March 1, 2017

Picture working as a Server in a busy restaurant. You are dashing around, trying to ensure all your tables are happy. Without you noticing, one of your tables pulls the dreaded “dine and dash.” Who is left picking up the tab for this? In some cases in the past, it would have been you and your tips from the shift. While not standard practice or policy in the majority of restaurants, this situation has played in numerous instances in the food and beverage service industry in the past.

Ontario’s Bill 12 has now attempted to put an end to this type of practice. Last year, the Protecting Employees’ Tips Act, 2015 came into force, amending the Employment Standards Act (the “ESA”). This law created new rules surrounding the handling of tips and gratuities in the workplace.

Tips and gratuities under the ESA are payments made voluntarily to or left for an employee by a customer, to the employer for the employees, and a payment in the form of a service or similar charges where a reasonable person would believe that the payment would go to the employees or would be shared amongst employees. Tips can be given directly to the employee in the form of cash, credit or debit, or may be in the form of a service charge at a banquet hall facility.

The new rules set out a limited number of circumstances under which an employer is able to withhold or make deductions from employees’ tips:

  • For the purpose of administering a tip pool, including tip outs; and
  • As required by law or court order.

Apart from these exceptions, an employer may not withhold tips or other gratuities from an employee, make a deduction from tips or gratuities, or cause the employee to return or give tips or gratuities to the employer.

Some examples of non-permissible withholding include deductions or taking of tips to cover losses from spilled food or beverages, employee error, broken supplies, or customers who do not pay their bill.

Under the ESA, different rules apply for managers and employers. The Ministry of Labour recommends that with the coming into force of the new rules, employers establish and post a clear policy with respect to how tips are handled and distributed in the workplace, including a clear and transparent articulation of any “tip pooling” or “tipping out” practices. Both employers and employees are encouraged to track and keep records with respect to tips earned or distributed.

If you have questions about how best to implement a tip policy for your workplace, please contact Elizabeth McLeod or another member of our labour and employment group.