What is SB 1524? An Update to the California Junk Fee Ban

Jun 12, 2024

California’s controversial SB 478 bill, set to ban “drip pricing” and junk fees starting July 1, may now include an exception for restaurants, thanks to a new addition, SB 1524. This comes off the heels of significant pushback from the restaurant industry. Introduced by State Senator, Bill Dodd, SB 1524 would allow restaurants to add service fees or surcharges if these are clearly displayed on menus before customers order. This amendment has support from the California Restaurant Association and Unite Here, a hospitality labor union. The bill, labeled as an urgency measure, must quickly pass the state Senate and Assembly and be signed by Governor Gavin Newsom to take effect immediately.


Why do Restaurants and Bars Oppose SB 478?

Restaurants and bars oppose SB 478 for several reasons:


Operational Costs: They face numerous costs, including taxes, credit card fees, and employee salaries and benefits. Service fees help cover these costs without significantly raising menu prices.

Transparency and Predictability: Many restaurants already disclose service fees on their menus or other displays. They argue that clear disclosure of fees should be acceptable and that SB 478’s restrictions are unnecessary and disruptive.

Customer Experience: Sudden price hikes on menu items to cover operational costs, instead of transparent service fees, could lead to sticker shock for customers, potentially reducing patronage.

Business Model Impact: Service fees are often used to support specific business models, such as replacing traditional tipping systems with automatic gratuities that ensure equitable pay for staff. Banning these fees could disrupt these models and negatively affect worker compensation.

Administrative Confusion: The inclusion of restaurants in the “junk fees” ban has caused confusion in the industry about what is permissible, leading to concerns about compliance and potential legal issues.

When does the Restaurant Fees Bill Need to be Passed?

SB 1524 must be passed by the California state Senate and Assembly and signed by Governor Gavin Newsom before July 1, when SB 478, the “junk fees” law, goes into effect. This accelerated timetable is necessary to ensure that restaurants can continue charging clearly disclosed service fees without interruption.