As we previously reported, the California Attorney General’s Office recently updated the FAQs on the California Attorney General’s website to include“Hidden Fees Act, which amended the Consumer Legal Remedies Act, SB 478. These FAQs expressed the position that restaurants must include all mandatory fees, including service charges and mandatory gratuities, as part of the displayed price for a product, while distinguishing delivery fees on the grounds that these fees are for a separate service.

California lawmakers moved quickly to override that portion of the guidance by passing an amendment that creates a modified standard for restaurants, bars, takeout outlets, grocery stores, or food delivery services. Specifically, SB1524 was whipped through both California chambers under an urgency clause and signed by the governor on June 29—two days before the now-current fee law took effect. The bill, which provides that the requirement to include all mandatory fees as part of the product price, does not apply to​“a mandatory fee or charge for any individual food or beverage item sold directly to a customer by a restaurant, bar, takeaway, grocery store, or food delivery service” or for catering services. However, the bill does not exclude such establishments entirely, but instead requires these businesses to clearly and conspicuously display a mandatory fee or charge.“with an explanation of its purpose on any advertisement, menu, or other display that includes the price of the food or beverage.” The bill’s sponsor noted in the Senate Floor Analyses that the bill would​“strikes the right balance between increasing transparency for consumers and providing clarity and flexibility for restaurants in covering their costs.”

While the general“The hidden fee law under SB 478 is now fully enforceable as of July 1, 2024. The requirement of this exception for clear and distinct disclosure does not take effect until July 1, 2025. We expect an increase in litigation and regulatory enforcement actions with the legislation now in effect, although SB 1524 should provide some relief to the restaurant industry.

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