way they can clear their name is to pay the money.'' The latest flare-up comes after Labour Minister the Hon. Irving Pearman sent the row again to the Essential Industries Disputes Settlement Board.

Unionised hotel workers have voted to strike over the dispute.

But they have stated no industrial action will occur if the board hearing goes ahead.

HEB lawyer Mr. Alan Dunch, meanwhile, has attacked Government's decision -- saying Professor Ronald Haughton and his board had already settled the row in the employers' favour.

And he has hinted at court action if Mr. Pearman does not change his mind.

HEB executive director Mr. John Harvey said he was still waiting for Mr.

Pearman to reply to a letter urging him to reconsider.

"We won't know our next step until we receive the reply.'' In their ad hoteliers state: "The leadership of the Bermuda Industrial Union is spreading false information regarding the alleged gratuity dispute.

"The HEB member properties have always and continue to pay to their employees 100 percent of all gratuities to which they are entitled.'' The ad says in January 1993 Prof. Haughton ordered gratuities to be paid for February 1993-February 1994 and February 1994-February 1995.

This did not cover February 1992-February 1993.

After a complaint from the union, the Haughton Board on August 5 made another ruling, the ad states.

"The Board decided that it would not change its original award.'' The ad continues: "The HEB member hotels are not illegally or otherwise withholding any portion of employee gratuities, and any suggestion to that effect is false.

"The employees are encouraged to use good judgment and not be persuaded to believe false statements and rumours.

"Any labour dispute in 1994 in the hotel industry will do irreparable damage to Bermuda's economy, its hotels and to the employees that rely on the tourism industry for their livelihood.'' Mr. Harvey said the ad was taken out to remind Bermuda of the facts to the tips dispute.

"Many people forget about what has happened, and need to be reminded time and time again of issues, particular the one regarding gratuities.'' Mr. Harvey said some people felt the BIU must be right if "it makes enough noise''.

But claims about withholding gratuities were "so far-fetched'' they needed to be countered.

Mr. Simmons, however, flatly rejected claims the union was spreading false information.

And he said employees were certain their gratuities were being withheld.

Mr. Simmons said the union had accepted Mr. Pearman's referral to the Board.

He urged the HEB to attend the hearing.