Some employers getting around minimum wage increases

By Jeffrey R. Smith ([email protected])

The minimum wage has been increasing in most Canadian jurisdictions lately. This is looked upon favourably by labour groups and those who get by on the basic rate. But there has been some outcry from employers regarding the financial pressures this puts on them and some may be trying to circumnavigate the wage increases.

The Toronto Star recently reported on a trend among some employers in the service industry of asking servers to hand part of their tip money over to the company. According to the Star, this practice was rare until last year when the economic slowdown prompted some restaurants and bars to take a little back from their employees. Sometimes it’s calculated as a percentage of tips and sometimes it’s based on net sales regardless of the tip. The latter calculation could hurt servers more if they don’t receive a good tip.

Now, business is on the uptick for many of them, but they are continuing this practice to offset recent increases in the minimum wage. On March 31, the minimum wage for servers in Ontario who get tips was set at $8.90 per hour and the general minimum wage at $10.25. One server at a Toronto restaurant told the newspaper her employer started asking for a portion of tips when the minimum wage went up and now she takes home less than what she did before the increase.

Some establishments say the money is used to cover breakage or calculation errors on bills. It’s illegal for employers to deduct wages for any reason without employee consent, but tips aren’t generally considered wages, leaving them open to be shared with the employer.

There are both legal and ethical considerations to keep in mind in these circumstances. Asking an employee to give part of her tips back to the employer could be considered a change in the employment contract, though it’s unlikely an employee at the low level of the totem pole would consider pursuing it, considering the small amounts involved. Courts might also not consider such an action worthwhile.

But could employers who take part in this practice be exposing themselves to potential legal trouble? What about the potential problems created by disgruntled employees? And what about the question of basic fairness? The employers are taking money from their lowest-paid employees to address financial concerns, but not from salaried management. Whether legal or not, is it ethical?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at employment law from a business perspective. For more information, visit

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