California flags mandatory‑fee litigation

Mandatory fees on customer checks are still drawing lawsuits across California, and restaurants are only the most visible target. (californiaemploymentlawreport.com) Anthony Zaller wrote on April 24 that the issue now reaches hotels, event venues, salons, fitness studios and delivery businesses that add separate line-item charges to consumer bills. (californiaemploymentlawreport.com) His bottom-line advice was blunt: raise the listed price if possible. He said folding costs into the advertised price is materially less risky than adding a house-retained fee at checkout. (californiaemploymentlawreport.com) Part of the risk comes from California’s hidden-fees law, Senate Bill 478. Since July 1, 2024, the law has barred most businesses from advertising a price that leaves out mandatory charges, except taxes, government fees and shipping. (oag.ca.gov) Restaurants got a narrower carveout through Senate Bill 1524, signed June 29, 2024. That exemption lets restaurants keep mandatory fees for individual food and beverage items only if the fee is clearly and conspicuously disclosed with an explanation of its purpose wherever the price appears. (legiscan.com) (oag.ca.gov) Those restaurant disclosures faced added technical requirements starting July 1, 2025, according to the bill text and Zaller’s note. That means a menu practice that once looked minor can now become a consumer-protection claim. (legiscan.com) (californiaemploymentlawreport.com) The employment-law side is separate from the pricing-law side. California Labor Code section 351 says an employer cannot collect or keep a gratuity left for an employee, and the Labor Commissioner may investigate or sue over violations. (california.public.law) That distinction matters because California courts have said a charge labeled a service charge can still count as a gratuity, depending on how customers would understand it. In O’Grady v. Merchant Exchange Productions, the dispute centered on a mandatory 21 percent banquet charge that employees said should have been distributed to service staff. (castleemploymentlaw.com) (californiaemploymentlawreport.com) Local ordinances add another layer. Zaller pointed to Santa Monica, West Hollywood, Berkeley and Oakland as cities that require mandatory service charges to be paid to non-managerial employees who contributed to the service. (californiaemploymentlawreport.com) Santa Monica and West Hollywood can reach employers headquartered elsewhere if workers spend as little as two hours a week inside city limits, Zaller wrote. West Hollywood also requires some healthcare surcharge money to be deposited into employee-controlled accounts or paid as wages within seven days of collection. (californiaemploymentlawreport.com) The result is a stack of exposure from menu wording, checkout design, payroll treatment and city-by-city rules, all attached to the same extra line on a bill. In California, that small fee can now trigger both consumer and wage claims at once. (californiaemploymentlawreport.com)