Should Ontario employers be forced to declare tips?

ANALYSIS: The Liberals have introduced legislation to protect servers — but unless the government forces employers to track gratuities, employees will still be at the mercy of bad bosses, writes Josh Dehaas
By Josh Dehaas - Published on April 9, 2018
a glass jar filled with coins and a label on it that reads TIPS
Much, if not most, of servers’ income consists of tips, which they don’t always pay taxes on. (iStock.com/Mizina)

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Ottawa server Michael Vorobej fought for years to get the Ontario government to pass a law stopping employers from stealing tips. He took days off work to speak out in support of New Democrat MPP Michael Prue’s 2010 proposed Protecting Employees’ Tips Act, which would have amended the Employment Standards Act to state that an “employer shall not take any portion of an employee’s tips or other gratuities.” Prue’s legislation died before the 2014 election, but a bill with the same name was introduced by Liberal MPP Arthur Potts the following year — and Vorobej travelled to Queen’s Park just to watch it pass its third reading.

Vorobej was so proud of the new law that when Labour Minister Kevin Flynn sent him a copy of a transit advertisement showing a tip jar with a lock on it, he had it framed and hung it up on his wall.

So imagine Vorobej’s surprise when the Ottawa Convention Centre, where he works — and which is an Ontario government agency — signed a new collective agreement with the union that allows management to continue to pocket 22 per cent of the 18 per cent charge tacked on to all food and beverage sales. The only thing that appears to have changed is the wording: they scratched out “gratuity” and now refer to the 18 per cent service fee as an “administrative charge.”

Vorobej suspects his union, the United Steelworkers, agreed to the clause because it was in a rush to get a deal done before its members were poached by another union on the prowl. He’s confident it’s a violation of the act. “If the Government of Ontario isn’t going to respect [the law],” he says, “who the hell will?”

The convention centre says it follows all applicable laws and informs clients that the 18 per cent “administrative charge” is divided up between the company and only a portion is considered a gratuity.

An explanatory note on the legislature’s website defines tips or other gratuities as including “a payment of a service charge or similar charge imposed by an employer on a customer in such circumstances that a reasonable person would be likely to infer that the customer intended or assumed that the payment would be redistributed to an employee or employees.” In other words, if convention-centre clients realize the 18 per cent isn’t all meant to be a gratuity, then it’s probably legal.

Toronto labour lawyer Andrew Monkhouse says there isn’t yet any relevant case law, but he thinks Vorobej is right. “It would seem to violate at least the spirit of the law and quite likely also the letter of the law,” he says.

Unlike most servers, Vorobej is unionized. That gives him the confidence to speak his mind when he feels his employer is breaking the rules. Most servers, he says, are afraid to speak out — not only because they aren’t unionized, but also because they may not be working entirely above-board themselves.


Servers typically earn minimum wage, and their minimum wage is lower than most people’s ($12.20 per hour versus $14 per hour). Much of their income — in some cases, the majority of it — comes from tips, which they don’t always pay taxes on. Vorobej says some servers may be afraid to complain about their bosses because their bosses could report them for not paying their taxes in full.

That’s why it’s time for Ontario to bring tipping out of the shadows once and for all, Vorobej says, by requiring that tips be tracked and reported, as is done in Quebec and the United States. Quebec requires servers to report their tips to employers weekly, and employers are required to deduct all taxes.

Servers might not like the sound of that, but the system would make them less vulnerable to bad bosses and could potentially give them better access to Employment Insurance and the Canada Pension Plan, depending on how the regulation is designed.

From a taxpayer’s perspective, it would also be a win, since servers would be paying their fair share.

So why hasn’t the Ontario government enacted such a system?

Owen Sound restaurant owner Stelios Dimakos says he worries that it would add to his paperwork burden. But the industry group representing owners isn’t strictly opposed: Restaurant Canada vice-president Joyce Reynolds says that Quebec restaurateurs haven’t found the paperwork particularly onerous, and that if the Ontario government collected more income taxes from servers, they might be able to afford to reduce taxes for restaurant owners who are struggling. Some, she says, earn less than servers do.

Arthur Potts is the Liberal MPP who shepherded the Protecting Employees’ Tips Act through the legislature and who invited Vorobej to Queen’s Park. He owns a small share in The Pilot, a restaurant in downtown Toronto, so he knows the industry well.

When it comes to Vorobej’s situation, Potts says that while he “guesses” it’s legal, “it would be a matter of law of whether the renegotiated collective agreement complies with the act or not.”

Regardless of who’s right, Potts agrees with Vorobej that “restaurant servers are a huge component of the underground economy.” Where they differ is on the question of whether they’re vulnerable: Potts says his “empathy goes down” when he hears they aren’t declaring all their tips.

“They have an obligation to declare their full income, and if they’re not and that stands in the way of them coming clean, that’s their problem,” he says. “In order to protect your tips, you’re probably going to be in a situation where you have to declare them as earnings.”

But that doesn’t explain why the Liberals haven’t made it mandatory for servers to report their tips in writing. Potts says it simply was “not the consideration” when the Liberals put together the act.

As for Vorobej, he plans to continue fighting for what he sees as right. He’s hoping that if the Liberals won’t help him, perhaps the NDP or Progressive Conservatives will.

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