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Employee tips or other gratuities

splitting the tip


In general, in Canada restaurant and bar patrons are expected to leave a tip amounting to approximately 15 percent of their total bill when dining out or drinking. However, we usually do so without asking ourselves how the money will be divided among staff members. Well, it seems in Ontario, it is a common practice for restaurants to require servers to share their tips and gratuities with their managers and the owners.

Ontario NDP MPP Michael Prue’s private member Bill 107, Protecting Employees’ Tips Act, 2012 was recently tabled in the legislature to amend the Ontario Employment Standards Act to include provisions on tips and gratuities, specifically, to prevent employers from taking any portion of an employee’s tips or other gratuities. The Bill would ensure that tips left by customers for servers go just to them and other staffers, and not shared with owners and managers.

Several years ago, similar problems were identified in Quebec and Prince Edward Island. Those provinces took steps to remedy the situation by amending their employment/labour standards legislation. For example:

Prince Edward Island’s Employment Standards Act deals with tips and gratuities, and confirms that tips and gratuities are the property of the employee to whom or for whom they are given. Further, no employer may withhold tips or gratuities intended for an employee or treat tips or gratuities intended for an employee as the wages or partial wages of the employee, unless the employer and the employee have first agreed that the tips or gratuities of the employee are to be calculated as additional wages of the employee.

In cases where the tips and gratuities of an employee are based on the billings of his or her employer in respect of banquets, bus tours and other prescribed events, the employer must pay the tips and gratuities to the employee within 60 days of the date of the event. Where an employer imposes a surcharge or other charge on a customer in lieu of the payment of tips or gratuities to an employee, all of the amounts collected in respect of the surcharge or other charge are the property of the employee for whom they are intended.

In addition, the section confirms that no employer of an employee can require the employee to share a tip or a gratuity with other employees or the employer. An employer may adopt the practice of pooling tips and gratuities for the benefit of some or all of the employees, but such practice does not give the employer a proprietary interest in the tips and gratuities so pooled. An employer must advise an employee, in writing, of any pooling policy in effect at the time the employee is hired.

The Quebec Labour Standards Act indicates that all tips received by an employee belong to the employee (or employees under a tip-sharing agreement). However, employees must report to the employer in writing, at the end of each pay period, the full amount of tips they received, directly or indirectly. The employer is obliged to accept the signed statement and to take the full amount into account. The employee’s signature certifies that the information provided on the statement is accurate. The employee does not have to remit the tips to the employer, just report them. The purpose of the requirement to report tips to employers is to enable restaurant and hotel employees to receive fringe benefits, including Employment Insurance (EI) benefits, calculated on the basis of their total remuneration, which includes tips and gratuities. For the purpose of calculating public (statutory) holidays, vacation, leaves, severance pay, the employer must take into account an employee’s total wages as well as his or her tips.

Where a tip is included on the customer’s bill as a service charge, the amount the employer subtracts as credit card costs must not exceed the portion of the costs attributable to the tip. The employer has an obligation to report all the employee’s tips (excluding tips that are allocated to the employee by the employer) and provide a statement with each paycheque. The statement should show:

  • The calculation of the employee’s net wages
  • Amount of tips reported by the employee
  • Tips allocated by the employer

The Ontario government agrees with the intent of the private member’s Bill. However, Labour Minister Linda Jeffrey said she plans to meet with Mr. Prue to discuss his Bill, which she says would have to be amended significantly. She said it is not clear whether the government will adopt the Bill as its own or leave it as a private member’s Bill.

One reason the private member’s Bill might not go through as it stands is that it lacks details on the required processes, compared to what we find in Prince Edward Island and Quebec.

Yosie Saint-Cyr
First Reference Human Resources and Compliance Managing Editor

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Yosie Saint-Cyr, LL.B. Managing Editor

Managing Editor at First Reference Inc.
Yosie Saint-Cyr, LL.B., is a trained lawyer called to the Quebec bar in 1988 and is still a member in good standing. She practiced business, employment and labour law until 1999. For over 18 years, Yosie has been the Managing Editor of the following publications, Human Resources Advisor, Human Resources PolicyPro, HRinfodesk and Accessibility Standards PolicyPro from First Reference. Yosie is one of Canada’s best known and most respected HR authors, with an extensive background in employment and labour across the country. Read more
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One thought on “Employee tips or other gratuities
  • John Miller says:

    What a lot of hoqwash from the Minister. All she has to do is import some of the processes from the other Bills and the Bill could be tabled. Get it tabled and give the people who work hard for a living a break.