California restaurants will soon have to include add-on fees into menu prices

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If a California restaurant violates a new law requiring transparent pricing, it allows a consumer to seek "actual damages of at least $1,000." Photobuff / Getty Images hide caption

If a California restaurant violates a new law requiring transparent pricing, it allows a consumer to seek "actual damages of at least $1,000."

Service charges; resort fees; "surcharge" add-ons: If you've been startled by unexpected fees when you pay your check at a restaurant — or book a hotel room or buy a ticket to a game, you're far from alone. But if you live in California, change is coming. A new state law requiring price transparency is set to take effect in July.

"The law is simple: the price you see is the price you pay," Attorney General Rob Bonta said on Wednesday, as his office issued long-awaited guidance about a law that applies to thousands of businesses in a wide range of sectors.

When it takes effect on July 1, the law promises to upend how many restaurants operate. Their menus will be required to list comprehensive prices for each item, with all mandatory charges baked into one figure. Only fees that are entirely optional — like leaving a tip for staff — can be left out of the posted price.

If a business violates the mandate, the law allows a consumer to seek "actual damages of at least $1,000." In its new guidelines, the state says it won't focus initial enforcement efforts on "fees that are paid directly and entirely by a restaurant to its workers, such as an automatic gratuity. However, businesses may be liable in private actions."

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Many business owners — and restaurant owners in particular — have been dreading the change, which is poised to ban separate surcharges that restaurateurs have increasingly relied on to pay higher wages to staff, and to absorb discrete costs such as San Francisco's mandatory health care payments for workers.

Consumer advocacy groups have celebrated the law, SB 478, calling it a simple matter of common sense that will bring much-needed clarity and transparency to retail transactions.

"People deserve to know the true price of products upfront so that they can do good comparison shopping and so that there's just good competition in the marketplace," Jenn Engstrom, state director for the California Public Interest Research Group, a Los Angeles-based nonprofit, told NPR.

"I think this guidance is great for consumers," Engstrom said, adding that in her view, the attorney general's interpretation tracks with legislators' intention.