New CA bill could allow restaurants to keep service fees if they are disclosed

SAN FRANCISCO (KGO) -- A law banning so-called junk fees across California on July 1 could soon be getting modified.

On Thursday, two Bay Area state senators introduced a new bill that clarifies how restaurants would be required to deal with the junk fee ban.

In the new bill, restaurants will still be able to charge things like service fees to customers as long as they're clearly explained to diners ahead of their meal.

"SB478 was not intended to affect the restaurants, bars and food service providers that had a clearly listed, transparent service charge or surcharge or additional fee," said Laurie Thomas of the Golden Gate Restaurant Association.

The original bill was passed last year, but concern over restaurants fees started just a few weeks ago.

MORE: New California law will ban restaurant surcharges, hidden fees

At the Palette Tea House in San Francisco's Ghiradelli Square, they already include verbiage about service charges on their menus.

However, they say the new law has still caused confusion among them and their staff.

"We knew about it for a while, but exactly whether it applied to a restaurant or not, nobody really knows for certain," said Dennis Leung.

Leung is the Palette's general manager. He believes the new legislation is needed.

Dennis says restaurants like his rely on service fees to make ends meet, and the possibility of getting rid of them would have been detrimental.

MORE: Cupertino restaurant sparks outrage after new gratuity policy implemented

He also tells me the money collected directly benefits his staff in a more equal way.

"Service charge is considered restaurant income and we can distribute that at our discretion. So we're able to tip our dishwashers, our line cooks and everybody in the restaurant will benefit from it," Leung said.

And given the difficult time many restaurants have had recovering since the pandemic, Thomas says she too is thankful lawmakers are stepping in to make things clear once and for all.

"We just don't want to leave a law having it have to be litigated to figure it out," she said.

Lawmakers say they hope to pass the new bill on an accelerated timeline.