Back in May, we published a blog about the forthcoming death of restaurant service fees. But it looks like we spoke… err, wrote too soon. Normally, we’d just update the original blog to reflect this, but since lawmakers are pushing through a complete “about face” at the 11th hour, we felt this deserved its own blog. Yes, due to the frenzied efforts of several state lawmakers, it seems very likely that restaurant junk fees will remain on the menu. 

Update:

There’s no longer any speculation about it. Late on Saturday, June 29th, Governor Gavin Newsom signed emergency legislation excluding California restaurants from the junk fee ban. We’re sure this is just the beginning of this story. But for now, junk fees in restaurants are perfectly legal.

The Era of Junk Fees

Photo credit: Envato

Just a month ago, we were nearing the end of restaurant junk fees in California. For those of you who don’t know what we mean, check the bottom of your receipt the next time you eat out. Chances are good that you’ve been paying some sort of hidden fee tacked onto the bottom of your bill. Some restaurants call them healthcare fees, others call them security fees. But whatever an establishment dubs these typically unadvertised fees, they all basically translate to additional revenue for restaurant owners. And they’ve become commonplace as restaurants struggle to make up revenue lost during the pandemic. 

Banning Hidden Fees

But lawmakers passed SB 478 last year, a law that was meant to eliminate these prevalent hidden service fees, or “junk fees”, from a range of businesses. It was primarily drafted to combat exorbitant fees for event ticketing, air travel, hospitality, credit cards, and loans. But careful examination proved that the law could also apply to restaurants that had been using junk fees to circumvent raising the prices of menu items. 

With SB 478 passed, restaurants nervously awaited the July 1 date when they’d no longer be able to rely on these fabricated fees. In the eyes of many restaurant owners, SB 478 was their business’s death knell. They argued that they relied heavily on these hidden fees to provide living wages to their staff and cover the costs of benefits required by the state of California. Suggestions of simply providing transparent menu items were often dismissed. In the eyes of these restaurant owners, increased menu prices would drive away customers. On the other hand, junk fees would leave them frustrated, but a good portion of them would return regardless. And if not, at least they’d be on the hook for the meal they’d just finished. 

Exempting Restaurants from the Junk Fee Ban

Photo credit: Envato

Then SB 1524 was introduced. Championed by San Francisco assemblymember Matt Haney and California Senator Scott Wiener, SB 1524 would exempt restaurants from the laws established by SB 478. So, if SB 1524 passes, those junk fees will be back on the menu… literally. SB 1524 stipulates that restaurants must clearly disclose any service charges and additional fees upfront. The impetus of doing the math will once again fall to the customer. 

SB 1524 has found powerful support in Unite Here, a labor union representing over 300,000 workers across the U.S. and Canada. This no doubt helped when SB 1524 passed the California assembly in a unanimous vote. Haney and Wiener have been adamant that restaurants were never intended to be included in SB 478. Through SB 1524, they are remedying an error. 

What’s Next for the Restaurant Exemption

SB 1524 will still need to pass the Senate and Governor Gavin Newsom before it takes effect. And with the July 1 deadline looming, Haney and Wiener are doing everything they can to beat the clock. For now, Californians will need to continue closely monitoring their menus when they dine out. Junk fees seem like they’re here to stay. Check out our former story about drip pricing here. We’ll be sure to update this story as it develops!