California Governor Gavin Newsom signed a measure into law that allows restaurants statewide to collect service charges, despite the new price transparency bill SB 478 that protects customers from hidden prices or "junk fees."

Allowing Restaurants to Charge Service Costs

Based on the new Consumers Legal Remedies Act signed by Newsom, restaurants, bars, food concessions, grocery shops, and grocery delivery services may now lawfully charge clients service fees, healthcare expenses, and other surcharges as long as they are correctly displayed for customers to view, as reported by KTLA 5.

Businesses that fall under this exception will have until July 1, 2025, to make any required adjustments to their menu.

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SB 478 Mandates Pricing Transparency

Before this, there was a so-called "junk fee" legislation that dining establishments had to follow.

According to a representative from the Department of Justice who talked with the San Francisco Chronicle in May, SB 478 applies to restaurants alongside all companies in California. The legislation mandates that all prices be displayed to ensure customers know the whole cost of a commodity or service.

The practice of imposing junk fees or hiding additional expenses to decrease prices, prevalent across many sectors artificially, is now illegal according to SB 478, which went into effect this week.

Food industry leaders were at odds with SB 478's initial structure, saying it would devastate the California restaurant business, leading to customers paying more and workers receiving less.

The new regulations follow the April implementation of California's fast-food legislation. Retailers in the fast-food industry had no choice but to hike prices in response to the new minimum wage legislation, which raised the hourly rate for fast-food employees from $16 to $20.

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