California Restaurants Can Still Charge Service Fees

California Governor Gavin Newsom signed Senate Bill 1524 into law, allowing California restaurants and bars to continue charging service fees, health surcharges, and other similar costs, provided they are clearly disclosed to customers. This emergency measure, which swiftly passed through the state Assembly and Senate, comes just in time to exempt these establishments from the provisions of Senate Bill 478, set to outlaw such fees starting July 1.

As the new law comes into effect, restaurants across California will need to ensure compliance by prominently displaying any additional fees on menus, advertisements, and other customer-facing materials. This transparency aims to empower consumers to make informed choices while allowing businesses to continue operating under their preferred financial models.

Supporters of SB 1524, including the California Restaurant Association and labor unions like Unite Here, hailed the decision as a win for restaurants and their employees. They argued that service fees help stabilize wages across different roles in restaurants, ensuring equitable compensation for both front-of-house staff who rely on tips and back-of-house employees who may not.

Critics, however, remain skeptical. Organizations like the California affiliate of the Public Interest Research Group (CALPIRG) express concerns that allowing separate service fees could confuse consumers and complicate their dining choices. They advocate for stricter regulations akin to SB 478, which aims to standardize pricing transparency across various consumer-facing industries beyond restaurants.

The controversy surrounding these fees stems from concerns over transparency and consumer protection. Proponents of SB 478 argued that hidden fees obscure true costs and mislead consumers, prompting Attorney General Rob Bonta to recommend that restaurants include surcharges in menu prices to avoid legal repercussions. However, this approach faced strong opposition from industry groups and some lawmakers who argued that it would burden businesses already grappling with economic challenges exacerbated by the pandemic and inflation.