California's service charge and gratuity disclosure rules, explained for restaurant owners

If you add an automatic service charge or gratuity line to your checks, California’s junk fee law almost took that away from you in 2024. It didn’t, but only because of a second bill passed two days before the first one took effect. Between the two, there’s now a specific set of rules for how that charge has to be disclosed, and getting it wrong exposes you to a lawsuit under a consumer protection statute with real teeth.

How we got here: two bills, two days apart

SB 478, California’s “Honest Pricing Law,” was signed in October 2023 and took effect July 1, 2024. It made it unlawful to advertise or display a price that doesn’t include all mandatory fees and charges, with narrow exceptions for government taxes and certain shipping costs. The intent was to kill drip pricing, the practice of showing a low headline price and tacking on fees at checkout.

As written, that rule would have swept up restaurant service charges and automatic gratuities too. A menu price of $24 for an entree, with a separate 20% service charge added at the bottom of the check, looks a lot like the exact thing SB 478 was written to stop. The California Attorney General’s office published guidance in May 2024 reading the law that way, which set off a scramble in the restaurant industry.

The fix came fast. SB 1524, backed by the California Restaurant Association and UNITE HERE, moved through the legislature as an urgency measure and was signed June 29, 2024, two days before SB 478’s effective date, with immediate effect. It carves out restaurants, bars, and banquet or catering services from the all-in pricing rule, on one condition: the service charge has to be clearly disclosed.

What “clearly and conspicuously disclosed” actually means

The exact standard is that any mandatory service charge, gratuity, or similar fee has to be displayed, along with an explanation of what it’s for, everywhere a price for food or drink appears. That means your printed menu, your online menu, your listings on delivery apps, any ads, and any digital displays or kiosks. Not just the receipt at the end.

There’s also a specific formatting bar to clear. Since July 1, 2025, “clear and conspicuous” has to meet the standard set out in Civil Code section 1791(u): the disclosure needs to be in larger type than the surrounding text, in a contrasting font or color, or otherwise set off with symbols so it draws attention rather than blending in with fine print.

A vague label like “service fee” or “employee benefits charge” without explanation isn’t enough. Trade guidance on this recommends being specific about what the money funds, something like “a 20% service charge is added to support staff wages and benefits,” placed near the price on every menu and listing where that price shows up.

A practical way to check yourself: pull up your printed menu, your website menu, and your listing on whatever delivery apps you use, side by side. If the service charge disclosure is missing, buried in different-sized type than the surrounding text, or worded differently in each place, that’s a gap to close before it becomes a claim.

What happens if you get it wrong

SB 478 amended the Consumers Legal Remedies Act, and the CLRA has a private right of action, meaning an individual customer, or a lawyer representing a class of them, can sue directly. The statute allows for actual damages or a minimum of $1,000 per violation, whichever is greater, plus punitive damages, an injunction, and attorney’s fees. There’s a required 30-day notice and cure period before a damages claim can proceed, but it doesn’t take a lot of digging for a plaintiff’s firm to spot a noncompliant menu and send that notice. The statute of limitations is three years.

Restaurants have also been called out specifically as easy targets for this kind of suit, because the evidence is public: a menu, a receipt, and an undisclosed fee are all a plaintiff needs to build a claim. Beyond the CLRA, the same conduct can also support a claim under California’s Unfair Competition Law, which the state attorney general, local prosecutors, or private plaintiffs can bring, generally seeking an injunction and restitution rather than damages.

A quick checklist

• Printed menus show the service charge or gratuity, its percentage or amount, and what it funds, near the prices
• Your website and online ordering pages show the same disclosure, in the same terms
• Third-party delivery app listings show it too, not just your own channels
• The disclosure text is visually set off from surrounding menu text, not the same small uniform font
• Wording is consistent across every place a price appears, not different phrasing menu to menu

If your point-of-sale system is set up to auto-apply a service charge, it’s worth checking with your Clover or terminal provider that the receipt and any on-screen prompts reflect the same disclosure language your menu uses. Consistency across every touchpoint is what the statute is actually asking for.

This is general information, not legal advice. Confirm your specific menu, signage, and online listings with a California employment or consumer protection attorney, especially if you run banquet or catering business under a separate contract structure.

Sources: California Restaurant Association on SB 1524, Greenberg Traurig client alert, California Employment Law Report (April 2026), California Attorney General hidden fees FAQ.