Nerva and others v United Kingdom [2002] IRLR 815

The High Court (as upheld by the Court of Appeal) ruled in 1995 that non-cash tips could be used by employers to count towards the National Minimum Wage (Nerva v R L & G Ltd [1995] IRLR 2000 and [1996] IRLR 461). There was, quite rightly, an outcry. The rationale of a tip is to thank the waiter and acknowledge the service and to give him or her a little extra. After all the cost of the meal and the restaurateur's overheads, including staff wages, is included in the bill itself.

Having had permission to appeal refused by the House of Lords, the waiters took their case to the European Court of Human Rights arguing that the High Court judgment deprived them of the peaceful enjoyment of their possessions in breach of Article 1 of Protocol 1 of the ECHR and amounted to discrimination against waiters in comparison to employees in other service industries.

The European Court of Human Rights has held there to be no breach. Ownership of tips through cheque and credit card first passes to the employer - simply because the voucher is made out in the establishment's name - and the waiting staff then receive a share of the tips, in the proportion agreed with them. The dispute was whether the share of credit card and cheque tips could be counted towards the statutory obligation to pay the minimum wage. The UK courts had ruled that the credit card tips amounted to 'remuneration' under the minimum wage legislation and so were included.

The European Court found that the matter was essentially a dispute between private litigants and the application of domestic legislation. The European Convention on Human Rights was not engaged in this case as the High Court's case could not be considered arbitrary and manifestly unreasonable. Nor could they establish discrimination.

Moreover the waiters did not have a legitimate expectation that the tips would not count towards remuneration.It is a disappointing judgment for the waiters, but not entirely unexpected. The Minimum Wage Regulations themselves should be amended to take on board the waiters' concerns. Unless and until that happens, our tip is to pay your tips in cash. Then the money will be treated as additional pay, and cannot count towards the minimum wage that must, by law, be paid to the waiter.