[BY WARDS PC LAWYERS]
So-called “tip theft” in Ontario will be no more, much to the delight of employees and the concern of businesses in industries that rely on tips and gratuities.
Ontario’s Protecting Employees’ Tips Act, 2015 (“Bill 12”) is now passed and will be the law in Ontario as of June 10, 2016. Bill 12 will change and update Ontario’s Employment Standards Act, 2000 (“ESA”). There will be a new Part V.1 of the ESA, called Employee Tips and Other Gratuities.
Effectively, Bill 12 will disallow employers from withholding, making deductions from or collecting tips and other gratuities from employees, unless otherwise authorized to do so. There is similar legislation already in effect in other provinces.
Under Bill 12, “tips and other gratuities” will include:
- voluntary payments made by a customer to an employee that could reasonably be inferred as intended by the customer or an employee to be kept by the employee or shared among other employees
- voluntary payments made by a customer to an employer that could reasonably be inferred as intended by the customer or an employee to be redistributed to an employee or employees
- payment of a service charge or similar charge that could reasonably be inferred as intended to be redistributed to an employee or employees
- other payments (that are specifically set out by legislation)
However, Bill 12 exempts “such charges as may be prescribed relating to the method of payment used, or a prescribed portion of those charges” and any other exempted payments as specified by regulation. So far, there has not been anything enacted or published by the Ontario government to give any guidance about the types of other or additional payments by customers that would be included in, or exempted from, the definition of “tips and other gratuities”.
There could potentially be an issue about service charges that credit card companies charge to businesses, mostly on a per transaction basis. Based on Bill 12, if, for example, if a customer uses a credit card and leaves a payment exceeding the cost for the meal (i.e., an additional 15%), the full excess amount will have to be re-directed to the employee server, notwithstanding that the restaurant business may have to pay a service fee to the credit card company on that excess amount (often 2.5%). This is likely to cause an issue with Bill 12 and will likely be addressed by the regulation(s) that will form part of the new law in the ESA. However, as of today, the employer business appears to be responsible for absorbing this hidden expense under Bill 12.
If a workplace is governed by a collective bargaining agreement, that will prevail over Bill 12 until the collective bargaining agreement must be renewed and, if an acceptable tips and gratuities process is not negotiated as part of the renewal, Bill 12 will take effect and govern.
If employers “pool” the tips received in the workplace, based on a current policy in place, the amounts must be paid out to the eligible employees in the pool ultimately. Employers, however, will generally not be able to share in the pooled tips, except in very limited circumstances. This may include an owner who actually does the same, or very similar work, to the employees in the place of business (i.e., also serving customers).
There remains some uncertainty about how Bill 12 will work in Ontario, but it is likely some of this uncertainty may be addressed by the regulations that will accompany the changes to the ESA or, alternatively, by case law decided after it comes in into effect.
Employers will hope for specific exemptions for credit card transactions and often other related fees that often are charged in special services, such as for banquets or special event services.
Employers should also be familiar with this new law and update or create their workplace policies to reflect these changes, subject to these uncertainties that will have to be clarified and sorted out.
Jason Ward – WARDS PC LAWYERS
This WARDSPC BLAWG is for general information only. It is not legal advice, or intended to be. Specific or more information may be necessary before advice could be provided for your circumstances.
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