Have you noticed these weird charges being added to your restaurant bills, or online food orders? If so, you’re not alone.

A growing number of local restaurants have started adding an extra service charge (often 3% or more) to all food bills – both for in-restaurant and online orders. Some businesses claim the charges are to help pay for employee health care or other costs.

However, the charges often are hard to notice, and end up meaning simply higher prices for consumers.

Under California state law, businesses can get in trouble (including criminal charges) for false or misleading advertising of prices.

Also, under Santa Monica law, any business that imposes a “service charge” must do it “clearly and conspicuously,” “in such a way that customers might easily and reasonably deduce” what the charge is for.  If they say the charge is to help employees, they have to actually give employees the money – and keep proof that they did so.

Some restaurants reportedly have made their surcharges look like government fees or taxes, which they are not. They do this by using words like “City Health” or “Living Wage” on receipts. In fact, 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.

Also, many online pickup or delivery sites add vague charges on top of the delivery fee. These too must be conspicuously disclosed and must comply with the law. Under the local law, all “service charges” are subject to additional rules, including:

  • They 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.

The Santa Monica City Attorney’s Consumer Protection Division has sent a letter to all local restaurants, advising them about these laws. The Division is now investigating to see which businesses may still be in violation of the law.

If restaurants want to charge more to help cover costs, the safest and most transparent way is to simply raise their prices. If they instead add a surcharge, it must comply with all laws and recordkeeping requirements.

Consumers who notice questionable charges in Santa Monica – or lack of clear disclosure – should contact the City’s Consumer Protection Division.

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.