New Ontario “Tip” Protection Legislation

In June 2016, Ontario’s “Protecting Employees’ Tips Act” (the “Act”) came into force, amending the Employment Standards Act to protect employee tips and gratuities.

Tips and gratuities are defined as monies that “a reasonable person would be likely to infer” are intended either for direct receipt by the employee or for redistribution to employees”.

The Act prohibits employers from:

• withholding tips or gratuities from employees;
• making deductions from an employee’s tips or gratuities; or
• causing an employee to return or give up tips or gratuities.

Employers may withhold or deduct from tips or gratuities where authorized by statute or court order, or where the deduction or withholding are intended for redistribution to employees.

Amounts withheld contrary to these restrictions will be considered (and will be enforceable as) “wages owing” by the employer under the ESA.

Employers, directors and shareholders are also prohibited from “sharing” in tips or gratuities under the Act.

This prohibition does not apply, however, to directors, shareholders, sole proprietors or partners who “regularly perform to a substantial degree the same work” performed by employees who share in the redistribution of tips or gratuities.

In the case of unionized employers, existing collective agreement provisions dealing with the treatment of tips or gratuities, to the extent that such provisions conflict with the Act, will be permitted to prevail until such time as the collective agreement expires and is renegotiated.

Employers operating businesses where tips or gratuities form part of employee compensation must carefully review their policies on the treatment of these earnings to ensure compliance with this new legislation.

If you would like to learn more about this or any other employment law topic, please contact me by phone or by email.

Thank you for watching.

Peter Straszynski explains the new rules for employers whose employees collect tips or gratuities as part of their compensation.