Tip Out Policy: Did Lone Star Pull the Trigger?

by Chantel Goldsmith


Wednesday, August 9th, 2017 at 1:55 am


Tip Out Policy Change

It is common in the restaurant industry to have a “tip out” policy for servers and bartenders. Tip out policies require servers and bartenders to give a certain percentage of their tips to be pooled and shared among the rest of the staff at the restaurant, including kitchen staff and host staff.

tip outFor years, Lone Star Texas Grill had a tip out policy for its servers that required them to give up 2.5% of their total sales to the kitchen and host staff. Recently, Lone Star has unilaterally changed its tip out policy, a controversial move that has angered many employees at the restaurant chain. Servers are now required to hand over a larger percentage of their tips (45-65%), which will now be distributed to all staff, including: cooks; dishwashers; hosts; and managers.

By unilaterally changing their tip out policy to increase the percentage of tips available to their staff, Lone Star could very well be opening itself up to constructive dismissal claims from its current servers.

Constructive Dismissal

Constructive dismissal occurs when an employer changes a fundamental term of an employment agreement without the employee’s consent, or without reasonable notice of the change. Fundamental terms of an employment agreement can include, but are not limited to:

  • Salary
  • Employee’s Work Location
  • Hours of Work
  • Authority
  • Position

Generally, when an employee does not accept the fundamental change to their employment, they have to make it clear to their employer that they do not accept the change, and that it amounts to constructive dismissal ending their employment relationship. This would then require the employer to pay severance to the employee.

In The News
Some customers, staff fuming about new Lone Star Texas Grill tip-sharing policy
Mysterious customers hand over $1K tip to Etobicoke waitress for her ‘honesty’
I went to a no-tipping restaurant for the first time — and I’m convinced it’s better for employees

Lesson for Employees

Seek legal advice before claiming Constructive Dismissal. It is very important for employees to take this step in order to verify that the employer’s unilateral change would, in fact, be considered a fundamental term of the employment relationship between the parties; and to consider the magnitude of the change and its effect on the employee.

Lesson for Employers

Consider the Consequences Before Changing Terms of Employment. Will the change to tip out policy significantly change the terms of the employment agreement? Are there steps that can be taken to avoid legitimate claims? To avoid potential constructive dismissal claims, it is equally as important for employers to obtain legal advice prior to the implementation of the change.

Chantel Goldsmith is a Partner at Samfiru Tumarkin LLP and practices exclusively in the area of labour and employment law. Contact her directly at chantel.goldsmith@stlawyers.ca

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