Credit card charges
New on the Ministry of Labour website is a dedicated page on Tips and Other Gratuities featuring a new guideline and FAQ:
Starting June 10, 2016, it will be illegal for employers to keep a portion of employees’ tips and other gratuities, except as permitted by the Employment Standards Act, 2000 (ESA).
These rules affect employers and employees covered by the ESA in workplaces where tips and gratuities are received – such as at bars, restaurants, hair and nail salons, catering firms and taxis.
The changes come as a result of Bill 12 Protecting Employees’ Tips Act, 2014.
VIDEO: Watch an educational video on Tips and Other Gratuities. Learn about the new rules around the handling of tips and othr greatuities in the workplace.
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 will be prohibited?
Employers will be prohibited from withholding, making deductions from or causing the employee to return tips and other gratuities. There are two situations in which this prohibition does not apply:
- If the employer collects and redistributes the money among its employees, a practice often referred to as “tip pooling.”
- If a statute or a court order authorizes it.
Employers can’t make deductions from tips for things like faulty work, cash shortages, or lost or stolen goods.
Employers will generally be prohibited from sharing in a tip pool. The exception is if the employer owns all or part of the business, and he or she regularly performs the same work to a large degree of:
- Some or all of the employees who share in the tip pool, or
- Those in the same industry who would normally receive tips.
For example, this exception would apply if a restaurant owner spent a substantial amount of his or her time serving food or in the kitchen doing the same work as staff members who receive a portion of a tip pool. The same standard applies to directors and shareholders of corporations.
ONTARIO REGULATION 125/16
made under the
EMPLOYMENT STANDARDS ACT, 2000
Made: May 4, 2016
Filed: May 6, 2016
Published on e-Laws: May 6, 2016
Printed in The Ontario Gazette: May 21, 2016
TIPS AND OTHER GRATUITIES
1. For the purposes of subsection 14.1 (2) of the Act, a tip or other gratuity does not include the portion of a service charge or similar charge imposed by a credit card company on an employer for processing a credit card payment made to the employer by a customer, as determined in accordance with the following:
1. Multiply the total amount of the tip or other gratuity by the greater of,
i. the per cent charged by the credit card company for processing the
ii. 1.5 per cent.
2. This Regulation comes into force on the later of the day section 1 of the Protecting Employees’ Tips Act, 2015 comes into force and the day this Regulation is filed.
Transition — collective agreements
14.5 (1) If a collective agreement that is in effect on the day section 1 of the Protecting Employees’ Tips Act, 2015 comes into force contains a provision that addresses the treatment of employee tips or other gratuities and there is a conflict between the provision of the collective agreement and this Part, the provision of the collective agreement prevails.
Same — expiry of agreement
(2) Following the expiry of a collective agreement described in subsection (1), if the provision that addresses the treatment of employee tips or other gratuities remains in effect, subsection (1) continues to apply to that provision, with necessary modifications, until a new or renewal agreement comes into effect.
Same — renewed or new agreement
(3) Subsection (1) does not apply to a collective agreement that is made or renewed on or after the day section 1 of the Protecting Employees’ Tips Act, 2015 comes into force.