California’s Anti-Hidden Fees Law, What It Means For Mandatory Tips In Restaurants

A new legislation in California that goes into effect on July 1st will forbid restaurants and other establishments from charging their patrons “junk” fees.

Senate Bill 478 will do away with surcharges on any transactions made in California, including those that are connected to internet sales like meal delivery services and concert tickets.

Restaurant fees are likewise prohibited, according to the attorney general’s office.

What About Mandatory Tips?

In a recent community-driven series called How To California, our journalists answered a reader’s question: Can restaurants impose additional tip charges on large groups of diners?

From what we can tell, When a large group of people dine, can restaurants charge more?

The California attorney general’s office sent an email to The Sacramento Bee stating, “SB 478 is a price transparency law.”

The attorney general’s office stated that if a restaurant requires a tip for a specific number of dine-in customers, the cost of the gratuity should be included in the menu prices.

The office stated in a FAQ that “a restaurant cannot charge an additional surcharge on top of the price listed under the law.”

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Gratuities that are “not voluntary” fall under this category.

Prices for products and services must include all fees that the customer is compelled to pay as part of the legislation outlined in the bill.

The office noted, “For instance, if a restaurant charges a 15% service charge and a burger costs $10, the burger would have to be listed as $11.50.”

In a May news release, Matthew Sutton, senior vice president of government affairs and public policy, stated that the California Restaurant Association “strenuously disagrees with the AG’s expansive interpretation of the law to outlaw restaurant service fees” in response to assertions that the bill would not affect restaurant operations throughout the state.

According to the news release, the group is thinking of ways to stop the new law from being used in its current understanding.

Sutton asserted that there was “no intent to change the pricing structure for every restaurant in this state” in the bill’s simple wording or the legislative debate.

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