What does your tip-out policy say about you?

Tipping out may get around rules prohibiting deduction of wages but may still lead to employer liability
By Shana French and Yasmin Askari
|Canadian Employment Law Today|Last Updated: 11/29/2013

“Tipping out” — the pooling and sharing of a portion of gratuities — is a common practice among restaurants and bars. Calculated either as a percentage of tips received by a server or of overall corporate sales for a period of time, pooled gratuities have traditionally been shared among servers, bussers, chefs and other restaurant staff. Increasingly, however, the “house”’ (the restaurant or bar itself) has begun to take piece of the action, ostensibly to recuperate for breakage costs or monetary errors.

Seemingly benign — what could be wrong with sharing among colleagues — tipping out has already been banned in New Brunswick, Prince Edward Island, and New York. In addition, for the third time, a well-known member of the Ontario Legislature has introduced a private member’s bill — supported by the Province’s Minister of Labour — that would amend the province’s Employment Standards Act (ESA) making it illegal for an employer to take any portion of an employee’s tips or other gratuities.

The criticism of tipping out is essentially two-fold: perceived unfairness, and the law.