California Is Banning Hidden Restaurant Fees, In Addition to Other Surcharges

The rule would also require companies to disclose upfront whether fees are refundable.

Hands down, one of the most contentious restaurant issues in 2024 is restaurant surcharges. From New York to Chicago, New Orleans to Los Angeles, owners have added fees to cover everything from tips for the kitchen to health care premiums, higher utility costs, and even pay for security.

Comments boards across social media have lit up with vocal protests over unexpectedly paying extra, what some people call “junk fees.” While some places disclose the surcharges up front on menus and table cards, many others don’t.

That’s led to accusations that restaurants are hiding them and making meals more expensive than diners realize. Now, California is stepping in to stop them. Last October, the state legislature approved a measure that bans hidden fees for hotel stays, as well as tickets to concerts and sporting events.

Related: Restaurant Fees Are Spiraling Out of Control

The bill said that any business “advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges” violated the state prohibition on unfair or deceptive practices. It wasn’t clear at the time whether dining establishments were included.

But this week, California attorney general Rob Bonta ruled that the ban also applies to restaurants. It will take effect July 1, giving them less than two months to figure out how to pivot.

Bonta, a former California assemblyman, pushed hard for the legislation. “These deceptive fees prevent us from knowing how much we will be charged at the outset,” he said last fall. “They are bad for consumers and bad for competition. They cost Americans tens of billions of dollars each year. They hit families who are just trying to make ends meet the hardest.”

Related: Before You Complain About That Restaurant Cancellation Fee, Read This

Along with lighting up Reddit and Facebook, anger over hidden fees has even reached the White House. Last fall, the Biden administration proposed guidelines that ban businesses from charging hidden and misleading fees and require them to show the full price up front.

The rule would also require companies to disclose upfront whether fees are refundable. The Federal Trade Commission just held its first hearing on the proposed ban, which it estimates could cost business owners up to $3.5 billion, or about $5,000 per establishment.

Related: Aldi Announces Major Discounts on 250 Popular Items This Summer, Saving Shoppers $100 Million

Banning junk fees is the second big California move affecting restaurants. In April, it raised minimum wages for fast food workers to $20 an hour, the highest in the country. The minimum wage for other California workers is $16 an hour, compared with the federal minimum wage of $7.25 an hour.

All eyes may be on California right now, but is the state setting the tone for the rest of America?

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