The Supreme Court today ruled that tips paid by customers to hotel staff did not amount to wages, and could not be taken into account for payment of premium to ESI Corporation by an industrial establishment.The apex court thus set aside the judgment of the Karnataka High Court and the ESI Court, which had maintained that the amount was part of wages. Quality Inn Southern Star had argued that the question was whether the service charge collected by the management from customers and distributed among employees amounted to wages within the meaning of Section 2(22) of the ESI Act. According to the hotel, it did not constitutewages.The corporation, on the other hand, contended that the three-star hotelcompulsorily collected 10% of the total bill amount as service charge and included it in the bills. The service charge so collected was distributed among the employees every quarter. The collection of service charge is essentially what is called tip and paid at the option of the customers.The ESI Court held that looking at the nature of the service charge, these are not paid directly by the customers to the employees but form part of the bills which the customers are obliged to pay without any option. The hotel had total control over the distribution of the amount, and this was distinguishable from tip. It was, in any event, covered by the expression "additional reimbursement".The Supreme Court ruled that the amount received by the employees were not in the nature of wages as they were not given to the employees under the terms of the contract of employment. The appointment letters stated that employees were not entitled to any other remuneration. Thus, the distribution of service charges was excluded from the wages.
