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Tip Protection for Servers – New Changes to the ESA

The Ontario government just passed a law to provide protection for servers and other employees who commonly receive tips. Under Bill 12Protecting Employees’ Tips Act, an employer is prohibited from withholding, making deductions from or causing an employee to return his or her tips or other gratuities.

The definition of “tips and other gratuities” includes voluntary payments made directly or indirectly to an employee where it is reasonable to infer that the customer intended that the payment would be kept by the employee or shared with other employees. It also includes payments of a service charge or similar charge where it is reasonable to infer that the customer intended or assumed the payment would be redistributed to an employee or employees. This would include, for instance, a mandatory gratuity that a restaurant may impose on large groups. Excluded from the definition are charges as may be prescribed relating to method of payment used, or a prescribed portion of those charges.

The Bill includes provisions for the pooling and redistribution of tips between employees. However, it prohibits business owners, directors or shareholders from taking a cut of the redistributed tips unless these individual regularly performs a substantial degree of the same work as the employees or work that an employee would commonly receive tips for based on industry practice.

The Bill does not prohibit an employer from making deductions from tips where otherwise required by law, for instance, with respect to applicable statutory deductions for taxation purposes.

For unionized employees, if there is a conflict between the Bill and pre-existing collective agreement provisions pertaining to tips and gratuities, the collective agreement will prevail until the parties negotiate a renewal agreement.

These changes come into effect on June 10, 2016. Employers in industries where employees receive tips should review their current policies and practices to ensure that they are in line with these new changes. Employers should note that the Bill does not change the definition of “wages” in the Employment Standards Act. As such, there is still no obligation to consider an employee’s tips when calculating termination and severance pay.

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