Starting June 10, 2016, it will be illegal for employers to keep a portion of employees’ tips and other gratuities, except as permitted by the Employment Standards Act, 2000 (ESA).

These rules affect employers and employees covered by the ESA in workplaces where tips and gratuities are received – such as at bars, restaurants, hair and nail salons, catering firms and taxis.

The changes come as a result of Bill 12 Protecting Employees’ Tips Act, 2014.

What are considered tips and gratuities?

Tips and gratuities include money voluntarily given by a customer for customer service. It could be given to the employee directly, like money left on a table or bar for a server. Or it could be given to the employee indirectly, like a tip paid using electronic payment like debit or credit, or in a tip jar.

Tips and gratuities can also include any service charges imposed by an employer on a customer that the customer intends or assumes would be given to employees (e.g., banquet hall service fees, catering service fees, group table service charges).

What will be prohibited?

Employers will be prohibited from withholding, making deductions from or causing the employee to return tips and other gratuities. There are two situations in which this prohibition does not apply:

• If the employer collects and redistributes the money among its employees, a practice often referred to as “tip pooling.”
• If a statute or a court order authorizes it.

Employers can’t make deductions from tips for things like faulty work, cash shortages, or lost or stolen goods.

Employers will generally be prohibited from sharing in a tip pool. The exception is if the employer owns all or part of the business, and he or she regularly performs the same work to a large degree of:

• Some or all of the employees who share in the tip pool, or
• Those in the same industry who would normally receive tips.

For example, this exception would apply if a restaurant owner spent a substantial amount of his or her time serving food or in the kitchen doing the same work as staff members who receive a portion of a tip pool. The same standard applies to directors and shareholders of corporations.

The ministry is currently seeking input on a proposal to exclude credit card processing fees from tips.

(From the Ministry of Labour Website, issued: March 29, 2016)