California Restaurant Service Fees Are Staying after Newsom Signs Last-Minute Bill

By: Sam Watanuki | Published: Jul 03, 2024

Late Saturday night, California Governor Gavin Newsom signed Senate Bill 1524, allowing restaurants to continue charging service fees.

The bill, an emergency measure, exempts food and beverage vendors from the broader Senate Bill 478. This last-minute legislation ensures that these surcharges remain, provided they are clearly disclosed on menus.

Background on the 2023 Law

The 2023 law aimed to eliminate hidden fees that businesses added to customer bills.

A close-up photograph of a check from a restaurant

Source: Freepik

These “junk fees” often surprised consumers, leading to frustration. Initially, restaurants were included in this legislation, which led to significant pushback from the industry.

Senator Bill Dodd's Role

Senator Bill Dodd of Napa was a key figure in amending the law to allow restaurants to keep service fees.

Person Eating Vegetable Dish

Source: Life Of Pix/Pexels

He emphasized transparency, stating, “We made it clear they can’t just change it without putting it in clear and concise type on the menu on every single page.” This ensures customers are well-informed.

California Restaurant Association's Opposition

The California Restaurant Association (CRA) argued that the initial law should not apply to restaurants.

Activists protesting holding loudspeaker and sign

Source: Freepik

They claimed that menu items do not qualify as “goods” or “services” under California’s civil code. The CRA’s lobbying efforts were instrumental in the passage of SB 1524.

Conditions for Retaining Surcharges

Restaurants can continue to charge surcharges if they clearly disclose these fees on their menus.

A lawyer sits down at his wooden desk and looks over papers from a recent case

Source: Freepik

Full compliance is required within a year, allowing establishments to update their menus and meet the legal requirements. This aims to prevent any surprises for customers.

Consumer Reactions

Many consumers appreciate the transparency brought by the new amendment.

A person eating a meal at a table, with many plates and cups on the table in front of him.

Source: Jasmin Schreiber/Unsplash

Jarrett Powers from San Jose said, “I don’t think it’s a bad thing it’s still there because it’s going to workers or at least it should be going toward workers.” This sentiment is shared by many who see the benefits for restaurant staff.


Impact on Restaurant Operations

For restaurants, this amendment provides operational flexibility. They can continue to charge surcharges but must ensure these fees are clearly communicated.

Chef Cooking in the Kitchen

Source: Rene Terp/Pexels

This balance aims to protect consumers while supporting businesses during a challenging economic period.


Ensuring Legal Compliance

Legal compliance is crucial for restaurants to avoid penalties. Clear communication on menus is mandated to adhere to the new law, preventing any misinterpretation by customers.

A lawyer pictured writing in his journal while he is seated at a wooden desk

Source: Freepik

This ensures that all charges are transparent and understood by diners.


Local Restaurant Strategies

Many local restaurants have already started implementing strategies to comply with the new law. For instance, Bell’s, a Michelin-starred restaurant in Los Alamos, has been diligently listing their 20% service charge on menus and their website.

Night-time view of a busy restaurant kitchen seen through a large window, with neon "OPEN" sign glowing above

Source: Khachik Simonian/Unsplash

This proactive approach ensures that diners are well-informed and helps the restaurant maintain a positive relationship with its patrons while adhering to legal requirements.


Broader Implications for Consumer Protection

This legislation reflects a broader trend towards consumer protection and transparency, whether it’s involving food or concert tickets.

A statue of the blindfolded ‘Lady Justice.’

Source: Tingey Injury Law Firm/Unsplash

By regulating how additional charges are disclosed, it aims to build trust between businesses and consumers. The clear listing of fees helps consumers make informed decisions.


Response from the Hospitality Industry

Eddie Navarrette, co-founder of the Independent Hospitality Coalition, noted, “When you add more regulations, it makes things more difficult.”

A woman with other people sitting around a table and eating food.

Source: Alex Haney/Unsplash

“There is a mass exodus of our small-restaurant community. I think it’s a huge relief, just to have one less thing being thrown at them right now.”


The Role of Transparency in Building Trust

The new legislation requires restaurants to be transparent about their fees, which is important for building trust with customers.

Two women eating pizza at a restaurant outside with string lights hanging above them

Source: Adrienn/Pexels

By clearly listing these charges, restaurants can ensure that patrons are not caught off guard, fostering a more positive dining experience.