CA Governor Newsom Signs Emergency Bill Allowing Restaurants to Keep Service Fees, With a Catch

By: Sam Watanuki | Last updated: Jul 08, 2024

Late Saturday night, California Gov. Gavin Newsom signed emergency legislation. This law allows restaurants to keep surcharges in place, provided they clearly disclose the additional charges.

The new legislation amends a 2023 law aimed at eliminating “junk fees.”

Background of the 2023 Law

The 2023 legislation was introduced to tackle “junk fees” that many businesses added to customer bills.

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These fees often appeared as surprises, leading to consumer frustration. Restaurants were initially included in this law.

The Role of Senator Bill Dodd

Senator Bill Dodd of Napa was instrumental in the latest amendment.

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He emphasized the importance of 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.”

California Restaurant Association's Opposition

The California Restaurant Association (CRA) opposed the initial law, arguing it shouldn’t apply to restaurants.

Gavin Newsome pictured standing during a speech

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The CRA claimed that menu items do not qualify as “goods” or “services” under California’s civil code.

Conditions for Keeping Surcharges

While restaurants can keep surcharges, they must ensure that these are clearly disclosed. This requirement aims to prevent any surprises for customers when they receive their bill.

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Full compliance is expected within a year.

Consumer Reactions to the Amendment

Many consumers are supportive of the change, appreciating the transparency it brings.

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Jarrett Powers from San Jose mentioned, “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.”


One-Year Compliance Period

Restaurants have one year to comply with the new disclosure rules.

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This period allows establishments to update their menus and meet the legal requirements, ensuring transparency for all patrons.


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.

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This balance aims to protect consumers while supporting businesses.


Potential Benefits for Workers

Some consumers believe that these surcharges benefit restaurant workers.

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There is an expectation that the additional charges support fair wages and better working conditions for staff.


Ensuring Legal Compliance

Legal compliance is crucial for restaurants to avoid penalties.

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Clear communication on menus is mandated to adhere to the new law, preventing any misinterpretation by customers.


Broader Implications for Consumer Protection

This legislation reflects a broader trend towards consumer protection and transparency.

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By regulating how additional charges are disclosed, it aims to build trust between businesses and consumers.


Future Outlook

Governor Newsom’s signing of the emergency bill marks a significant shift in the state’s approach to regulating service fees.

Gavin Newsom standing behind a wooden lectern. The U.S. and California flags are behind him.

Source: Office of the Governor of California/Wikimedia Commons

As restaurants adapt to these changes, the emphasis remains on clear communication and transparency, ultimately benefiting both businesses and consumers.