A new state law banning hidden surcharges and other “junk fees” from being added to customer bills will take effect on July 1, requiring businesses to include the fees in the prices they post or advertise.
Now, however, the law’s authors are proposing to carve out an exception for one type of business: restaurants.
Under a proposal from Sen. Bill Dodd (D-Napa), restaurants could continue to add surcharges, mandatory tips or other charges to diners’ bills rather than display a “total price” on their menus — as long as they disclose it up front The cost is “clear and obvious”.
Dodd said in a press release Thursday that Senate Bill 1524 seeks to clarify the new law.
“This proposal would level the playing field for all restaurants and resolve confusion and disagreement about what is allowed under state law,” Dodd said in a statement.
The confusion stems from conflicting statements from the state attorney general’s office, which initially said restaurants could continue to impose surcharges as long as the surcharges were disclosed on menus. The office later said those charges must be included in the prices and promotions listed on menus, ultimately confirming the position in guidance issued last month.
For example, a restaurant that charges a 10% fee to cover employee wellness costs must list a $15 burrito on the menu as a $16.50 burrito. If a restaurant advertises a $10 lunch buffet with a mandatory 10% service charge, the flyer must refer to the offer as a $11 lunch buffet.
The law won’t change the cost of dining out; it will only change how the cost is communicated to diners.
Still, restaurant industry groups warn it will force them to significantly raise menu prices, drive away some customers and cause owners to cut workers’ hours. Restaurant chains have already been hurt this year by state minimum wage increases, prompting many California franchises to raise prices or cut service.
Paul Payne, Dodd’s press secretary, said the restaurant industry didn’t really engage in the debate over the trash fee measure (SB 478) last year because restaurants “didn’t really think it applied to them.” Since then, Payne said, Dodd has heard from restaurants in his area seeking changes.
The new bill is supported by the California Restaurant Association. The union “Unite Here” represents many restaurant workers.
“This will allow restaurants to continue to support increased pay equity and contribute to worker health care and other employee benefits,” Matthew Sutton of the Restaurant Association said in a statement.
The garbage fee ban was originally proposed by lawyers. Gen. Rob Bonta said last month that requiring comprehensive pricing “empowers consumers by providing them with accurate information up front so they can compare prices between merchants and creates a level playing field for businesses to compete.” market. His office did not immediately respond to a request for comment on Dodd’s new bill.
Jenn Engstrom, state director of the CalPIRG Education Fund, said it would be better for consumers if prices on restaurant menus included surcharges and other mandatory fees. All-inclusive pricing makes it easier for people to browse the menu and see how prices compare to other options, she said.
Still, she said, Dodd’s proposed changes may be acceptable if restaurants don’t try to hide the surcharge in the fine print. As long as the disclosure is on the menu and presented clearly, “that’s all that matters to us,” she said.
Carmen Balber, executive director of the consumer watchdog, was less optimistic.
Trash fee protections are especially important for restaurants because so many consumers visit them, Barber said. While it’s good to reveal fees on menus, they need to be included in the menu’s price, she said.
“Otherwise, you would expect consumers to do a lot of complex math on every menu item.”
