Restaurant can charge service fees and gratuities after Gov. Newsom signs last-minute carve-out to junk fee bill

Governor Newsom signed a last-minute exemption allowing restaurants and other establishments selling prepared food to keep charging service and gratuity fees. The move was made to clear confusion about whether a new law banning junk fees in California would apply to those businesses.

The original law, SB 478, takes effect July 1. It would have made it illegal “for businesses to advertise or list a price for a good or service that does not include all required fees or charges other than certain government taxes and shipping costs,” according to an interpretation of the law that California Attorney General Rob Bonta released in May.

In this statement, Bonta indicated that these requirements would apply to restaurants, a clarification that sent lawmakers back to the drawing board to carve out an exemption for restaurants.

The new bill, SB 1524, was fast-tracked through the state assembly before the start of next month before being signed by Newsom on Saturday. It passed the state assembly and senate unanimously and was supported by restaurant associations across the state. It also grants service fee exceptions to other establishments selling prepared food, like bars, caterers and supermarkets.

Senator Bill Dodd, who co-sponsored both bills, said the bill still includes protections that ensure "restaurant customers are not shocked when they get their checks.”

Under the bill, restaurants would be required to clearly demarcate what additional fees – including service fees and gratuities – will be levied.

“SB 1524 strikes the right balance between strengthening transparency for consumers and providing restaurants with clarity and flexibility in how they cover their costs,” said Lt. Gov. Eleni Kounalakis, a cosponsor of the bill.

Other retailers, like ticket sellers and hotel booking sites, will still be subject to SB 478. That means that starting July 1, you can say goodbye to those pesky Ticketmaster fees: They’ll be required to disclose the full price of their merchandise up front – though that doesn’t mean the ticket prices will get any cheaper.