California’s Department of Justice has confirmed that a new law requiring businesses to disclose “junk fees” will apply to restaurants starting July 1, 2024. Under Senate Bill 478, signed by Governor Newsom, restaurants must include all mandatory fees in advertised prices, aiming to prevent “drip pricing,” where additional fees are added at the final bill.
This law, deemed a “transparency law,” mandates that any listed price must reflect the total amount a consumer will pay, excluding taxes and shipping. Businesses can still charge fees, but these must be included in the advertised price. The regulation covers event tickets, short-term rentals, hotels, food delivery, and most consumer goods and services.
For restaurants, this means service fees or surcharges, including mandatory gratuity for large parties, must be part of the listed price. This shift challenges the hospitality industry, already facing high wages and inflation, to adjust their pricing strategies.
The law also raises concerns about potential lawsuits under the California Consumers Legal Remedies Act (CLRA), allowing plaintiffs to seek damages for violations. This could lead to increased legal actions and financial strain on the industry. Despite initial enforcement not targeting fees paid directly to workers, restaurants must review their practices to ensure compliance by July 1, 2024.
