In Ontario, employees governed by the Employment Standards Act, 2000 (ESA) have the right to keep their tips. In order to comply with the law, small business owners must fulfill this employer obligation by paying employees correctly. Here’s what employers should know about the minimum employment standards that apply to tips and gratuities.
Tips and Gratuities Defined
The ESA defines tips and gratuities as voluntary payments left for employees by customers. This includes service charges and tips left for employers to be given to employees.
The Laws on Employee Tips
Allowing employees to keep their tips is an employment standard. This means employees cannot give up their right to keep tips even if they agree to this verbally or in writing.
Before the Protecting Employees’ Tips Act, 2015, there were no laws restricting employers from withholding or deducting tips, or asking employees to return their tips. Since June 10, 2016, this is no longer allowed. Although employers can make deductions in specific circumstances, they cannot do this to cover expenses such as spilled food or drinks, damages, theft or losses.
Tips and Employee Wages
Under the ESA, tips and gratuities are not counted as wages when calculating termination pay, vacation pay, severance pay, minimum wage, public holiday pay or overtime pay. If an employer is found to be withholding tips from an employee, the amount will be considered as wages owed to the employee.
Although the ESA does not establish a time frame in which employers must distribute tips to employees, if they do not do this beyond a reasonable period of time they may be considered to be withholding them.
Need advice on tip pools and tip deductions?
Call our HR experts today to get answers to your questions on tips and gratuities or any other type of employee pay. We can help you ensure you are following the rules of the ESA by paying your employees correctly.