California’s Newsom grants exception to state law so restaurants can cope with other state law

By Sean Higgins.

"California Governor Gavin Newsom signed legislation over the weekend that exempted restaurants in the Golden State from an anti-false advertising law that Newsom had signed last year. The exemption was, in reality, a fix-it bill needed because the state’s restaurants had adopted special workarounds to comply with the state’s other various other regulations. Chief among those was the state’s second-highest-in-the-nation minimum wage law; legislation that Newsom had also championed.

The legislation signed Saturday allowed restaurants to include service fees in the customers’ tabs, provided that the restaurants are upfront about them on the menu. The state’s anti-false advertising law would have otherwise prohibited such added-on fees. 

Newsom’s administration has defended the anti-false advertising legislation by saying it would enhance price transparency for consumers. It hasn’t issued a statement on why it granted restaurants the exception. 

The restaurants have included the service fees on customers’ tabs as a workaround to the state’s high minimum wage law. The wage floor is currently $16 an hour for all workers and rises to $20 if the restaurant falls under the arbitrary criteria of being a fast-food establishment.  

This endless micromanagement has not increased employment for California workers, but it has increased menu prices paid by customers. Restaurant owners meanwhile claim the state’s ever-growing regulatory structure has given them new and more powerful headaches. 

This mandate became a problem due to a separate long-standing issue restaurant managers face: some of their employees (servers and bartenders) receive customer tips, while others (cooks, dishwashers, etc.) don’t. Restauranteurs have long said that this difference makes it hard for them to hire people as cooks and dishwashers because most workers, unsurprisingly, want jobs where their wages will be supplemented by tips.  

In decades past, restaurants often simply paid the servers and bartenders less, knowing that the tips would make up the difference. What did it matter if the money came from the employer or directly from the customer so long as it went into the pocket of the worker? The federal government even has a special lower minimum wage for tipped employees. 

The California minimum wage laws, however, require the same wage be paid to workers whether they receive customer tips or not. This coincided with the nation’s steady transition towards a cashless society. The credit card machines now include sections to add tips, which made giving gratuities an even more widespread practice. Due to these changes, restaurant owners faced an even harder time hiring people for the jobs that don’t get tips. 

Employers are, however, allowed under state and federal law to create “mandatory tip pools” that collect the gratuities made to servers and bartenders and instead give all workers a cut. Restaurateurs also often add special surcharges to bills to further balance out this process. The California anti-false advertising law prohibited such “hidden fees.” 

Golden State restaurants are obligated to engage in these increasingly complicated workarounds to comply with regulations so they can remain open and profitable. Newsom and politicians like him support this ever-expanding regulatory state so they can claim that they’re fighting for working folks. But as Saturday shows, they’ll quietly pass exceptions to the messes they created when they become problematic.  

They could have saved everyone a lot of time and energy by just leaving well enough alone."