Tips and Gratuities | Legal Definitions & Bill 12

Tips and Gratuities

Tips and Gratuities | Legal Definitions & Bill 12

You waiters know the struggle. Well, you know many struggles: the long break-less hours, the fussy diners, the absence of a free Friday night.

But the struggle I’m referring to is tips: their distribution, pooling, breakage etc. You know how quickly that $80 cash at the end of a shift becomes $60. You’re probably familiar with just how unfamiliar you are with the actual regulations regarding that ‘bonus’ money you take home at the end of each shift.

But don’t worry, you’re actually not that far out of the loop because up until last year there were no laws or regulations in Ontario governing tips and gratuities.

New Legislation For Tips & Gratuities – Bill 12

In 2015 Bill 12 (An Act to amend the Employment Standards Act, 2000 with respect to tips and other gratuities) created legal definitions of tips and gratuities and set rules to govern them.

According to the Employment Standards Act (ESA), tips and gratuities are voluntary payments given by customers to employees or to an employer for employees. A service payment imposed by an employer is also considered a tip or gratuity.

Cash in a tip jar, money left on a restaurant table after bills have been paid, and gratuity charges to the bill for a banquet are all examples of tips or gratuities.

Service charges on invoices and agreements should explicitly state what they are for, otherwise they will be considered tips and intended for employees.

While employers have the authority to prohibit tipping in their establishment, many prefer to have their employees’ wages subsidized by tipping customers. However, those who choose to prohibit tipping should make this clear to customers and ensure that their employees do not accept tips.

Laws About Tips in Canada - KCY at LAW

Employers’ Rights To Employees’ Tips

Many bars and restaurants used to deduct a percentage of employee’s tips for ‘breakage’ to cover any unexpected expenses that may arise (i.e. fallen plates, broken glasses). This is no longer permitted.

Generally speaking, employers may not take a portion of their employees’ tips or gratuities. If an employer takes an employee’s tips they will owe the employee a debt.

Employees cannot contract out of this employment standard. They cannot agree to give an employer a portion of their tips for things like ‘breakage’ any longer. The only circumstance under which they can withhold or make deductions from an employee’s tips is if they are “required by law or court order, or administering a tip pool.” For example, if an employee owes child support, their employer may be legally required to deduct money from the employee’s tips to pay this.

A percentage of tips may be taken from an employee if they will go to a tip pool for redistribution among other employees.

Tip Pools

A tip pool is when tips are collected and redistributed (servers may be familiar with tip outs). Employees don’t have to agree to a tip pool to be in one, but tip pool policies should be clear and well-communicated.

Employers should establish a clear policy for how pooled tips or gratuities will be divided, post this policy in the workplace, and keep track of tips.

Laws About Tip Pools Canada - Employment Lawyer - KCY at LAW

Tips must be paid out by cash, cheque or direct deposit. However, there is no rule regarding specifically how or when they must be paid out. It is, however, advisable that employers establish a regular procedure for distributing pooled tips.

Employers may not partake in tip pools to receive a portion of the collective tips unless the work they do is comparable to the work of the employees earning tips. An example of this would be in a small restaurant where the employer waits tables with the same frequency as his or her employees.

If an employee is withholding tips from the tip pool, other employees can only go to their manager or boss to deal with the issue internally. They can’t file a claim against their fellow employees.

Legal Experts on Tips & Gratuities

If you are concerned with how tips and gratuities are being handled at your place of work, or if you have any other questions concerning your employment, contact KCY at LAW. (905) 639-0999 or fill out one of our online consultation forms here.