Restaurants brace for California’s ban on service fees
Diners really dislike fees at restaurants — those amounts that go by various names that are tacked onto end-of-meal bills. The phenomenon has been proliferating in the last few years. In California, though, they are about to go away.
The state this week issued guidance for a law, which takes effect in July, that bans such fees in a wide range of settings, including hotels, concert venues and restaurants. The measure, which is aimed at making it clearer up front to consumers what things cost, is particularly unsettling to restaurants, some of which had thought they might be exempt.
“Our price transparency law is about clear and honest communication with consumers, so consumers can make the financial choices that are best for them and their families,” California Attorney General Rob Bonta said this week in a news release. “The law is simple: the price you see is the price you pay.”
Once the law takes effect July 1, it will be illegal for businesses to advertise or list a price that does not reflect any fees or additional charges that customers must pay. That means restaurants will not be able to impose the kinds of separate, mandatory add-ons that have been cropping up under different monikers — a “service fee,” perhaps, or a “health and wellness fee” — that they have been using to cover labor or food costs without directly raising their menu prices. The law does not affect tips, which aren’t covered since they are technically voluntary.
“If a restaurant charges a mandatory fee, it must be included in the displayed price,” the guidance states. “Under the law, a restaurant cannot charge an additional surcharge on top of the price listed.”
And while lawmakers have insisted the law does not dictate prices, some restaurants are saying they will now have to charge more — and some say their businesses might not survive. “It could put people out of business immediately,” Golden Gate Restaurant Association President Laurie Thomas told Eater San Francisco.
This week’s news that the law does, in fact, apply to restaurants, reportedly came as a surprise to some. There had been confusion after the passage of the law, with the California attorney general’s office “telling some news outlets that restaurants could continue to keep their current prices while listing any surcharges on their menus, and others that the surcharges had to be included in the prices themselves,” according to the Los Angeles Times.
Fees at restaurants are deeply unpopular with diners. An overwhelming 72% of people oppose them, with only 10% saying they favor them, according to a November study by the Pew Research Center.
But some restaurants still have chosen to impose them rather than raise their prices, often tying the fee to something specific, such as wage laws or the rising costs of health care.
In Washington, D.C., for example, restaurants began adding hefty fees after the city imposed a law eliminating the tipped minimum wage — a lower per-hour pay that restaurant workers are supposed to be able to make up for in tips.
President Biden has pushed for the elimination of “junk fees” on everything from credit card bills to air travel. Last month, the Department of Transportation announced new rules requiring airlines and ticket agents to disclose up front any baggage fees and how much they charge for canceling or changing a reservation. Legislation banning such fees is active in 12 states, according to the nonprofit advocacy group American Economic Liberties Project.