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As discussed in a previous Compliance Matters, California passed two new laws banning so-called “junk fees” set to take effect on July 1, 2024. SB 478 applies to California businesses generally while AB 537 targets the hotel industry. Specifically, the laws prohibit covered businesses from advertising or listing a price that does not include all mandatory fees (excluding government-imposed taxes). Following an uproar from the restaurant and hospitality industries, Senator Bill Dodd proposed SB 1524 (an amendment to SB 478) to create various exemptions for long-standing food and beverage practices. Governor Gavin Newsom signed the bill into law today just before the July 1st effective date.
Under the amended law, mandatory fees and charges for individual food or beverage items sold directly to customers by restaurants, bars, food concessions, grocery stores, grocery delivery services, or by means of a menu or contract for banquet or catering services are now exempt from SB 478, provided the mandatory fee or charge is clearly and conspicuously displayed, along with an explanation of its purpose, on any advertisement, menu, or other display that contains the price of the food or beverage item. This means that such establishments can continue adding mandatory service charges or large-party dining fees without adjusting the prices listed on their menus or banquet contracts.
It is important to note that this emergency measure does not impact AB 537, also scheduled to take effect on July 1st. Accordingly, hotels will still be prohibited from advertising, displaying, or offering a “room rate” that does not include all fees or charges (excluding government-imposed taxes and fees) required for the stay. Further, the scope of “room rates” covered by the law is broad and applies to guest room rates and any “other accommodations” rented to occupants.
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