Those 3, 5, and 20 percent fees at the bottom of your menu could be here to stay. With little time to waste, a new law will allow restaurants and bars to continue charging service fees, health fees, and other surcharges when they are clearly marked for diners to see. The practice was supposed to be banned on July 1.
SATURDAY, Governor Gavin Newsom signed Senate Bill 1524, an emergency measure that would exempt California food and beverage vendors from Senate Bill 478: A Law which goes into effect at the beginning of the month and targets ticket sellers, hotel and travel websites and other businesses that charge “hidden” or “unwanted” fees. Introduction of SB 1524 in early Junerestaurants and bars were included among the affected professions, with Attorney General Rob Bonta advising restaurants and bars to include additional fees in menu prices to avoid the possibility of legal action.
“These misleading charges prevent us from knowing upfront how much we will be charged,” Atty. Gen. Rob Bonta, who co-sponsored SB 478, said in a statement the day it was signed. Bonta could not be reached for comment on SB 1524.
Many service industry operators have spoken out against SB 478 since its passage in October, fearing that increasing list prices during a tumultuous year marked by closures and inflation will only lead to more loss of customers and support. Several restaurant owners told the Los Angeles Times that the process of overhauling or completely revamping their tipping and surcharge systems could result in the loss of employee benefits or total closures. Passing SB 1524 and keeping these surcharges in place could affect tens of thousands of restaurants across the state.
Learn more: The Shocking State of the Restaurant Industry: “We Can’t Afford to Be Open. We Can’t Afford to Be Closed.”
“We’re the most regulated business in the world and we’re struggling to survive in the broken system that’s been handed down to us over many decades,” said Eddie Navarrette, co-founder of restaurant advocacy group The Independent Hospitality Coalition. “When you add more regulation of any kind, it makes it harder. It’s already hard … there’s a mass exodus of our small restaurant community. I think it’s a huge relief, just to be able to throw one less thing at them right now.”
Navarrette spent weeks campaigning for the passage of SB 1524, writing letters, meeting with more than 35 political advisers, legislators or their representatives, knocking on doors at the State Capitol and explaining the use of service charges in the tipped restaurant industry, which operates in a unique way compared to most other areas that will be affected by the SB 478 bill.
Surcharges, health fees and service charges are routinely used in the industry to stabilize wages in dining rooms and kitchens – where servers often receive tips but cooks and dishwashers do not – and to help offset the cost of employee benefits such as health care. Businesses with higher service fees, such as 18% or 20%, often note that no tipping is expected.
“It’s hard to understand why restaurants are saying they have to do things differently, because it just seems like they’re saying they have to hide the cost of their food from us and that doesn’t seem right,” he said. said Jenn Engstrom, the state director of the California affiliate of the Public Interest Research Group (CALPIRG). The non-profit organization defends the interests and protection of consumers. “It’s like you’re being deceived, that’s what it’s like: They’re trying to deceive you.”
Learn more: Restaurants can keep the service charge if the menu lists the charge.
Some local restaurants have to be under fire from critics for alleged misuse of charging service fees or other surcharges, although several chefs and restaurateurs told the Los Angeles Times that such “bad actors” are rare.
“Every restaurateur I know who cares about this industry is using it in such an appropriate, responsible and forward-thinking way that if it were to disappear it would really be crippling for everyone,” said restaurateur Ryan Bailey by Kato. The Times earlier this year.
The new bill, which passed the state Assembly and Senate unanimously in late June, was co-authored by Sen. Bill Dodd (D-Napa) — who also co-authored SB 478 — along with Sen. Scott Wiener (D-San Francisco) and Assembly members Matt Haney (D-San Francisco), Jesse Gabriel (D-Encino) and Cecilia Aguiar-Curry (D-Winters).
It is supported by the California Restaurant Assn. and the Unite Here union, both of which represent thousands of California hospitality workers.
“This bill (SB 1524) will allow restaurants to continue to support increased pay equity and contribute to worker health care and other employee benefits,” Matthew Sutton of the California Restaurant Assn. said in a public statement. “And, most importantly, consumers will continue to be able to make informed choices about where they choose to dine.”
While some restaurateurs and bar operators are breathing a sigh of relief that service fees will remain in place, others are frustrated by the government’s rapid change of course.
In accordance with the Attorney General’s directives for SB 478, in April, restaurateur Dustin Lancaster added a 4% markup to menu prices of two of his Los Angeles restaurants, L&E Oyster Bar and El Condor. He said that in light of SB 1524, he would not return to a service fee model, at least in the foreseeable future, and that it is “not so easy to just undo the pie.”
“This is unfortunately all too familiar territory for restaurants in California,” Lancaster told the LA Times this week. “Much like COVID, they’re pushing us around and expecting us to pivot and change our model over and over again as if it’s not a problem for small businesses. Restaurants continue to close at an alarming rate in Los Angeles and this kind of unnecessary flip-flopping is why California continues to be the least small business-friendly state in America.”
At Bell’s, a Michelin-starred restaurant in Los Alamos, the owners have been diligently following the progress of the two Senate bills and waiting for final word before determining whether to eliminate the 20% service fee that benefits all non-management staff. Before SB 1524 passed, Bell’s fee was already listed on its lunch and dinner menus, its website FAQ page, and its takeout homepage; the new law will allow the restaurant to continue doing so without reconfiguring its business model.
Greg Ryan, owner of Bell’s, told the Times that he listens and understands customers, legislators and his team, and wants to do what is best for his staff.
For months, this practice has seemed like a balancing act.
As SB 1524 was being considered in the California Assembly and Senate, the outcry on social media and in public forums such as Reddit was swift and loud, with many anonymous users commenting that they would start leaving 0% tips in retaliation for the exemption. Another Reddit user created a spreadsheet which tracks surcharges and service charges at restaurants across the state.
Learn more: “Do you all think tipping culture has gotten out of control?” In Our Evolving Tipping Dilemma
A Los Angeles restaurateur who asked to remain anonymous for fear of retaliation from his customers told the Times that he had noticed a 1.0 percent or so increase in tips over the month, likely due to the 3 percent to 4 percent service charge the restaurant charges.
“I’m not thrilled with the bill,” said Jenn Engstrom of CALPIRG. “I think it would be better if restaurants and bars also had very clear upfront prices, so consumers could easily compare prices. When I decide to go to a restaurant with my family, I first check the prices, on the menu, online.
The fact that SB 1524 requires clear signage is a plus, she said, but it’s not as strong a bill as SB 478 with its initial direction from the attorney general that called for incorporating service fees into list prices. Engstrom called SB 478 “an excellent model bill” and would like to see similar consumer protection legislation in other states or at the federal level — without a lot of carve-outs for industries, regardless of how service fees are factored into their business plans.
“I think this (SB 1524) is unfortunately kind of a step backward, but it’s still transparent,” she said. “You can still see it, you just have to do the math.”
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This article was originally published in the Los Angeles Times.