New ESA Requirements Coming into Force for Tips and other Gratuities

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On June 10, 2016 amendments the Employment Standards Act, 2000 came into force and clarified procedures for managing tips and gratuities in the workplace. Notably, the amendment defines “tip or gratuity” and bars employers from withholding, deducting from, or causing the return of tips, or other gratuities, except as authorized.

The amendments include some exceptions to the bar on employer’s withholding tips such as:

  • when authorized by a federal or provincial statute, or by a court order.
  • when they are collected and redistributed among some/all employees in order to administer a “tip pool”.

Employers cannot take a share of tips unless they are a director, sole proprietor, partner or shareholder in the business, and regularly perform work done by employees who share in the redistribution, or if they regularly perform work that employees of other employers in the same industry regularly receive tips for.

A new regulation, Tips and Other Gratuities, O Reg 125/16, which also came into force on June 10, 2016, provides that tips/gratuities do not include the portion of a service charge imposed by a credit card company on an employer for processing a credit card payment by a customer.