Restaurant owners criticize California’s new “junk fee” law

California restaurant owners are angry about a new law that prohibits restaurants from charging customers so-called “junk fees.”

Senate Bill 478, signed by California Gov. Gavin Newsom last year, would prevent most businesses in the Golden State from charging hidden fees starting July 1. Although fees can still be charged for goods or services, the new law stipulates that required fees must be included in advertised prices, including “service fees” and other additional fees.

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Although there are some questions about how the law applies to restaurants specifically, California Attorney General Rob Bonta’s office said this week that the law requires that “a restaurant cannot charge an additional surcharge above the stated price,” including for… “Involuntary gratuity payments.”

“The law is simple: the price you see is the price you pay,” Bonta said in a statement. “Laws work when everyone can abide by them. I’m pleased that we can provide this guidance to help facilitate compliance with the law and create a fairer and more level marketplace for businesses and consumers.”

Customers are photographed ordering at Philip’s restaurant in Los Angeles, California on December 10, 2021. California restaurateurs and industry groups are expressing concerns that a new law will prohibit them from charging “unwanted fees”…

Frederick J. Brown/AFP

Matthew Sutton, senior vice president of government affairs and public policy for the California Restaurant Association (CRA), argued in a statement that Bonta’s guidance on the law shows “a fundamental misunderstanding of the restaurant industry standard of transparent, upfront menu pricing.”

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“The CRA strongly opposes the Attorney General’s expanded interpretation of the law to prohibit restaurant service fees,” Sutton said. “We are examining all available options to prevent SB 478 from being implemented in the manner proposed by the Attorney General’s Office.”

Newsweek I reached out to Bonta and Newsom’s offices for comment via email on Friday.

Restaurant owners and industry groups have been particularly upset in San Francisco, where many restaurants are charging customers an additional 5 to 6 percent to comply with the city’s “health care security” law.

Some have also expressed concerns that the new law will negatively impact restaurants that charge service fees instead of tips, arguing that encouraging tips instead of mandatory fees will result in “unfair” wages for workers.

“This fundamentally changes long-standing ways of doing business,” said Lori Thomas, executive director of the Golden Gate Restaurant Association. San Francisco Chronicle. “If operators can’t work, people will lose their jobs. We will go back to what is seen as a less equitable model, which is the tipping model.”

Others suggested that mandatory service fees, often 20 percent or more, foster ambiguity and confusion among diners about whether or not to expect an additional tip on top of the fee.

Most opponents of the law agree that forcing restaurants to include the fees they charge in menu prices could create “sticker shock” for customers and discourage dining out.

“We’re concerned about label shock, basically, to see if that discourages diners,” Yuka Iroi, owner of Cassava restaurant in San Francisco, told Eater SF. “Our industry is still facing difficult times and this is another thing that adds uncertainty. I feel like this will likely initially negatively impact the industry. We are very concerned.”