Revenue and Customs Commissioners v Annabel’s (Berkeley Square) Ltd
Encyclopedia
Revenue and Customs Commissioners v Annabel’s (Berkeley Square) Ltd [2009] EWCA Civ 361 is a UK labour law case regarding the treatment of tips under the National Minimum Wage Act 1998
. It led to the abolition of the exception of tips from the national minimum wage.
, Mayfair
, as well as George (Mount Street) Ltd and Harry’s Bar Ltd had a ‘tronc
master’ 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. The Inland Revenue
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 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 (ie £125k). 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
. The revenue’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
held that the tronc payments could be a part of the minimum wage and rescinded the enforcement notice, but Wilkie J in the EAT held they could not.
Mummery LJ and Sullivan LJ concurred.
National Minimum Wage Act 1998
The National Minimum Wage Act 1998 creates a minimum wage across the United Kingdom, currently £6.08 per hour for workers aged 21 years and older, £4.98 per hour for workers aged 18–20...
. It led to the abolition of the exception of tips from the national minimum wage.
Facts
Workers at a restaurant named Annabel’s on Berkeley SquareBerkeley Square
Berkeley Square is a town square in the West End of London, England, in the City of Westminster. It was originally laid out in the mid 18th century by architect William Kent...
, Mayfair
Mayfair
Mayfair is an area of central London, within the City of Westminster.-History:Mayfair is named after the annual fortnight-long May Fair that took place on the site that is Shepherd Market today...
, as well as George (Mount Street) Ltd and Harry’s Bar Ltd had a ‘tronc
Tronc
Tronc may refer to the following:*Shane Tronc , Australian rugby league footballer*Scott Tronc , Australian rugby league footballer*Yves Tronc , French sport shooter...
master’ 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. The Inland Revenue
Inland Revenue
The Inland Revenue was, until April 2005, a department of the British Government responsible for the collection of direct taxation, including income tax, national insurance contributions, capital gains tax, inheritance tax, corporation tax, petroleum revenue tax and stamp duty...
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 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 (ie £125k). 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
Quistclose trust
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 is a leading property, unjust enrichment and trusts case, which invented a new species of proprietary interest...
. The revenue’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 tribunal
Employment Tribunals are tribunal non-departmental 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, redundancy payments and employment...
held that the tronc payments could be a part of the minimum wage and rescinded the enforcement notice, but Wilkie J in the EAT held they could not.
Judgment
Rimer LJ upheld the EAT, and preferred the Revenue’s arguments, holding that the tips were not part of the pay and the restaurants were in breach of the NMWA 1998.Mummery LJ and Sullivan LJ 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.See also
- NMWA 1998
- Nerva v RL & G Ltd [1997] ICR 11, [1996] IRLR 461, CA.
- Nerva v United Kingdom 422295/98 (2003) 36 EHRR 4, ECt HR