Are Service Fees on top of Tips too Much? Here's What Lawmakers Think

Tipping is an essential part of dining out in the US and now it's also making its way to other sectors where services are on offer. But now service fees are being added as an additional levy on top of tips, which is turning out to be a bit too much for consumers. That is why a lawmaker wants to restrict restaurants and motels from adding extra charges, such as "service fees," to tips or bills.

Concerns and proposed solution

Representative Emma Greenman observed this issue when she saw a 4% fee on a receipt at the MSP Airport, and she believes it is incorrect because it is unclear what the cost is for until clients have already committed to paying. These charges became more prevalent throughout the pandemic. Because servers cannot be forced to share their tips, several restaurants use them to help pay their kitchen personnel more fairly. Others use them to cover things like health insurance for employees. Greenman believes that these fees should be included in the menu prices rather than added afterward. Her proposal would make it illegal for firms to promote prices that do not include all obligatory fees and levies.

On the other hand, the likes of Tony Boen of Grandma's Restaurants, are concerned that without these fees, customers will not know where the extra money is going.

Uncertain future of the proposal

Greenman's approach would still allow eateries to collect a service fee rather than forcing consumers to tip individually. However, this plan is still in its early stages, and it is unclear whether it will be passed this year. Meanwhile, more and more restaurants in Minnesota are eliminating these additional costs because customers dislike them.

Crackdown on "Junk Fees"

Recently something similar was implemented where Senate Bill 478, signed into law by Governor Gavin Newsom in October, will prohibit businesses from imposing "junk fees" beginning on July 1. Senators believe it will provide improved consumer protection.

Many restaurant and bar owners use surcharges to pay costs such as healthcare and higher wages for their personnel. Some menus include these surcharges, while others allow customers to choose whether or not to pay them. However, some are concerned that the new regulation may have far-reaching repercussions and radically transform how the sector operates.

Controversy & lawsuit

Service fees have sparked tensions among diners, food workers, and restaurant owners. Former waiters at Jon & Vinny's, a prominent Italian American restaurant, filed a class-action complaint in Los Angeles Superior Court in June against the restaurant's owners, Jon Shook and Vinny Dotolo. They alleged that the corporation did not tip waiters, resulting in less money for them because guests were confused about an 18% service fee.

The restaurant proprietors then modified the text on the bottom of client bills regarding the cost. It now states, "The service charge is not a tip or gratuity, but rather an additional fee managed by the restaurant that contributes to a greater living basic salary for all of our staff. Please scan the QR code at the top of the receipt for more information, or contact a manager.