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Tips and Other Gratuities

This workbook has been prepared to assist employers and employees in understanding some of their obligations and rights under the Employment Standards Act (ESA) and its regulations. It does not take the place of the ESA and its regulations and it should not be considered to offer any legal advice on your particular situation.

Generally, an employer cannot withhold, make deductions from, or make an employee return his or her tips and other gratuities to them, unless they are:

  • Following a court order or statute, or
  • Redistributing them as part of a tip pool.

Deductions from tips and other gratuities to cover things like spillage, breakage, losses or damage, etc. are not allowed.

For more information see Tips and Gratuities.

Court Orders/Garnishment

A court order may indicate that an employee owes money either to the employer or to someone else other than his or her employer, and that the employer can make a deduction from the employee's tips to pay what is owed.

Tip Pooling

Important note: An employer generally cannot share in a tip pool unless he or she is a sole proprietor, partner, director or shareholder in the business and regularly performs to a substantial degree the same work performed by some or all of the employees who share in the redistribution, or by employees of other employers in the same industry who commonly receive tips and other gratuities.

Example A

John is a director and manager of a restaurant that employs servers, bartenders, chefs and hostesses. John has a tip pooling practice in place whereby he collects a percentage of his servers’ tips and then redistributes them among the chefs, the hostesses and the bartender. In this circumstance, John does not perform to a substantial degree the same work performed by some or all of the employees who share in the redistribution, or by employees of other employers in the same industry who commonly receive tips or other gratuities therefore John may not participate in the tip pool.

Example B

Daisy is the sole proprietor of a hair salon and works at her salon as a stylist. When salon patrons pay for their services they often include a tip for their stylist. Daisy collects these tips and provides them to the stylists at the end of their shift. She also runs a tip pool where a percentage of the tips collected are redistributed to salon support staff (e.g. hair washers, styling assistants, etc.). In this case, Daisy may participate in the tip pool because she performs to a substantial degree the same work performed by some or all of the employees who share in the redistribution, or by employees of other employers in the same industry who commonly receive tips or other gratuities.

Tips and Gratuities Checklist

Employers, please verify that:

  • The only time you are withholding, making deductions from or requiring employees to turn over their tips and other gratuities is when doing so is authorized by a statute, court order, or if it is part of a tip pooling arrangement.
  • The only time you are taking a portion of a tip pool for yourself is if you are a sole proprietor, partner, director or shareholder in the business and you regularly perform to a substantial degree the same work performed by some or all of the employees who share in the redistribution (or by employees of other employers in the same industry who commonly receive or share tips and other gratuities).
  • While there is no responsibility on the part of an employer to keep records regarding tips and gratuities, it would be beneficial to document your practices relating to tips and gratuities, including tip pooling, electronic tip payments, and any deductions made pursuant to statute or court order.

Employees:

  • While there is no responsibility on the part of the employee to keep records, it is beneficial to track the tips and other gratuities you receive from customers or as part of a tip pool, and any amounts that you may contribute to a tip pool.

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