Despite a recently enacted California law intended to shield consumers from hidden costs, restaurants across the state will still be permitted to charge service fees after Governor Gavin Newsom signed a new bill into law. The Consumers Legal Remedies Act allows establishments such as restaurants, bars, food concessions, grocery stores, and grocery delivery services to continue imposing service fees, healthcare costs, and other surcharges, provided these charges are transparently listed for customers.
The legislation specifies that these businesses have until July 1, 2025, to update their menus to reflect any necessary changes. Prior to the Consumers Legal Remedies Act, the so-called “junk fee” law required restaurants to disclose all charges upfront.
“SB 478 applies to restaurants just as it applies to businesses across California,” a spokesperson from the Department of Justice told the San Francisco Chronicle in May. “The law ensures that consumers know what they are going to pay and mandates that the posted price includes the full amount a consumer must pay for that good or service.”
Since Monday, SB 478 prohibits businesses from charging “junk fees” or hiding additional costs to make prices appear artificially low, a tactic common across various industries. Food industry leaders previously expressed concerns that SB 478 would adversely affect the California restaurant industry, potentially leading to price hikes for consumers and reduced wages for employees. They contested the original interpretation of the law, arguing it could have severe repercussions.
“This legislation was promoted as a measure that would clarify, but not expand, the scope of current law,” said Jot Condie, President of the California Restaurant Association. “Unfortunately, the Attorney General seems to have broader ambitions for this law than the legislators who wrote and passed it.”
The Consumers Legal Remedies Act follows the implementation of California’s fast-food law in April, which raised the minimum wage for fast-food workers from $16 per hour to $20. This wage increase has prompted fast-food companies to raise prices to offset higher labor costs.
The new exemption for restaurants under the Consumers Legal Remedies Act represents a significant shift in the regulatory landscape. It underscores the balancing act between protecting consumers and supporting businesses in the state’s dynamic food industry. The law mandates transparency, aiming to ensure that all additional costs are visible to customers before they make a purchase, thus avoiding any surprise charges.
The broader implications of the Consumers Legal Remedies Act highlight ongoing debates about consumer protection and business regulation. While the law aims to increase price transparency, its exemptions for specific industries illustrate the complexities of implementing such regulations across diverse sectors.
As California continues to navigate these changes, both consumers and businesses will need to stay informed about their rights and obligations under the new law. The success of the Consumers Legal Remedies Act will ultimately depend on its execution and the ability of businesses to comply with its requirements without imposing undue burdens on consumers or themselves.