Restaurants that add surcharges to customers’ bills to cover their employees’ health care or wages are being warned to be completely transparent about the added cost or risk being fined.
The Santa Monica City Attorney’s Office has sent a letter to all local restaurants, advising them about the laws that protect consumers from hidden surcharges.
The City Attorney’s Office Consumer Protection Division has received recent reports of restaurants imposing surcharges on top of their regular prices. Customers have complained that often the surcharges are not disclosed adequately, if at all.
Some restaurants say these charges are to help defray costs associated with the living wage ordinance approved by the City Council.
Also, some restaurants reportedly have made surcharges look like government fees or taxes, when they are not. This includes using words like “City Health” or “Living Wage” on customer receipts.
There are no such government-mandated extra fees for restaurants. It violates California law to falsely portray a charge as a government fee or tax, city attorneys said.
“If a restaurant wants to charge more to help cover its costs, the safest and most transparent way is to simply raise prices,” said Chief Deputy City Attorney Adam Radinsky, who heads the city’s Consumer Protection Division. “If they instead add a ‘surcharge,’ they risk violating the law if it’s unclear or hidden.”
State law require all prices to be clearly and accurately posted, with no hidden fees.
Any “surcharges” are subject to additional rules. These require, at a minimum, that:
• All surcharges need to be “clear and conspicuous”
• The disclosure needs to be “clearly visible in context”
• The disclosure needs to “clearly [call] attention to the language.”
• They must be disclosed before the time of selection or purchase
Also, if a business intends a surcharge to defray health, wage, or other costs for the benefit of employees, the law requires that the business:
• Tell employees in writing about the surcharge and how it will be allocated
• Pay the amounts to employees by the next payroll
California consumer protection laws impose steep fines and other remedies for false advertising, failing to charge the posted price, and other violations.
Investigators from the City Attorney's Office will be conducting undercover inspections to make sure local restaurants are following the law.
Santa Monica City Attorney’s Office Consumer Protection Division enforces state and local laws to ensure that businesses treat their customers fairly. To report a consumer issue, go to smconsumer.org or call (310) 458-8336.