Update on court case on tipping

A recent court case in Ontario caused some confusion when the judge indicated that any tips handled by employers should be subject to EI and CPP deductions.  This is contrary to current Canada Revenue Agency policy, which applies different rules to tips depending on whether they are direct or controlled. See this guide for an explanation of direct vs. controlled tips and how CRA treats them.

We remain on alert about the outcome of this court case, but our discussions with Canada Revenue Agency have been positive.  They plan to keep their policy intact for controlled and direct tips, citing other court cases that don’t contradict that policy.  They have promised to notify us if the situation changes, and we will have an opportunity to provide input.

In the meantime, take care to ensure you are making source deductions when you control or redistribute tips.