Dan Walters | California Restaurants and the ‘Junk Fee’ Ban


A friend and I recently met at a chain restaurant in Sacramento for our weekly lunch. Both of us ordered $16 plates of Mexican food. When the bill came, it totaled a bit over $36, including taxes and a $1.28 “surcharge.” We gave the server $45, assuming 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.

“Senate Bill 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 restaurants were not among the business groups opposing the measure. 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.”

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

“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.

“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 tendency toward secretive, hide-the-pea decision-making.

Ballot Measures Shaping Up for November

California politics being what they are – deeply blue domination by Democrats – means that many of the races on the November ballot are already decided. The outcome of Democratic President Joe Biden’s replay battle with Republican predecessor Donald Trump – assuming both are nominated – is very much in doubt nationally. However, Biden can count on winning California’s 54 electoral votes, probably by a landslide.

Rep. Adam Schiff will be elected to the U.S. Senate over token Republican rival Steve Garvey. Democrats will continue to enjoy supermajority control of the state Legislature. 

While Democrats will capture the vast majority of California’s 52 congressional seats, there are about a half-dozen in play, enough to potentially determine which party controls the House of Representatives.

The real action will be the fate of as many as 15 state ballot measures: four placed on the ballot by the Legislature’s majority Democrats, one referendum seeking to overturn a new law regulating the placement of oil wells, and potentially 10 initiatives.

Taken as a whole, the ballot measures represent fundamental ideological and cultural clashes – particularly those sponsored by business and aimed at blunting the left-leaning policies of dominant Democrats and their allies. If passed, they would have massive financial impacts.

The scale of the conflicts is most evident in an initiative, sponsored by the Business Roundtable and anti-tax groups, that would make state and local tax increases markedly more difficult to enact. It hits Democrats and their allied public employee unions where they live and they have mounted a two-pronged effort to block passage: a lawsuit, now pending in the state Supreme Court, to strike the measure from the ballot, and a competing proposition that would impose a higher and potentially prohibitive vote threshold on the tax measure.

June 27 is the deadline for finalizing which measures will appear on the ballot, so both sides of the tax battle are awaiting the court’s decision. However, they aren’t the only ones because advocates and foes for four other initiatives still await confirmation that they have enough signatures to qualify. The quartet includes an initiative that would modify Proposition 47, a 2014 ballot measure that reduced penalties for many crimes.

Prop. 47 symbolizes the last decade’s strenuous efforts – through both ballot measures and legislation – to undo the tough-on-crime sentencing laws that were enacted in the 1980s and 1990s, most famously the Three Strikes law.

The laws pushed California’s prison population well past 160,000, an eightfold increase from 1980, resulting in federal court decrees to reduce overcrowding. Since then, the number of felons behind bars has dropped by nearly half, but spikes in crime have sparked a backlash, encapsulated in the pending ballot measure, which probably will qualify for the ballot.

Gov. Gavin Newsom and legislative leaders are trying to persuade its sponsors to drop the measure by crafting a narrow set of sentencing changes that would leave Prop. 47 intact. As the June 27 deadline nears, whether that effort succeeds is uncertain.

Dan Walters’ commentary is distributed by CalMatters, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters.

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