New Price Transparency Law Frustrates California Hospitality Industry

Employers in the hospitality industry may be scrambling to make big changes leading up to July 1, when California’s new “Honest Pricing Law” (also known as the “Hidden Fees Statute) takes effect.

The law has been enacted to eliminate “drip pricing,” or advertising or listing a lower cost or amount than what a consumer will eventually pay for a good or service. Hospitality employers will no longer be able to add service fees, fees for healthcare costs, credit card fees, mandatory gratuities, or other charges on customers’ bills in addition to the prices in the menu. The Honest Pricing Law does not regulate what businesses charge for their goods and services, only that the total amount that will be paid is disclosed to the customer before they place an order. Restaurants and facilities that charge patrons to host banquets or accommodate large parties may still do so, but they must notify the customer of the amount of the charge before any orders are placed.

It is against the law in California to take credit card charges out of servers’ credit card tips, so if hospitality employers want to claw back the processing fee associated with credit card use, they can either raise menu prices to account for the fees, or list separate cash and credit card prices on the menu, factoring the credit card processing fees into the credit card price.

Hospitality employers who currently tack on a surcharge for employees’ health care costs will no longer be able to do so, and raising menu prices may be the only option to cover those costs.  Higher menu prices could lead to a downturn in business and lower tips for servers. You can charge an automatic gratuity for your servers, but it must be listed on the menu for your customers to see before they order so that they may know the full price of their meal, all charges and fees included. Some servers dislike this practice and may leave you with a labor shortage.

For more information on how to stay compliant with California’s new “Honest Pricing Law” and the ever-changing employment laws covering all 50 states, contact myHRcounsel at info@myHRcounsel.com.