Interested in more careers-related content? Check out our new weekly Work Life newsletter. Sent every Monday afternoon.
THE QUESTION
I work in a service environment where we collect tips from customers who often pay by credit card. My manager says that the credit card companies charge him a 3-per-cent processing fee, so he deducts 3 per cent from our tips paid by credit card. Is this legal? What can we do if it’s not?
THE FIRST ANSWER
Brooke Finkelstein, employment lawyer and workplace investigator, West Coast Workplace Law, Richmond, B.C.
Each province has their own laws and regulations regarding tips. Under B.C.’s Employment Standards Act (ESA), tips belong to employees – no ifs, ands or buts. Employers can’t withhold, deduct or require you to hand over gratuities unless specifically authorized by law or a court order. Deducting 3 per cent for credit card processing fees? That doesn’t make the cut.
Section 30.3 of the ESA makes it clear that gratuities are yours. If your employer is skimming from your tips, they’re likely violating the law. Start by having a conversation with them – sometimes employers simply aren’t aware of their obligations. If that doesn’t work, you can file a complaint with your provincial employment standards branch, which can help recover the improperly deducted amounts. Under the ESA, these deductions are considered a debt owed to you.
Redistributing tips through a pooling system is allowed under Section 30.4, but employers can’t dip into that pool for business expenses like card fees. Transparent handling of tips isn’t just the right thing to do – it’s also essential for maintaining trust and morale among employees.
Employers, take note: failing to follow the rules can lead to complaints, investigations, repayment orders and even fines. Fair and legal handling of gratuities isn’t just good for employee morale – it’s the law.
The takeaway? Gratuities aren’t a grey area. If you earn them, they’re yours.
THE SECOND ANSWER
Tareq Shahwan, associate, Randy Ai Law Office, Toronto
There are different provisions and laws in each province that dictate how tips and gratuities are paid out. In the province of Ontario, as per Section 14 of the Employment Standards Act, 2000 (ESA), employers are prohibited from withholding, deducting or requiring employees to return tips or gratuities unless specifically authorized by the law. The practice of deducting credit card processing fees from employees’ tips violates this provision, with extremely narrow exceptions. In other provinces, one must check the relevant provincial statute(s) that govern employment matters. For example, in Quebec, one may need to refer to the Act Respecting Labour Standards.
In your case, your manager’s practice of deducting 3 per cent from your credit card tips to offset credit card fees most likely violates the ESA. This means you are legally entitled to receive the full amount of your tips, without any deductions for credit card processing fees.
To address this issue, you may start by raising it directly with your employer. If you are in Ontario, politely inform your manager that under Ontario law, tips cannot be deducted to cover credit card fees. If your employer refuses to comply or continues this practice, you can file a complaint with the Ontario Ministry of Labour or the appropriate provincial or territorial employment standards office/agency. After the complaint, the office/agency will investigate and may require your employer to reimburse you for any improper deductions.
It’s important to keep detailed records of your tips, including the amounts received and any deductions made by your employer. These records will support your case if you file a complaint. Additionally, it is advisable to consult a licensed employment lawyer in your province to obtain comprehensive legal advice. This will help you understand the merits of your case, the procedures for pursuing a claim and the potential remedies that may be awarded if you decide to take the matter to court.
In Ontario, you have a right to your full tips. The law is on your side to ensure fair treatment in this matter.
Have a question for our experts? Send an e-mail to NineToFive@globeandmail.com with ‘Nine to Five’ in the subject line. Emails without the correct subject line may not be answered.