Recent changes to Ontario’s Employment Standards Act (ESA) mean that there are now rules about the handling of tips and gratuities in the workplace.
This month’s On the Radar looks at these new rules, including when workers get to keep tips and what they can do to protect their rights.
When workers get to keep tips
In workplaces where people leave tips, like hair and nail salons, restaurants, bars, and taxis, employers must now let workers keep the tips that people give them.
That’s the general rule in the ESA.
But there are 2 exceptions to this general rule:
- The employer can decide that tips go into a “pool” for sharing. And the employer can also decide what share of the pool a worker gets.
- The employer might have to follow another law or a court order. For example, a court order could say that an employer has to take money out of a worker’s wages and tips to pay for something that the worker owes, like child support.
When employers can share in the tips
An employer who decides that tips go into a pool for sharing does not usually get a share for themselves.
But the rules now say that an employer who owns all or part of the business can share in the tips if they regularly do a lot of the same work as:
- workers who are sharing the tips, or
- workers in the same industry who normally get tips.
For example, a restaurant owner who spends a lot of time serving food can share in the tips.
Tips aren’t wages
The ESA does not count tips as wages. So, employers still have to pay minimum wage to workers who get tips.
But there’s more than one minimum wage. For example, there’s a general minimum wage, a minimum wage for students, and a minimum wage for people who serve liquor.
The Ministry of Labour has information about the different minimum wage rates.
Reporting tips as income
Workers should keep track of the tips they get, whether they keep their own tips or get a share of tips from a “pool”.
Tips are income from employment so workers should include the amount in their income tax returns.
An employer who puts tips in a pool and decides what share of the tips to give a worker has to include the amount on the worker’s T4 statement. The worker uses the information from the T4 statement on their income tax return.
Otherwise, workers are supposed to report tips themselves when they do their income tax.
Making a claim against an employer
If an employer does not follow the rules about tips, a worker might be able to get the money they’re owed by making a claim with the Ministry of Labour.
Workers have up to 2 years to make a claim from the date the employer owes the money.
Most people don’t make claims against an employer that they’re still working for. This is because the laws to protect workers don’t stop employers from firing their workers.
And if a worker is fired, it’s up to them to take action against the employer to get the money the employer owes them.
The ESA says that employers can’t punish workers for asking about their rights or acting on their rights. If this happens, there may be steps the worker can take.
Getting legal help
Workers who have questions or need help to deal with a problem with their employer, can read more in CLEO’s Where can I get help and advice about my rights as a worker?
This email alert gives general legal information. It is not a substitute for getting legal advice about a particular situation.
*This article is reproduced with permission of CLEO (Community Legal Education Ontario).