Human Resources Legislative Update
New ESA “Tips and Gratuities” Exemption for Prescribed Credit Card Charges
Date: May 6, 2016
On May 6, 2016, the Ontario government prescribed a regulatory exemption for certain credit card payment processing fees in connection with pending reforms to the Employment Standards Act, 2000 (ESA) enacted by Bill 12, Protecting Employees’ Tips Act, 2015.
Ontario regulation 125/16 (Tips and Other Gratuities) provides that the definition of “tips and gratuities” in section 14.1(2) of the ESA does not include a portion of a credit card company service charge or similar charge imposed on an employer for processing a payment made by a customer, as determined in accordance with a prescribed formula. Specifically, the exempt portion is to be calculated by multiplying the total tip or gratuity amount by the greater of:
(i) the per cent charged by the credit card company for processing the payment, and
(ii) 1.5 per cent.
The new rules and exemption will come into force on June 10, 2016.
As outlined in our FTR Now of December 15, 2015, Ontario Passes New Legislation Governing Tips and Gratuities, the Bill 12 reforms will prohibit employers from withholding, making deductions from, or collecting tips or other gratuities from employees unless authorized to do so under the ESA or its regulations.