Regulation - LGIC

Credit Card Processing Fee Exemption - Employment Standards Act, 2000

Regulation Number(s):
Instrument Type:
Regulation - LGIC
Bill or Act:
Employment Standards Act, 2000
Summary of Decision:
Further Information:
Proposal Number:
Posting Date:
February 22, 2016
Summary of Proposal:
Bill 12, Protecting Employees' Tips Act, 2015, amended the Employment Standards Act, 2000 (ESA) to provide that employers are prohibited from taking any portion of an employee's tips or other gratuities, except in limited circumstances. This prohibition applies to all sectors and workplaces where an employer-employee relationship exists (e.g., restaurants, nail and hair salons, banquet halls, hotels, spas, etc.), subject to other ESA exclusions. The amendments to the ESA will come into force on June 10, 2016.

The ESA provides that a "tip or other gratuity" does not include such charges as may be prescribed relating to the method of payment used, or a prescribed portion of those charges (subsection 14.1(2)).

When a business receives payment from a customer by credit card, they pay a fee to the credit card merchant. This fee is generally a percentage of the payment and is referred to as the credit card processing fee.

The Ministry of Labour is proposing to make a regulation under subsection 14.1(2) of the ESA that would exclude a portion of credit card processing fees from the definition of "tips or other gratuity". Under the proposed regulation, a tip or other gratuity would not include the portion of a service charge or similar charge imposed by a credit card company on an employer for processing a credit card payment made to the employer by a customer. The portion of the charge that would be excluded would be determined by multiplying the total amount of the tip or gratuity by the greater of:
• the per cent charged by the credit card company for processing the payment, and
• 1.5 per cent.
If adopted, this would mean that where tips and gratuities are paid by a customer on a credit card, an employer could deduct or withhold a portion of the credit card processing fee from the tip or gratuity provided to the employee. Employers would be able to deduct the greater of a flat rate of 1.5% of the tip or the pro-rated share of the processing fee associated with the tip on the specific credit card transaction. This regulation is proposed to come into effect on June 10, 2016 (the day the Protecting Employees' Tips Act, 2015 comes into force).

The Ministry is seeking input on this subject.
Contact Address:
Regulation under the Employment Standards Act, 2000
c/o Employment, Labour and Corporate Policy Branch
400 University Ave, 12th Floor
Toronto, ON M7A 1T7
Effective Date:
June 10, 2016