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California restaurants secure the right to charge service fees

California Governor Gavin Newsom signed Senate Bill 1524 into law, allowing California restaurants and bars to continue charging service fees, health surcharges and similar costs as long as they are clearly disclosed to customers. This emergency measure, which moved quickly through the state Assembly and Senate, comes just in time to exempt these establishments from the provisions of Senate Bill 478, which would ban such fees starting July 1.

When the new law takes effect, restaurants across California will be required to ensure compliance by prominently displaying any additional fees on menus, in advertisements and other customer-facing materials. This transparency is intended to empower consumers to make informed decisions while allowing businesses to continue to operate with their preferred financial models.

Supporters of SB 1524, including the California Restaurant Association and unions like Unite Here, hailed the decision as a victory for restaurants and their employees, arguing that service fees help stabilize wages for various roles in restaurants and ensure fair compensation for both service staff who rely on tips and kitchen staff who may not rely on them.

But critics remain skeptical. Organizations such as the California branch of the Public Interest Research Group (CALPIRG) raise concerns that allowing separate service charges could confuse consumers and complicate their restaurant choices. They argue for stricter regulations along the lines of SB 478, which aimed to standardize price transparency across various consumer-facing industries beyond the restaurant industry.

The controversy surrounding these fees stems from concerns about transparency and consumer protection. Proponents of SB 478 argued that hidden fees obscure true costs and mislead consumers, prompting Attorney General Rob Bonta to recommend that restaurants include surcharges in menu prices to avoid legal consequences. But that approach faced strong opposition from industry groups and some lawmakers who argued that it would burden businesses already struggling with economic challenges exacerbated by the pandemic and inflation.

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