THE QUESTION
I work for a service-based company where I’m sent to clients’ houses and help them with various tasks and errands. Our company policy is not to accept tips, and our clients are aware of that. Recently, one client has been insisting on tipping me in cash after my shift. She says she won’t tell my boss. I refused the first two times, but I’m barely paid more than minimum wage and could really use the extra money. Is it legal for my employer to prevent me from taking tips? Could they fire me if they found out I accepted tips?
THE FIRST ANSWER
Christie Gilmour, employment lawyer, Forte Workplace Law, Surrey, B.C.
There can be good reasons why businesses set policies saying that employees are not allowed to accept tips, including trying to ensure that equal services are provided to all clients whether clients can afford to tip or not, standardizing employee compensation to promote a positive workplace culture, protecting clients from exploitation and/or addressing discriminatory tipping practices.
Generally, employers have the right to set ethical, professional and operational policies for the workplace, including tipping policies, and employees have obligations to obey them. Whether a policy is a condition of employment or not, employees also have an implied common law obligation to follow their employer’s lawful and reasonable directions.
If an employee willfully disobeys a reasonable employer policy or direction, they can face employment consequences, which could include termination “with cause” (without notice or severance) if the breach is severe (which may depend on the reasons for the policy and the circumstances surrounding receipt of the tip) or often repeated, despite warnings. The employer may consider letting the employee go “without cause” and paying the required severance, especially if the required severance is small.
There are specific rules around tipping and rights vary somewhat from province to province, but generally an employer cannot withhold tips that have been paid by a customer and earned by an employee. In B.C., the Employment Standards Act prohibits employers from withholding tips from employees unless the tips are redistributed in a tip pool and prohibits employers from sharing in the tip pool unless they do work similar to the employees who received the tips.
THE SECOND ANSWER
Shibil Siddiqi, lawyer, Progressive Barristers, Toronto
Many workers rely on tips to supplement their wages, particularly given today’s inflationary pressures and the high cost of living. In Ontario, the Employment Standards Act provides certain protections for workers who receive tips. Employers are prohibited from withholding or making deductions from tips, and from requiring employees to give their tips to the employer. The narrow exceptions to these rules are where a court orders otherwise, or where the employer establishes a “tips pool” to collect tips and redistribute them among employees.
The rationale behind these protections is to ensure that tips flow through to employees without being improperly taken by employers. However, these protections do not extend to a situation where an employer explicitly prohibits employees from accepting tips in the first place. While such a policy is unusual, it is legal. It may be designed to protect a vulnerable client population such as seniors or persons with disabilities receiving services in their home. Or it may be part of an employer’s business model to seek a competitive advantage by offering services with no hidden charges, including tips.
Given that the policy preventing tips is legal, an employer can fire an employee for breach of the policy. Knowingly breaching employer policies has been held in some cases to be just cause for termination. In Ontario, a breach that rises to the standard of wilful misconduct that has not been condoned permits termination without any notice or severance. Such cases are highly context-specific, and the heavy burden to prove serious misconduct is on the employer. However, even if just cause is not met, provincially regulated employees in Ontario can generally be fired without cause upon being provided lawful notice and severance.
An approach may be to disclose this situation to the employer prior to accepting any tips and to request a formal exemption from the policy or some other mutually agreeable solution.
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