Can a restaurant owner keep the servers’ tips?

For this week’s Top Story, we’re investigating how tips aren’t always given to servers, if it’s legal and what workers can do about it.

When cash was more commonly used to pay restaurant bills, tipping was a direct and immediate gift by the customer to the server. No fuss, no muss.

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“I worked in hospitality for 15 years. I would leave work with my cash tips every day,” says Pamela Charron, executive director of the Worker Solidarity Network, a non-profit based in Vancouver that advocates for low-wage workers in the retail, restaurant and hospitality sectors. “But now workers need to wait a couple of days or weeks to receive their gratuities.”

In our increasingly cashless economy, and as every mobile payment terminal insists on reminding us, the tip is an expected addition to the bill usually paid by credit or debit card or their phone-app extensions. This means that, as a customer, you’re relying on the restaurant or other service provider to collect, pool and duly remit your gratuity to the staff who served you.

What if they don’t?

When bosses don’t give staff tips

“It’s definitely still a very common form of wage theft,” Charron says. Restaurant owners sometimes draw from the tip pool to pay for unexpected business costs like breakage or dine-and-dashes. Some non-franchise, mom-and-pop owners decline to pay out tips at all. Some structure tip sharing, though, so the support staff and those in the kitchen get a portion of tips. (Read: How much do Canadians tip?)

The general understanding in Canada is that tips are the property of the servers, or staff more generally, and should not be pocketed by managers or owners.

“The employer is not supposed to withhold or make a deduction from the gratuities that are collected,” says Jenson Leung, an employment lawyer with Kane Shannon Weiler LLP in Vancouver, speaking of the law in B.C., where tips have been specifically covered under the Employment Standards Act since 2019. “Tips are treated essentially as part of the wages paid out to employees.”

Not all provinces and territories have legislation specifically prohibiting employers from keeping tips. (The three Prairie provinces, Nova Scotia and the territories do not. See graph below.)

But even where the tipping rules are not spelled out, they can be covered in a collective agreement or the business’s own employment contract. 

Moreover, an employer cannot arbitrarily seize tips that it used to distribute to employees. “If the employees have traditionally received tips in a certain way, then the employer can’t suddenly change that key term of their employment,” Leung notes. “It’s potentially constructive dismissal, where an employer has essentially changed a fundamental term without the employee’s agreement.”

Yes, some employers keep servers tips

Even in provinces that ban the practice, restaurant owners have been known to retain tips. A 2024 investigation by CBC’s Marketplace visited 100 consumer-facing businesses that had tip prompts in their payment systems and found six where employees claimed they were not receiving tips. Out of nearly 800 complaints of tip theft in Ontario in the first nine months of 2024, 96 resulted in a violation finding.

In January 2026, the Ontario Labour Relations Board ordered a Mississauga restaurant, Sultan Ahmet Turkish Cuisine, to pay back $16,259 to two servers after finding that ownership and management improperly took roughly one-third of the employee tip pool, absorbing about $130,000 total.

It’s not just restaurant owners who have been caught with their hands in the tip jar. Servers at restaurants in several provinces were out of pocket earlier this year when Everyday Payments, a Toronto financial technology provider that promised to simplify tip collection and distribution for restaurants, suspended payments. Parent company XTM Inc. subsequently entered creditor protection.

Also this year, Northland Properties Corp., which owns Denny’s restaurants in Canada, filed suit against three former managers at a Kamloops, B.C., location who, according to a company audit, misappropriated half a million dollars in tips over a two-year period.

Laws in both Ontario and B.C. allow managers and owners who at times serve customers to participate in the tip pool, within limits. But they can’t use tips to cover costs they blame the servers for, such as spillage, broken dishes, credit or debit card fees, “house costs,” a customer theft.

The federal government’s main interest in tipping relates to taxation. It defines tips that are collected and pooled by the employer or derived from a service charge as “controlled tips.” The employer must include these on the employees’ pay slips and make deductions for Employment Insurance (EI) and Canada Pension Plan (CPP) as well as pay the applicable EI premiums.

“Direct tips,” usually paid in cash, should be declared by the server on their tax return, but are not applied to EI and CPP. Quebec has a third category, “declared tips,” for tips given directly to the server but declared to the employer and included in insurable earnings. (Read: Do servers see your tip right away?)

What to do when you don’t see your tips

If you believe your employer collected tips but did not distribute them, first take it up with a manager. “There may be a reasonable explanation,” Leung says. Charron recommends making the inquiry by email, so that you obtain a written record of their response. If you still come away unsatisfied, the next step would be to file a complaint with the employment standards regulator in your province or territory. For this you will need evidence of tips going astray, so it helps to have a record of tips paid by customers and the percentage of the tip pool you’re entitled to, for example.

“Gratuities have always had this opaque system with significant variations in how tips are collected, distributed and accounted for,” Charron says. And the disappearance of cash has only made it worse. “Workers have limited access to information about how gratuities are calculated and where the money ultimately goes, making it difficult to identify when tips have been withheld or misappropriated.”

For service workers, though, it’s a top concern. “Tips are a way servers earn their living,” Charron says. “It’s how they pay their rent.”

Read more from this issue of The Get:

1. Stealth wealth: How to be secretly rich
2. Actor and economist Ben McKenzie calls crypto BS
3. Need new winter tires? Here’s how to get a good deal
4. How to get into the stock market in a safe way