California diners should expect higher menu prices when this new law takes effect

This summer, California diners will see a new law go into effect – one that bans unadvertised service fees, or "junk fees," typically tacked on to the bill at the end of a meal or on a delivery service.

Gov. Gavin Newsom signed the bill into law back in October 2023 and is set to go into effect July 1, 2024. The new law aims to prohibit "junk fees" across a range of businesses, including restaurants, bars and delivery apps.

"These deceptive fees prevent us from knowing how much we will be charged at the outset," Atty. Gen. Rob Bonta, who co-sponsored the measure, said in a statement the day it was signed. "They are bad for consumers and bad for competition. ... With the signing of SB478, California now has the most effective piece of legislation in the nation to tackle this problem. The price Californians see will be the price they pay."

However, many owners of restaurants and bars rely surcharges to offer employee benefits such as healthcare and higher wages 

Once the law is passed, officials said restaurants will need to factor surcharge fees into menu prices, as opposed to simply advertising them at the end of a bill.

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Food apps, however, will be required to function differently under the new law.

According to the attorney general’s office, these apps must list the price for delivery costs and all other fees; services such as delivery cannot be advertised as free or at a given amount, with additional miscellaneous fees tacked on at the end of the transaction. However, unlike with restaurants, previously listed surcharges or service fees cannot be built into the item price. 

Assembly Bill 2149, also referred to as the Fair Food Delivery Act of 2020, states that menu prices are set by the participating restaurants on the platforms and cannot be inflated by delivery services.

While most new laws go into effect January 1, the July delay gives restaurants adequate time to adjust their business practices accordingly, officials said. Officials are expected to release further clarifications on the new law prior to July 1.

This story was reported from Los Angeles.