Governor Newsom signs legislation allowing restaurants and bars to charge service charges with prior disclosure

Those 3, 5 and 20% fees at the bottom of your menu may be here to stay. With little time to spare, a new law will allow restaurants and bars to continue paying service charges, health care costs and other surcharges when they are clearly listed for diners to see. The practice was set to be outlawed starting Monday.

On Saturday, Govt. Gavin Newsom signed Senate Bill 1524, an emergency measure to exempt food and beverage vendors in California from Senate Bill 478 – a law which comes into force in July and targets ticket sellers, hotel and travel websites and other businesses that pay “hidden” or “useless” fees.

Before Newsom signed SB 1524which was introduced in early June, restaurants and bars were included in the affected businesses, and Atty. General Rob Bonta had advised food and drink vendors to include these charges in listed menu prices to avoid the possibility of legal action.

“These deceptive fees prevent us from knowing how much we will be charged from the start,” the attorney general, who co-sponsored SB 478, said in a statement the day it was signed. Bonta could not be reached for comment about the exemptions allowed by SB 1524.

Many business operators in the service industry have been vocal against SB 478, which passed in October. They said they were afraid that the increase in long list prices a turbulent year marked by shutdowns and inflation it would cost them more customers and support. Multiple restaurants told the Los Angeles Times that the process of overhauling or completely overhauling their tip and surcharge system could result in staff losing benefits or closing entirely. SB 1524 rules allowing such payments could affect tens of thousands of restaurants across the state.

Read more: The shocking state of the restaurant industry: ‘We can’t afford to be open. We cannot afford to be closed’.

“We’re the most regulated of any business out there, and we’re struggling to survive in the broken system that’s been handed down to us over many, many decades,” said Eddie Navarrette, a co-founder of the Independent Hospitality Coalition. a restaurant advocacy group. “When you add more regulation, whatever it is, it makes things more difficult. Things are already tough … there is a mass exodus of our small restaurant community. I think it’s a huge relief, just to have one less thing thrown at them now.”

Navarrette spent weeks campaigning for the passage of SB 1524, writing letters, meeting with over 35 policy advisors, legislators or their representatives, knocking on doors at the state Capitol, and explaining the use of service fees within the industry. restaurants whose tipped employee earnings make it different from most areas that would be affected by SB 478.

Supplements, health fees, and service charges are regularly used within 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 benefits such as health care. . Businesses with larger service charges, such as 18% or 20%, often note that tips are not expected.

“It’s confusing why restaurants are claiming 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’s not fair,” Jenn Engstrom said. , state director of the California chapter of the Public Interest Research Group (CALPIRG), a nonprofit organization that advocates for the interests and protection of consumers.

“It feels like you’re cheating,” she said. “That’s what it feels like: that they’re trying to trick you.”

Read more: Restaurants may be able to keep service charges if the menu shows the charges

Some local restaurants have fall under fire on allegations of misusing service charges or other surcharges, though multiple chefs and restaurateurs told The Times that such “bad actors” are few and far between.

“Every restaurant that I know that cares about this industry is using it in a way that is extremely appropriate and responsible and forward-thinking, so if it were to go away, it would be really crippling for everyone,” the restaurateur said. Kato Ryan Bailey. The Times earlier this year.

The new bill, which passed unanimously in the state Assembly and Senate in late June, was authored by Sen. Bill Dodd (D-Napa) — who also co-authored SB 478 — as well as 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 labor union Unite Here, both of which represent thousands of hospitality workers in California.

SB 1524 “will enable restaurants to continue to support increased pay equity and make contributions to employee health care and other employee benefits,” Matthew Sutton of the California Restaurant Assn. said in a statement. “And, most importantly, consumers will remain empowered to make informed choices about where they choose to dine out.”

While some restaurateurs and bar operators are heaving a sigh of relief at the continuation of service charges, others are frustrated with the government’s quick change of attitude.

Following the attorney general’s guidance on SB 478, in April restaurant Dustin Lancaster introduced a 4% surcharge on menu list prices from two of his LA restaurants, L&E Oyster Bar and El Condor. He said SB 1524 wouldn’t push him back to the fee-for-service model, at least for the foreseeable future, and that it wasn’t “that easy to take the cake.”

“This is, unfortunately, very familiar territory for restaurants in California,” Lancaster told the LA Times this week. “Like in COVID, they pull us in and expect us to pivot and change our model repeatedly, like it’s no big deal for small businesses. Restaurants continue to close [at] an alarming rate in LA, and this kind of unnecessary about-face is why California continues to be the least small-business-friendly state in America.”

At Bell’s, a Michelin-starred restaurant in Santa Barbara County’s Los Alamos, the owners eagerly followed the progress of both state Senate bills and awaited final word before deciding whether to drop the 20% service charge, which benefits all non-managerial staff.

And even before the passage of SB 1524, Bell’s listed the fee on its lunch and dinner menus, on its website for frequently asked questions and on its homepage section for purchase orders. The new law will allow the restaurant to continue its practice without reconfiguring its business model.

Greg Ryan, an owner of Bell’s, told The Times that he listened to and understood his customers, legislators and team, and that he wanted to do what was best for his staff.

For months, the practice has felt like a balancing act.

As SB 1524 moved through the California Assembly and Senate, the outcry on social media and public forums like Reddit was swift and loud, with many anonymous posters commenting that in retaliation for the exemption, they would not tip . Another Reddit user was created a spreadsheet that tracks surcharges and service charges at restaurants across the state.

Read more: “Do you think tipping culture has gotten out of hand?” Inside our ongoing dilemma

One LA restaurateur, speaking anonymously for fear of customer retribution, told The Times that they had seen tip increases of $1.0% or other low amounts during the month, possibly in response to the 3- 4%. the fees their restaurant was charging.

“I’m not thrilled with the bill,” CALPIRG’s Engstrom said of SB 1524. “I think it was better when restaurants and bars also had to have clear upfront prices so consumers could do simple comparison shopping .When I decide to go out to a restaurant with my family, I check the prices first, on the menu, online.”

The fact that SB 1524 requires clear posting of fees is a benefit, she said, but it is not as strong as SB 478 with the attorney general’s initial guidance that required the transfer of service fees to listed prices. Engstrom called SB 478 “a great model bill,” saying she would like to see similar consumer protection legislation in other states, or federally — without much change for industries, regardless of how service fees affect in their business plans.

“I think [SB 1524] Unfortunately it’s kind of a step back, but it’s still transparent,” she said. “You can still see it; you just have to do the math.”

Sign up for Essential California for news, features and recommendations from the LA Times and beyond delivered to your inbox six days a week.

This story originally appeared in the Los Angeles Times.