‘If an employer is paying something to an employee on a regular basis, then call it what it is,' says lawyer discussing labour board decision
The Manitoba Labour Board has upheld a payment of wages order against a restaurant, dismissing the employer’s appeal arguing that the worker had been paid advances that equalled more than any unpaid wages at the time the worker quit.
The Chaise Café and Lounge is a restaurant in Winnipeg that employed the worker as a server starting in July 2021.
Employees at the restaurant each had a code when they logged into the restaurant’s system so that tips paid on sales by debit or credit cards would be logged to the employee’s individual code. Each paycheque would have an amount of money labelled as an “advance” that corresponded to the amount of tips the employee had received, while any cash tips were collected and kept by servers themselves.
The owner told the worker and other employees when putting in their hours that amounts were called “advances” on paycheques so employees wouldn’t have to claim the tips as income and pay tax on them. He didn’t mention anything about paying back the advances and the worker never asked for an advance on her pay, according to her. The amount of advance on each paycheque corresponded to the exact amount of tips left by customers.
According to the owner, tips processed through electronic payments were the employer’s property and that the amounts paid out were considered advances under an incentive program that was calculated loosely based in tips and membership sale bonuses, but he told employees that the incentive program was in place instead of tips. He maintained that this practice allowed him to forgive or recall such advances at his discretion – such as when an employee was short on sales remittances or a top performer - although there was no written policy for an incentive program.
Over the course of her employment, the worker received more than $9,000 in advances on her paycheques.
Notice of resignation
The worker had no problems at work for two years until 2023, when the restaurant rolled out a membership subscription program. Servers were ordered to solicit each table they served to try to sell memberships. The owner said that he would reduce the hours of any servers who didn’t sell enough memberships.
The worker didn’t like having to push customers for memberships and the threats of reduced hours. She had another job, so she decided to quit her restaurant position. She gave her two-week notice of resignation in late August. A few other staff members also gave their notice around the same time.
When the worker went to pick up her paycheque the following week, it wasn’t available. The employee who processed payroll told her that cheques had been printed but the owner hadn’t signed them because he was performing an audit. The worker spoke with other employees and learned that only employees who had given their notice of resignation were being audited.
The worker told the owner that she would go to the Manitoba Labour Board if he didn’t pay her, and the owner said to go ahead. The owner also removed her from the group chat where shifts were scheduled, leaving her unable to work her last shift on Sept. 2.
Unpaid wages claim
The worker filed a claim for unpaid wages with the Manitoba Employment Standards Branch (ESB). Several months later, the ESB issued a payment of wages order to the restaurant requiring it to pay the worker $539.48 plus a $100 administrative fee.
The restaurant appealed the decision, asserting that the worker had been paid more than she was owed through wage advances that were labelled on her paycheques. The owner argued that advances are wages and must be paid back if they aren’t earned. Even if an employee doesn’t request an advance, if one is paid then it would be a payroll error that also must be paid back, the owner said.
Under the Manitoba’s The Employment Standards Code, an employer can withhold an employee’s pay without the employee’s consent to make up for a payroll error or cash advance that results in the employee getting paid too much, according to Mark Alward, an employment lawyer at Taylor McCaffrey in Winnipeg.
“But, generally speaking, unless it's very clear that something like that happened and it’s communicated to the employee, I'm always very cautious when I have an employer who's suggesting that they're going to hold back wages,” says Alward. “Knowing how many employees live paycheque-to-paycheque, rather than trying to claw all of it back on the next paycheque, it might be better to meet in the middle and claw a little bit back over the next handful of paychecques, just so the employee isn't put into too much of a disadvantage.”
The board found that the amounts labelled as “advances” were, in fact, tips, and the worker was never informed that these amounts were part of an incentive program, nor was there evidence of a pre-existing policy. Although employees have no statutory entitlement to keep tips in Manitoba, once an employer decides to remit tips to employees, they become wages under the definition in the province’s The Employment Standards Code, said the board.
Statutory definition of wages
“There’s a bit of a weird definition of wages in Manitoba employment standards legislation where it includes salary, commission, or compensation in any other form,” says Alward. “Compensation in any other form could include tips, so when they were actually paid to the worker, they became compensation in another form and part of the wages.”
The board also found that the worker never requested a pay advance and was entitled to keep the amounts paid to her as tips. The restaurant couldn’t reclaim those amounts by reclassifying them retroactively or alleging payroll errors, as “simply calling it an advance does not make it an advance,” the board said.
“If an employer is paying something to an employee on a regular basis, then call it what it is, because in this instance, it appears that the employer was basically trying to have its cake and eat it too,” says Alward. “It was providing the tips to employees, but then after the fact it was suggesting that that's not, in fact, what they were.”
“The easier resolution here is to pay your people fairly and appropriately and don't try to mislead in order to try to get out of an obligation,” he adds. “It's clear that these employees were paid their tips over an extended period of time and this was their standard practice.”
The board determined that the worker was entitled to unpaid wages for two pay periods in August 2023, including tips she didn’t originally claim, in the amounts of $74.29 and $35.09. Additionally, the worker was entitled to $269.76 in general holiday pay dating back to 2021 and $86.14 in vacation pay, said the board.
Terminated without cause
The board also found that the worker was effectively terminated without cause when she was removed from the scheduling group chat after raising concerns about her pay. As a result, the board awarded $74 for wages in lieu of notice for the last shift she couldn’t work.
The board confirmed the ESB’s order, directing the restaurant to pay the worker $539.58 in wages, vacation pay, and general holiday pay less statutory deductions, along with a $100 administrative fee.
Alward notes that tips aren’t considered wages under the Manitoba code and employers have flexibility with tips, but once a practice is established where employees are paid tips, that flexibility can disappear.
“The Labour Board isn’t interested in arguments where an employer decides that it would like to try to be cute on what certain classifications are,” he says. “This is one of those situations where the board isn’t interested in what parties call certain things in their relationship – it’s interested in what is the true substance of the matter?”
