Why California restaurants are shocked by the 'junk fee' law

Last Friday, a friend and I met at a chain restaurant in Sacramento for our usual weekly lunch. We both ordered $16 plates of Mexican food.

When the bill arrived, it totaled just over $36, including tax and a $1.28 “surcharge”. We gave the server $45 before leaving, assuming the extra money would cover his tip.

I mention this somewhat mysterious surcharge because, just days earlier, California Attorney General Rob Bonta’s office said a new state law banning unnecessary charges attached to bills for services or goods also included the restaurants.

“SB 478 applies to restaurants, just as it applies to businesses throughout California,” a Justice Department spokesperson told the San Francisco Chronicle. “The law aims to ensure that consumers know what they are going to pay and requires that the price displayed includes the total amount a consumer must pay for that good or service.”

This came as a shock to restaurateurs, because when the bill came before the Legislature last year, they inferred from the discussions that restaurants would be exempt. This assumption meant that restaurants were not among the business groups opposed to the measure.

The Chronicle’s reporting sparked a strong reaction from restaurateurs, many of whom added fees to their bills to cover rising costs, particularly for wages, without raising prices on their core menus.

“It’s like the state lit the fuse on this bomb and is standing back to see what happens,” Tim Stannard of Bacchus Management Group, which operates several Bay Area restaurants, told the newspaper. “It’s terrifying. We can’t pay the wages we’re paying now unless we raise prices dramatically and hope that customers actually come and pay those prices.

On Monday, the Employment Policy Institute, a national organization that tracks minimum wages and other employment issues from a business perspective, denounced Bonta’s statement, saying it would exacerbate an already evident decline in employment. California’s restaurant industry.

“Service charges have become an increasingly common tool aimed at keeping restaurants afloat and able to pay the highest minimum wages, amid rapidly increasing minimum wage requirements at the state level and localities,” the organization said in a statement. “Since the state began raising annual wages to $16.50 per hour starting in 2017 and localities raised wages even higher, California restaurants have suffered significant losses. Now this tool will be withdrawn from restaurants, which will cause even more damage to the sector and its employees.

Bonta and a coalition of consumer groups sponsored SB 478 after President Joe Biden pledged to eliminate what he calls “junk fees” that have proliferated across several industries. Two Democratic senators, Nancy Skinner of Oakland and Bill Dodd of Napa, passed the measure, which gained final approval last September and will take effect July 1.

“Baiting advertising to hide fees is a significant problem facing consumers and one that appears to be proliferating in more and more sectors of the economy,” the bill’s authors said while it was pending. “Hiding required fees is nothing more than a deceptive way of hiding the true price of a good or service. »

Restaurants and other businesses could – and should – be upfront about posting prices that reflect what it costs them to operate. Some argue, on the contrary, that to attract customers, they must deceive them by offering them low prices.

It’s a bait and switch and SB 478 rightly prohibits it. Parenthetically, Parliament should practice what it preaches by reversing its recent tendency to make secret and hide-and-seek decisions.

CalMatters is a public interest journalism company dedicated to explaining how the California State Capitol works and why it matters.