Restaurant Employers Beware: Your Business May Need To Pay CPP And EI For Employees' Tips And Gratuities

As restaurant employees grapple with labour shortages and soaring food costs, a recent decision added another complication to their plates.

The Federal Court of Appeal (FCA) has found that, in certain circumstances, an employer may be required to pay Canada Pension Plan contributions and Employment Insurance premiums on tips and gratuities paid by customers to employees.

In Ristorante a Mano Limited v The Minister of National Revenue (2022 FCA 151), the corporate taxpayer operated a restaurant in Halifax and employed staff to provide table service to its customers.

As is customary in most restaurants, customers often pay gratuities or tips to their servers. Sometimes, gratuities are paid in cash, which are kept by servers without any interaction with their employer, but more frequently, customers pay their bills using an electronic form of payment.