Nerva v R.L. & G. Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,MR JUSTICE DOUGLAS BROWN,LORD JUSTICE ALDOUS |
| Judgment Date | 15 May 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0515-8 |
| Docket Number | QBENF 94/0967/C |
| Court | Court of Appeal (Civil Division) |
| Date | 15 May 1996 |
[1996] EWCA Civ J0515-8
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(MR JUSTICE MANCE)
Royal Courts of Justice
The Strand
London
Lord Justice Staughton
Lord Justice Aldous
and
Mr Justice Douglas Brown
QBENF 94/0967/C
MR PATRICK ELIAS QC and MR NICHOLAS O'BRIEN (instructed by Central London Law Centre, London WC2) appeared on behalf of THE APPELLANTS
MR NICHOLAS UNDERHILL QC (instructed by Messrs Anthony Gold Lerman & Muirhead, London SE1) appeared on behalf of THE RESPONDENT
Wednesday 15 May 1996
Mr Nerva and three others worked as waiters at one or other of two restaurants in London owned by the Defendants. I shall call them the Employees and the Employers respectively. The system in operation with regard to tips at the time with which we are concerned was as follows. When a tip was paid in cash, the money was placed in a box called the tronc. At the end of the week it would be distributed among the waiters by one of their number, called the tronc master, in such proportions as they—or on one view he—might decide. On the other hand tips which were paid by including the amount in a cheque or credit card voucher which was used to pay the bill would be paid to the Employers. They would then distribute an equivalent amount, in proportions which they would decide, among the waiters.
It may be of some significance that the amount distributed by the Employers was necessarily larger than the amount that they received as tips from the customers. That was so in the first place because the credit card company would deduct commission, of between three and five per cent, where payment was made by credit card. In addition cheques might be returned unpaid, or payment against a credit card voucher refused on the ground that it was not properly prepared. In all such cases the full amount of the tip was nevertheless distributed among the waiters. They also enjoyed a cash flow advantage over the Employers: distribution was made within a week or so after the transaction, but it might be a month or more before the Employer received payment from the credit card company.
It is agreed on the pleadings that the contracts between the Employers and the Employees provided that for each week there would be paid to each Employee
"…an amount equal to the total of the credit card and cheque tips received by [the Employers] during that week for the restaurant where [the Employees] worked divided by the number of waiters who had worked during that week at that restaurant (or a proportionate part thereof)."
Since the contracts were not in writing, that is all that we know about them.
There was at the time a legal requirement that waiters should be paid a minimum sum as remuneration. It would seem that these proceedings related to a period of six years before they were commenced in March 1989. If that is right, the legislation applicable for the first half of that period was the Wages Councils Act 1979; and for the second half, the Wages Act 1986. In each case there was an Order governing the minimum remuneration of the Employees. The question is whether the amounts received by the Employees under the system for dealing with tips could be counted as part of their minimum remuneration. It is conceded that the tips which passed through the tronc should not be counted; the dispute is as to the tips which were paid by cheque or credit card. The point is of some importance; there are figures which show that on occasion an Employee's share in the tips for the week could be more than his basic wage agreed with the Employers, although on other occasions it might be much less. Mance J has held on a preliminary issue that tips paid by cheques or credit card do count against the minimum remuneration requirement. The Employees appeal against that decision.
I start with the proposition that remuneration (or as Americans tend to call it, compensation) is that which an employee receives as a reward for the work that he has done. As such, it includes tips; for cricketers, the proceeds of some benefit collections; and for parsons, the Easter offering in the days when there was one. That is the view of the Inland Revenue, and it seems to me to accord with the ordinary English meaning of remuneration.
However, the minimum wages legislation takes a different view. Remuneration is confined to that which the employee receives from his employer. Thus the Catering Wages Act 1943 in section 9(1) provided:
"If a contract between a worker to whom a wages regulation order applies and his employer provides for the payment of less remuneration than the statutory minimum remuneration—"
it was to have effect as if it did. Section 10(1) likewise provided:
"For the purpose of determining whether the remuneration paid or agreed to be paid to a worker…is less than the statutory minimum remuneration clear of all deductions the net remuneration obtained or to be obtained by him in cash from his employer…shall, subject to the provisions of this section, be deemed to be the remuneration paid or to be paid to him…"
The statute was only concerned with what was paid by the employer, and not what the employee received from customers or from anyone else.
That is plainly the reason for the decision of the Divisional Court in Wrottesley v. Regent Street Florida Restaurant (1951) 2 KB 277. That was concerned with cash tips, which were placed in a box and later distributed by the head waiter. The waiters received £1.50 a week from their employer as wages, and £4.50 or so per week as tips. It was held that the tips were not remuneration for the purpose of the Wages Regulation Order. The judgment of Lord Goddard CJ is instructive. He said (at p.283):
"What we have to decide is whether, when a waiter receives a payment from the tronc in the manner found in the case, that sum can be regarded as remuneration paid to him by, or as remuneration obtained by him in cash from, his employer."
Lord Goddard was evidently referring to the very words of section 10(1) of the Catering Wages Act. He continued:
"The customer has no intention of giving anything to the employer…It seems to us that there is no ground for saying that these tips ever became the property of the employer…When the tronc money is shared out the waiters are dividing up their own money. Accordingly, we hold that the sums received from the tronc by the waiters cannot be taken into account in computing the amount paid by the respondents to them."
The Wages Councils Act 1979 had in sections 15 and 17 provisions closely corresponding to those that I have quoted from the Catering Wages Act; and so did the Wages Act 1986 in sections 16 and 17. It thus remained the law that only what was paid by the employer, and not by any other person, counted as remuneration for the purpose of the legislation. That, as it seems to me, was the justification for the concession which was made in this case, that tips paid in cash to the waiters or to the tronc do not count.
At first sight none of that reasoning applies to sums which are paid by cheque or credit card to the employer. Those sums do become his property; and it is he who thereafter pays an equivalent amount to the waiters. It should therefore count against the minimum remuneration requirement. But Mr Elias, for the Employees, has advanced five reasons for not reaching that conclusion. I understood it to be said that they had not been relied on in the court below, or foreshadowed in the notice of appeal or outline argument.
The first is based on paragraphs 3 and 12 in the schedule to The Wages (Licensed Residential Establishment and Licensed Restaurant) Order 1982:
" 3(1) Workers who work not less than 40 hours per week—The minimum rates to be paid for a week of not less than 40 hours…shall be as specified in paragraph 4 and subject to the following provisions where applicable:-
…
(g) for service workers in the London area employed under a written agreement relating to gratuities—paragraph 12.
12(1) This paragraph applies to any service worker aged 18 years or over who works in the London area and is employed under a written agreement which provides that if in any week in which the worker performs some work for the employer the total amount of gratuities from customers received by the worker is less than £8.40, the employer shall pay to the worker such sum as the amount of gratuities falls short of £8.40
(2) Where such an agreement applies, the worker shall be paid the appropriate amount under the provisions of this Schedule REDUCED by 21p per hour for the first 40 hours worked by him in any week."
It is argued that this limited provision, allowing gratuities to count against the minimum remuneration, by implication provides that in no other circumstances shall they count against it.
In my judgment the implication is not justified. It is equally if not more plausible that paragraph 12 was intended to mitigate in favour of employers the effect of the Wrottesley decision. Cash tips shall be allowed to count against the minimum requirement, but only (i) up to £8.40 in amount (40 x 21p), (ii) in London, (iii) in the case of a service worker aged 18 or more. That bears all the signs of being the result of industrial negotiation. It says nothing about tips by cheque or credit card.
Secondly, it is said by reference to section 17 of the 1986 Act that nothing can count as remuneration unless it is a sum calculated by reference to time worked. Section 17 provides:
"(1) For the purpose of determining, for...
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