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January 6 2017

Update: City of San Diego Says Restaurants Can't Publicly Blame Surcharge on Minimum Wage Hike

Patrice L. Onwuka

In a stunning and rapid response, San Diego officials are going to crack down on restaurants that add surcharges to customers’ bill in response to recent minimum wage hikes.

As we just reported, some San Diego restaurants have added a new surcharge of 3-5 percent on meals because of the city’s increased minimum wage that went in effect on New Year’s Day.

Now, the city’s attorney Mara Elliott says restaurants are violating the law by stating on the bill that the surcharge is the result of government mandates and by not divulging the charge to customers before they order. Apparently, this violates California’s false advertising provisions. These restaurants are being threatened with legal action by the city if they don’t cease and desist.

Elliott pointed to complaints on a consumer hotline about the surcharges, but did not divulge how many complaints were made. Diners said the added costs were not articulated to them beforehand and once the meal was ordered (and consumed) there was nothing they could do but eat the surcharge.

The San Diego Union-Tribune reports:

"If a family goes out to dinner, they should be able to trust that the prices on the menu are the prices they will pay, especially when there is no legal basis for the imposition of an additional fee," said Elliott, who replaced Jan Goldsmith on Dec. 12. "That's just treating people fairly."

In another interview she adds:

"Some diners are surprised to learn that they're being charged as much  as 3.5 percent above and beyond what the prices on the menu indicate," Elliott  said at a news conference. 

"Many of these diners did not learn of this so-called surcharge - which is not mandated by any governmental entity - until they received their check," Elliott said. "At that point, of course, it was too late to send the food back." 

To be clear, the new surcharge is not illegal, but the city doesn’t like the bad PR that’s it’s generated is probably afraid of scaring away customers and visitors to city. It’s really coming down to word choice, because the city attorney says that the restaurants can legally describe the surcharge as a response to a government mandate, but not as a government mandate.

According to reports, some restaurants are scrambling to comply with city demands to make customers aware in advance, but are adamant that they won’t get rid of the surcharges. They have an ally in the California Restaurant Association which issued a statement defending the use of surcharges as a standard practice across industries:

“To adapt to wage increases, restaurants around the state have either raised menu prices, reduced employees’ hours, reduced their own hours of operation, or adopted a surcharge or, in some cases, eliminated tipping and are now using a service charge. San Diego is not alone in this challenge and restaurants are not the first business to use a surcharge – many hotels and transportation providers also use a surcharge.

Whatever avenue each business chooses as a way to survive in the coming years, restaurants in San Diego and in every city want to be around for a long time to come.”

The city is trying to do damage control, but instead of reassessing the aggressive minimum wage hike they are blaming the unintended – but not unexpected – effects  on the business community. What better a way to galvanize citizens behind misguided policy then to make businesses and employers the villains?

We won’t argue against businesses communicating their fees to customers in advance – although hotels don’t usually posts their surcharges. However, to make it seem as though the surcharge itself is illegal, is the real crime here.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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