Does California’s New ‘Junk Fee’ Law Ban Restaurant Service Fees?

Update: October 18, 2023, 5:08 p.m. Following the publication of this piece the California Attorney General’s office provided to Eater SF with a clearer picture of how service fees may be impacted by the new junk fee ban. Read more about this emerging story on the potential banning of restaurant service fees in the state of California.

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Hey Eater SF,

I was wondering if you knew about the new junk fee bill that was signed into law over the weekend. It’s a little bit vague with regard to restaurants, but do you know if mandatory service changes and fees including those for large parties will be allowed under the new law?

Thanks,

Uncertain About Service Fees

Hey Uncertain About Service Fees,

First, for those who aren’t familiar, here’s some background. On Saturday, October 7, Gov. Gavin Newsom signed Senate Bill 478 into law. It’s been colloquially referred to as a ban on “junk fees,” those annoying and sometimes exorbitant fees most often associated with things like concert tickets and hotel stays. And for what it’s worth, it’s not just California looking to get rid of these charges; on Wednesday, President Biden announced a proposed rule that would similarly ban “hidden and bogus” fees nationwide.

The California law won’t go into effect until July 1, 2024, and it’s specifically intended to prevent businesses from being deceptive about the final cost of a product or service. In a press release, California Attorney General Rob Bonta, who sponsored the bill, says the law prohibits “fees in which a seller uses an artificially low headline price to attract a customer and usually either discloses additional required fees in smaller print or reveals additional unavoidable charges later in the buying process.”

This brings us back to the original question: Would a restaurant service fee count as a “junk fee”?

The short answer is yes it could. A spokesperson for the Attorney General’s office confirmed on Friday afternoon that all businesses will be subject to the new law — including restaurants. So while restaurants aren’t specifically mentioned in the legislation, and though they’re not necessarily the main target of the law, the scope of the definition of “junk fees” would include restaurant and bar service fees.

But that doesn’t mean restaurants and bars won’t be able to charge these fees — whether the surcharge goes toward employee healthcare or functions as a gratuity (allegedly, at least). “SB 478 is an advertising law — not a pricing law — so businesses are free to set their own prices and use the money however they choose as long as consumers know from the start what the price will be,” the Attorney General’s spokesperson writes. “Simply put, the price Californians see will be the price they pay.”

That means restaurants, like all businesses in the state, will just need to make sure they’re disclosing any surcharges or service fees to customers clearly and before the final bill hits the table. That means disclosing any mandatory charges on menus — both in print and online, if that applies — and upfront. In an email to members, San Francisco’s restaurant lobby the Golden Gate Restaurant Association had this advice: “It is important that all menus and all means of sales (online menus /ordering) should include the service charge language in readable font. Customers should never be surprised by an additional charge.”

It’s yet to be determined what enforcement of the new law will look like but as long as restaurants and bars are being upfront about what fees customers will pay, they should be clear to continue charging them.

Update: October 13, 2023, 3:57 p.m. This article was updated to include information from Attorney General Rob Bonta’s office.