Appeal No.	 EAT/915/98

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On  1 July 1999

Before
HIS HONOUR JUDGE H WILSON
MR D CHADWICK
MR P R A JACQUES CBE

MR S SOUDIERE	APPELLANT

THE CAPITAL HOTEL (KNIGHTSBRIDGE) LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR N TSE
(Of Counsel)
Messrs Bracher Rawlins
(Solicitors)
180 Fleet Street
London  EC4A 2HG	
For the Respondents	MR B E PUXLEY
(Representative)
Senior Manager
The Capital Hotel
(Knightsbridge) Ltd
22 Basil Street
London  SW3 1AT	

	JUDGE WILSON:	This has been the final hearing of the appeal by the original Applicant against the decision of the Employment Tribunal on 17 March 1998 in which they dismissed his applications.  

1	The Employment Tribunal concluded that there had been no repudiatory breach of the contract of employment by the Respondent; that the Applicant had failed to show that he had asserted his statutory right and that the breaches of Health and Safety which were alleged, had not been proved.  In particular, with regard to this appeal, they found that tips, which had been part of the Applicant’s remuneration, had not been part of his wages.

2	The matter had come before the Employment Appeal Tribunal on a preliminary point and the President, sitting with lay members on 27 November 1998, had given leave for the appeal to proceed to a full hearing, principally upon the submission made to the Employment Appeal Tribunal that the Employment Tribunal had erred in law in arriving at the conclusion that the employers were not responsible for the tips given by customers to employees, when regard was had to the Court of Appeal’s decision in the case of Nerva and Others v RLG Ltd (1997) ICR 11.  The President stated that the Employment Appeal Tribunal considered that that point was arguable and that much would depend, as it seemed to them, on the contract, or rather the particulars of the terms of employment which the employers said had been sent to the Applicant, but which the Applicant said that he had never received.  

3	The second point under the Health and Safety at work issue, the Employment Appeal Tribunal did not permit to go forward to a full hearing.  The third main complaint, namely that the Employment Tribunal should not have dismissed the application for unfair dismissal so as to preclude the Appellant from pursuing such complaint in due course (if the decision in Seymour-Smith was such that it entitled him to bring his complaint) was allowed to go forward solely, as it were, on the back of the real point, which was the one concerning the error of law to which we have already referred.  

4	The appeal has been argued by Mr Tse on behalf of the Appellant, and by Mr Puxley on behalf of the Respondent.  We have been greatly assisted by an exhaustive skeleton argument, covering all aspects of the material law, statutory and otherwise, from Mr Tse, which was compendiously amplified and by the succinct reply and response from Mr Puxley.  It emerges in our judgment that the Employment Tribunal did err in law when it stated in paragraph 4 of its decision as follows:-

“The Applicant agreed to take the new position on the same conditions of employment and the same salary.  The wages the Applicant received did not include a contractual entitlement to tips.  The Applicant’s wages remained the same after the transfer as before.  The tips the Applicant received came from hotel customers and the Respondent had not control over them.”

We find that that expression and finding was an error of law and we rehearse very briefly from the judgment of the Employment Appeal Tribunal the facts relating to the antecedents of that quotation from the Employment Tribunal’s decision.  

5	The Appellant had been employed initially as a commis waiter by the Respondent and there was a brief letter setting out the essential terms of his employment.  Subsequently, he received a second letter changing his employment to working in the preparation room for service orders and matters of that kind.  

6	It is clear from the argument today, that there is material dispute between the parties about the circumstances of the change of job which happened in February 1997, the employment having begun in June 1996, and having terminated eventually at the beginning of July 1997.  It is equally clear that the Employment Tribunal did not focus on the issue about the circumstances of the change, which may well be crucially important to the section 13 claim.  In our view the matter, because of the error of law, should be remitted, but before dealing with the way in which the matter is to be remitted, we have regard to the law, and in particular, to the decision to which we were referred the case of Nerva v RLG.  

7	Nerva v RLG was a case under the Wages Act 1986 and it was held by the majority in the Court of Appeal that only what was paid by the employer and not by any other person counted as remuneration for the purposes of the Wages Act 1986.  Cheque and credit card tips paid to the employers became the property of the employers, and when the employers paid over an equivalent amount they were doing so as agents for the customers.  The minority view was that of Lord Justice Aldous.  He pointed out that he did not think that the intention of the customer varied whether he paid his tip in cash or by cheque.  The fact remains of course, that with tips which were paid by cheque or credit card, the money involved, and in particular, adopting the way Mr Tse put it, any surplus over the 12½% service which was added to the bill, was under the control of the employer.  Similarly, it being common ground that the cash tips were paid into a tronc which was periodically divided out on an agreed basis by the employer, that too was under the control of the employer.  It seems to us therefore that the Employment Tribunal proceeded upon a false premise and erred in law when they concluded that the question of tips were not under the control of the employer.  

8	A considerable part of the proceedings today have concerned the meaning of wages and the construction to be put upon section 27 in the Employment Rights Act 1996 where that matter is discussed.  Subsection 1(a) provides that:

“’wages’, in relation to a worker, means any sums payable to the worker in connection with his employment, including –
(a)	any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise”.

9	We construe that subsection to mean that wages to a worker under the Employment Rights Act 1996 and for the purposes of section 13 and 27, may be comprised of differing elements.  One element will be any pay, payable under the contract by the employer.  Another element may be any fee, bonus, commission etc. payable “otherwise” – that is to say, tips.  Tips are not paid by the employer, they are paid by satisfied customers.  There may be circumstances, as we find there were in this case, where there is an element of control by the employer, but there are in our view, clearly distinct elements of meaning in section 28.

10	We therefore consider that the matter should be remitted to a differently constituted Employment Tribunal and we suggest the following questions for consideration:

(1)	What were the terms of the original contract of employment?
(2)	Were there any additional implied terms?
(3)	If so, what were those implied terms?
(4)	Were the terms of the new employment in February 1997 the same as the terms of the original contract?
(5)	What was the basis upon which the change of employment in February 1997 took place?  That is to say by way of example only, was it a free choice and a free change at the Applicant’s wish?  Was it an arbitrary move imposed by the employer on the Applicant?  Was it a consensual move made, so far as the Applicant was concerned, with his eyes open as to the difference in circumstances?  Was it a consensual move by the Applicant having been misled by the employer?  Finally, was it a consensual move involving misunderstanding on both sides?

Those examples are by no means exhaustive, but are by way of illustration of what we intend should be looked at when finding the basis for the change.  

11	So far as the Seymour-Smith point is concerned, we do not consider that we should make any decision about that and we do not.