California restaurateurs are counting the days to July 1, when a statewide law is set to ban restaurants, bars, hotels, concert venues and other businesses from charging service fees — sending the hospitality industry into a tailspin. But a new emergency measure unanimously approved by the state Assembly on Tuesday could exempt restaurants and bars from the law if signed by Gov. Gavin Newsom.
Signed into law last October, Senate Bill 478 prohibits “hidden fees” such as service charges. In restaurants and bars, these fees can appear as additional costs on the menu or final bill, ranging from 1% to 22% or even more. The practice is regularly used to stabilize wages across dining rooms and kitchens — where servers often receive tips but cooks and dishwashers do not — and to help offset the cost of benefits such as healthcare.
But the practice has been called into question, with multiple lawsuits filed against restaurateurs over their distribution and use of service fees.
Sens. Bill Dodd (D-Napa) and Nancy Skinner (D-Berkeley) co-wrote SB 478 in what they called an effort to protect consumers from surprise fees. In early June Dodd proposed Senate Bill 1524, a new emergency measure that would clarify aspects of his original bill and, if passed, exempt restaurants from eliminating surcharges, provided they are listed clearly.
“Any mandatory gratuity, service charge or other fee charged by restaurants must be displayed conspicuously on restaurant menus,” a statement from Dodd’s office said. “For example, if a restaurant adds a 20% security fee to all bills, that 20% charge must be clearly stated up front on the menu. It cannot be a surprise that only shows up when the bill arrives.”
SB 1524 would take effect immediately. It is co-authored by Sen. Scott Wiener (D-San Francisco) and Assemblymembers Matt Haney (D-San Francisco), Jesse Gabriel (D-Encino) and Cecilia Aguiar-Curry (D-Winters).
“This measure has enjoyed unanimous bipartisan support, and recent amendments have responded to concerns from some consumer groups,” Haney said in an address to the Assembly on Tuesday. It passed unanimously with 79 votes.
In February a representative for Atty. Gen. Rob Bonta, who co-sponsored SB 478, told the Los Angeles Times that restaurants and bars would need to roll what were previously listed surcharge percentages into the list prices of menus and confirmed the guidance in “price transparency law” guidelines last month.
SB 478 would not impose fines on restaurants but could open them up to lawsuits come July 1. A number of California restaurants and bars have already begun eliminating surcharges entirely or rolling the fees into menu prices, per the attorney general’s guidance. Others have been watching the progression of SB 1524 since its introduction on June 6. Many restaurateurs told the L.A. Times that rolling surcharge fees into menu pricing would cost them customers due to sticker shock at an already fraught time for the industry.
“Restaurants are vital to the fabric of life in California, and they should be able to cover costs as long as they do so transparently,” Wiener, a co-author of the new bill, said in a statement earlier this month. “SB 1524 clarifies portions of the law that pose a serious threat to restaurants. The bill strikes the right balance between supporting restaurants and delivering transparency for consumers, and I’m proud to support it.”
After Tuesday’s approval in the Assembly, SB 1524 will proceed to the Senate, where it requires a passing vote before it reaches Newsom.
