Will new CA law ban mandatory gratuities at restaurants?
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A new law prohibiting restaurant surcharges goes into effect on July 1. The state attorney general’s office and the California Restaurant Association disagree on its implication for required tips.
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How To California
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Starting July 1, a new California law will prohibit restaurants and other businesses from charging customers “junk” fees.
Senate Bill 478 will eliminate hidden charges on purchases made across California, including those related to online sales, such as concert tickets and food delivery. It also prohibits restaurant surcharges, according to the attorney general’s office.
But what about required tips?
A reader asked our journalists with How To California — a new community-driven series to help readers navigate life in the Golden State: Are restaurants allowed to charge extra gratuity fees when dining with a big group?
Here’s what we know:
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Can restaurants charge extra for dining in a large group?
“SB 478 is a price transparency law,” the California attorney general’s office wrote in an email to The Sacramento Bee.
If a restaurant charges a mandatory gratuity fee for a certain number of people who dine-in, the attorney general’s office said that fee must be folded into menu prices.
“Under the law, a restaurant cannot charge an additional surcharge on top of the price listed,” the office shared in an FAQ.
That includes gratuities that are “not voluntary.”
As part of the bill’s legislation, prices for goods and services must include all fees the consumer is required to pay.
“For example, if a burger is $10 and a restaurant charges a 15% service charge, the burger would have to be listed as $11.50,” the office wrote.
The California Restaurant Association has objected to claims that the bill would not impact restaurant operations statewide — and “strenuously disagrees with the AG’s expansive interpretation of the law to outlaw restaurant service fees,” said Matthew Sutton, senior vice president of government affairs and public policy, in a May news release.
The association is considering options to prevent the new law from being implemented with the current interpretation, according to the news release.
“Nothing in the plain language of the bill or legislative debate suggested an intent to change the pricing structure for every restaurant in this state,” Sutton said.
This story was originally published May 15, 2024, 5:00 AM.
Angela Rodriguez is a service journalism reporter for The Bee. She is a graduate of Sacramento State with a bachelor’s degree in journalism. During her time there, she worked on the State Hornet covering arts and entertainment.
