Last month hoteliers bought a Royal Gazette ad to lash the Bermuda Industrial Union.

They rubbished union allegations they were illegally withholding workers' 1992 gratuities.

Yesterday BIU president Mr. Ottiwell Simmons said small versions of the advertisement had now appeared with hotel workers' pay cheques.

And he accused the Hotel Employers of Bermuda of acting in a "very unfair'' way.

"What they are doing is spreading propaganda,'' he said.

But HEB executive director Mr. John Harvey was quick to hit back.

He said the Royal Gazette ad was not propaganda, but a clear setting out of the facts.

"The ad was faxed to all our members, and if they wished to distribute it through pay packets then I would be delighted. The more people who know the facts the better.'' The ad attacked the BIU for "spreading false information''.

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

The clash between Mr. Harvey and Mr. Simmons comes just 13 days before a planned hearing into the gratuities dispute.

Labour Minister the Hon. Irving Pearman has asked the Essential Industries Disputes Settlement Board to hear the row on April 19.

But HEB lawyer Mr. Alan Dunch has attacked the 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.

"I'm awaiting instructions as to the next move,'' Mr. Dunch said.

Mr. Harvey said the HEB was still waiting for Mr. Pearman to reply to a letter urging him to reconsider.

"We are still considering our options,'' he said.

He declined to say whether the HEB would attend the hearing.

Mr. Simmons, however, said yesterday: "The HEB had better attend. Not to do so would be to flout the law.'' He also flatly rejected claims the union was spreading false information.

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