Last Friday, a friend and I met at a chain restaurant in Sacramento for our customary weekly lunch. Both of us ordered $16 plates of Mexican food.

Dan Walters

CalMatters

Opinion

When the bill came, it totaled a bit over $36, including taxes and a $1.28 “surcharge.” We gave the server $45 before leaving, assuming that the extra cash would cover her tip.

I mention the somewhat mysterious surcharge because, just a few days earlier, California Attorney General Rob Bonta’s office declared that a new state law outlawing extraneous fees attached to bills for services or goods also includes restaurants.

“SB 478 applies to restaurants, just like it applies to businesses across California,” a Department of Justice spokesperson told the San Francisco Chronicle. “The law is about making sure consumers know what they are going to pay and requires that the posted price include the full amount that a consumer must pay for that good or service.”

It was something of a shock to restaurateurs because when the bill was making its way through the Legislature last year, they inferred from the discussions that restaurants would be exempt. That assumption meant that restaurants were not among the business groups opposing the measure.

Restaurants Have Come to Rely on Surcharges

The Chronicle’s reporting generated a sharp reaction from restaurant operators, many of whom have added fees to their bills to cover rising costs, particularly for wages, without raising their basic menu prices.

“It feels like the state lit the fuse to this bomb and is standing back to see what happens,” Tim Stannard of Bacchus Management Group, which operates multiple Bay Area restaurants, told the newspaper. “It is terrifying. We can’t pay the wages we’re paying now unless we dramatically increase prices and hope guests actually come in and pay those prices.”

On Monday, the Employment Policy Institute, a national organization that tracks minimum wages and other employment issues from a business standpoint, denounced Bonta’s declaration, saying it would exacerbate a decline already evident in California’s restaurant industry.

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“Service charges have been increasingly common tools aimed at keeping restaurants afloat and able to pay the higher minimum wages, amid rapidly rising state and local minimum wage requirements,” the organization said in a statement. “Since the state began annual wage hikes up to $16.50 per hour starting in 2017, and localities raised wages even higher, California restaurants have suffered significant losses. Now this tool will be taken away from restaurants, causing further damage to the industry and its employees.”

Bonta and a coalition of consumer groups sponsored SB 478 after President Joe Biden vowed to eliminate what he calls “junk fees” that have proliferated in multiple industries. Two Democratic senators, Nancy Skinner of Oakland and Bill Dodd of Napa, carried the measure, which gained final approval last September and will take effect on July 1.

Be Upfront About Pricing, Legislation

“Bait-and-switch advertising to hide fees is a significant problem facing consumers that appears to be proliferating in more and more sectors of the economy” the bill authors said while it was pending. “Hiding required fees is nothing more than a deceptive way of hiding the true price of a good or service.”

Restaurants and other businesses could – and should – be upfront by posting prices that reflect what it costs them to operate. Some are arguing, instead, that to attract customers they must mislead them with lowball prices.

That’s bait-and-switch and SB 478 rightly prohibits it. Parenthetically, the Legislature should practice what it preaches by reversing its recent tendency toward secretive, hide-the-pea decision-making.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more columns by Dan Walters, go to calmatters.org/commentary.

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