The Court of Appeal in the UK has ruled that employers must pay their staff at least the national minimum wage regardless of any tips, gratuities, service charges or cover charges, providing they are not paid by the employer to workers through the employer's payroll.
The Court determined that where restaurant or bar service charges are paid by the customer to the employer, but are then paid into a 'troncmaster's' bank account for distribution in accordance with a 'tronc' scheme agreed between the troncmaster and workers, the sums distributed to workers are not "paid by the employer" and so cannot be included in national minimum wage pay.
The case, Annabel's (Berkeley Square) Ltd & Ors v Revenue and Customs [2009] EWCA Civ 361, is available here