A Few Good “Tips”
By: Georg Reuter
By: Kyusik ShinTips may be freely given, but they are not governed by free-for-all rules. For employers, misunderstanding the law on tips or gratuities can turn a gesture of appreciation into an employment standards complaint.
To help employers and employees navigate this often-misunderstood area of employment law, we have prepared a series of frequently asked questions and answers addressing some of the most common issues relating to tips and gratuities in British Columbia.
Do tips count towards wages?
No. Tips do not count as wages; therefore, the minimum wage requirement under the BC Employment Standards Act R.S.B.C. 1996, c.113 (the “ESA“) applies to wages before tips.
Are owners of a business legally allowed to withhold (or deduct) any tips from an employee?
No. This is specifically prohibited under Section 30.3(1) of the ESA. Any amount withheld or deducted is deemed a debt owed to the employee under the ESA, and interest may accrue on the outstanding amount.
Are owners of a business legally allowed to distribute tips to other employees?
Yes, as long as those participating and receiving redistributed gratuities are “employees” (Under Section 30.4(1) of the ESA), employers can require employees to pool their tips and share them with certain other employees.
Example
An employer requires all employees who receive tips to put 15% of the tips received into a pool. The pool is disbursed to all employees who do not receive tips at the end of each shift according to a formula agreed to by the employees. This activity does not contravene the Act.
Are directors, shareholders, managers, administrators, legally allowed to share tips?
Yes – But. This is permitted under Section 30.4(5) of the ESA if the director or shareholder performs to a substantial degree the same work performed by some or all of the employees who share in the redistribution of the tips.
The BC Employment Standards Tribunal, in a 2021 decision called Retail Action Network and Anna Gerrard (Re), 2021 BCEST 5 (CanLII), also specifically determined that the ESA does not limit the class of employees that can share in gratuities and found that there was no exclusion of managers and administrators, stating that: “there is nothing in the ESA prohibiting a tip pool that includes, for example, managers and administrative staff.”
Do Employers have to maintain records of who receives tips?
Yes. Under Section 27 of the ESA, employers must record any “money, allowance or other payment” to its employees on wage statements. Where an employer participates in the collection and redistribution of tips, failure to maintain proper wage statement records may leave the employer without sufficient evidence to establish that the tips were distributed in compliance with the ESA – see: Cioffi’s Meat Market, 2023 BCEST 10..
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