Reference no: EM132986605

Eammon O'Dwyer owned a successful upscale restaurant in Toronto. Many challenges were involved in operating this type of business, including the collection and distribution of tips or gratuities. In the past few years, proposals to regulate tips had been introduced in the Ontario Legislature. Bill 81, the "Elimination of Automatic Tips Act, 20 IO," proposed that "No person who owns or operates an eating establishment shall charge any customer an automatic service charge, regardless of whether notice of the service charge is provided in advance." An exception was made for private functions and banquets. Often automatic tips were added to larger parties of six or more. The proposal raised the issue of whether tips should be given only in recognition of exemplary service, or imposed even if the service was poor. Eammon was of the view that his wait staff had to work harder with larger groups and they deserved a specified tip. Some patrons objected to the automatic aspect. A second proposed regulation was Bill I 07, "Protecting Employees' Tips Act, 2012," which would amend the Employment Standards Act, 2000, by adding the clause "An employer shall not take any portion of an employee's tips or other gratuities." The regulation was to prevent employers from "tipping out," that is, taking a cut of the tips received by employees. It was not intended to prevent tip pooling or tip sharing, where all employees, including host and kitchen staff, received a portion of the wait staff gratuities. Eammon knew that some restaurateurs were involved in the "tipping out" practice whereby they took a portion for themselves. He felt that this was not being fair to employees. The proposed regulations created a lively discussion in the media both for and against regulation. Some staff believed that "tipping out," if properly done, would reduce the income inequity among staff. Many wait staff felt they deserved most of the tips as they worked the hardest. Others said they had no problems with tip pooling and received their share. Unfortunately, some unscrupulous operators took advantage of the "tipping out" practice according to some wait staff. Complaints about these operators had prompted the proposed regulations. This type of regulation had a substantial impact on the Ontario restaurant industry, which had revenues of $24 billion and employed 30,000 people. The Canadian Restaurant & Foodservices Association (CRFA) stated that tips were a complex issue and that restaurant operators understood their significance to employees and their importance to customer service. The CRFA felt that the regulation was unwarranted and would be difficult to enforce. Eammon thought that the proposed regulations extended the hand of government too deeply into his business and were not necessary. He felt that there must be better things for government to be doing.

Questions

Q1. What are the ethical issues involved with the proposed regulation?

Q2. Who are the stakeholders, and what are their "stakes" i.e. how are they affected, how are they involved? do they have influence? what is their interest?

Q3. How should tips be regulated?