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Effective June 10, employers in Ontario will no longer be able to keep a portion of employee tips. These rules affect employers and employees covered by the Employment Standards Act (ESA) and in workplaces where tips and gratuities are received; such as:bars, restaurants, hair and nail salons, catering firms, and taxis.
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 is prohibited?
Employers will be prohibited from withholding, making deductions from, or causing the employee to return tips and other gratuities. There are two situations where this would not apply:
· If the employer collects and redistributes the money among their employees (a practice often referred to as “tip pooling”);
· If a statute or a court order authorizes it.
Employers cannot make deductions from tips for things like: faulty work, cash shortages, or lost or stolen goods.
How should tips and other gratuities be tracked?
· establish a clear policy for the handling of tips (e.g, how tip jars will be divided, when and how employees will be compensated for electronically paid tips; post the policy in the workplace where employees can see it;
· develop a system to track tips and other gratuities paid electronically, particularly the amount given to employees.
· track the tips they receive, including amounts received from a tip pool;
· track the exact amount they contribute to tip pools.
The Ministry of Labour has a video that explains tips and gratuities in more detail.
A number of downloadable mobile apps are available to help track tips and other gratuities. See the Guidelines for Tips and Gratuities.
For more information on tips and gratuities, see the Frequently Asked Questions on the Ministry of Labour's website.