''Revenue and Customs Commissioners v Annabel's (Berkeley Square) Ltd'' EWCA_Civ_361
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EWCA Civ 361
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EWCA Civ 361
is a UK labour law case regarding the treatment of tips under the

National Minimum Wage Act 1998 The National Minimum Wage Act 1998 creates a minimum wage across the United Kingdom.. E McGaughey, ''A Casebook on Labour Law'' (Hart 2019) ch 6(1) From 1 April 2022 this was £9.50 for people age 23 and over, £9.18 for 21- to 22-year-olds, £6. ...

. It led to the abolition of tips being considered part of wages for the purpose of assessing compliance with the national minimum wage.The National Minimum Wage Regulations 1999 (Amendment) Regulations 2009 (SI 2009/1902) reg 5 has removed the words "that is not paid through the payroll", which means that tips now cannot be taken as part of the employer's obligation to pay the minimum wage

Facts

Workers at a restaurant named

Annabel's Annabel's is a private members club at 46 Berkeley Square in Mayfair, London. It was opened at 44 Berkeley Square in 1963 by Mark Birley and named for his wife Lady Annabel Vane-Tempest-Stewart. It was founded in the basement of the Clermont C ...

Berkeley Square Berkeley Square is a garden square in the West End of London. It is one of the best known of the many squares in London, located in Mayfair in the City of Westminster. It was laid out in the mid 18th century by the architect William Kent ...

, in London's

Mayfair Mayfair is an affluent area in the West End of London towards the eastern edge of Hyde Park, in the City of Westminster, between Oxford Street, Regent Street, Piccadilly and Park Lane. It is one of the most expensive districts in the world. ...

, as well as George (Mount Street) Ltd and Harry's Bar Ltd had a " troncmaster" in charge of tips. Tips would be distributed to all the employees based on length of service under a points system. The troncmasters were the senior managers, and were given the job by the employer.

Her Majesty's Revenue and Customs , patch = , patchcaption = , logo = HM Revenue & Customs.svg , logocaption = , badge = , badgecaption = , flag = , flagcaption = , image_size = , co ...

(HMRC) issued

(NMWA 1998) s. 19 enforcement notices, saying that the employer was not entitled to deduct the amounts distributed through this system from the workers' wages. It argued that the tronc system did not count under the

National Minimum Wage Regulations 1999 The National Minimum Wage Regulations 1999SI 1999/584 were passed as a statutory instrument under the National Minimum Wage Act 1998 to specify various detailed points about how to calculate whether someone is being paid the minimum wage, who get ...

(NMWR 1999) r. 30(a) as "money payments paid by the employer to the worker". NMWR 1999 rr. 31–37 set out the reductions allowed and r 31(1)(e) said that money "paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through the payroll" is not a legitimate reduction. The amounts claimed to be outstanding were £49,862.45, £48,901.97 and £28,738.47 at the respective restaurants (so around £125,000). The employer's argument was that since the troncmaster was always contractually bound to distribute the money, or was the employer's agent and appeals about the process would always go to the employer, it never became the employees' money. In the alternative, the troncmaster was holding the money on a primary trust to pay the employees, or failing that for the employers, a

Quistclose trust A ''Quistclose'' trust is a trust created where a creditor has lent money to a debtor for a particular purpose. If the debtor uses the money for any other purpose, then it is held on trust for the creditor. Any inappropriately spent money can t ...

. HMR's argument was that when the money was handed over to the troncmaster, in his capacity as such, there was a trust for him to pay the money to the employees. Although the money started as the employer's, when given to the troncmaster, this meant the money was no longer being paid under r. 30(a) "by the employer". Mr Edge in the

Employment Tribunal Employment tribunals are tribunal public bodies in England and Wales and Scotland which have statutory jurisdiction to hear many kinds of disputes between employers and employees. The most common disputes are concerned with unfair dismissal, red ...

held that the tronc payments could be a part of the minimum wage and rescinded the enforcement notice, but Wilkie in the

Employment Appeal Tribunal The Employment Appeal Tribunal is a tribunal in England and Wales and Scotland, and is a superior court of record. Its primary role is to hear appeals from Employment Tribunals in England, Scotland and Wales. It also hears appeals from decisions o ...

(EAT) held they could not.

Judgment

Rimer upheld the EAT, and preferred HMRC's arguments, holding that the tips were not part of the pay and the restaurants were in breach of the

. Mummery and Sullivan concurred.

Significance

Although the 2009 Statutory Instrument changed the law, it has been reported that many employers are breaching the new law and sticking with their old practice of taking their workers' tips.G Snowdon and M King,
Law to stop restaurants misusing tips has failed, union claims
(1 October 2010) The Guardian

References

{{reflist, 2 United Kingdom labour case law Court of Appeal (England and Wales) cases 2009 in case law 2009 in British law

Facts

Judgment

Significance

See also

References