California ​“Junk Fee” Statute Now Fully In Play with New Twist from Last Minute Legislation

As we previously reported, the California AG’s office recently provided clarification through FAQs on the California ​“hidden fee” law that amended the Consumer Legal Remedies Act, SB 478. Those FAQs articulated the position that restaurants must include all mandatory fees, including service charges and mandatory gratuity, as part of the displayed price for a product, while distinguishing delivery fees on the grounds that those fees are for a separate service.

The California legislature swiftly took action to override this part of the guidance in passing an amendment that adopts a modified standard for a restaurant, bar, food concession, grocery store, or grocery delivery service. Specifically, SB1524 rushed through both chambers in California on an urgency clause and was signed by the Governor on June 29 – two days before the now effective fee law took effect. The bill that provides that the requirement to include all mandatory fees as part of product price does not apply to ​“a mandatory fee or charge for individual food or beverage items sold directly to a customer by a restaurant, bar, food concession, grocery store, or grocery delivery service” or for catering services. However, the bill does not carve-out such establishments altogether and instead requires that these businesses clearly and conspicuously display a mandatory fee or charge ​“with an explanation of its purpose, on any advertisement, menu, or other display that contains the price of the food or beverage item.” The sponsor of the bill noted in the Senate Floor Analyses that the bill ​“strikes the right balance between strengthening transparency for consumers and providing restaurants with clarity and flexibility in how they cover their costs.”

While the general ​“hidden fee” law under SB 478 is now fully enforceable as of July 1, 2024, this exception’s requirement for clear and conspicuous disclosure is not effective until July 1, 2025. We expect to see an uptick in litigation and regulatory enforcement in light of the now effective legislation, though SB 1524 should offer some reprieve to the restaurant industry.