In another crackdown on unexpected restaurant surcharges, New Jersey has cited 16 establishments for failing to adequately alert guests that they’ll be charged an additional fee for settling their bill with a credit card.
Separately, the state’s Division of Consumer Affairs said it has also sanctioned 12 restaurants for violating a state law prohibiting businesses from refusing to accept cash payments from customers. The Division said it spent a year pursuing the offending restaurants.
The penalties levied on the offending establishments ranged from $500 to $4,000, as determined by the number and severity of the infractions.
A mandate that restaurants forewarn customers about surcharges became state law in August 2023. Passing along card-processing fees to customers is legal, but the new measure requires restaurants to notify guests before they pay that a surcharge will be added to their bill to cover swipe fees. The amount they’ll be charged also has to be revealed. The fee cannot exceed what the restaurant is charged for the card transactions.
The enforcement effort is the latest incidence of authorities cracking down on surcharge regulations. Skillet Restaurant Group, a five-unit diner operation in Seattle, recently agreed to settle charges that it allegedly led customers to believe a service fee added to their bills would go fully to front-of-house staff. None of the money was distributed to dining-room workers, according to civic authorities. Instead, they said, the funds were used to defray the company’s overall labor costs and other overhead expenses.
Skillet agreed to reimburse employees $318,782.48 and to pay the city a $4,958.25 fine, though those charges also included the penalties for allegedly denying workers meal and rest breaks.
Washington, D.C., which has seen a rapid spread of service charges since voters elected in November 2022 to phase out the tip credit, has set out specific requirements for how customers must be alerted to surcharges, right down to the type size of the alerts. The city also requires that restaurants specify how the proceeds will be used and obliges them to allocate the funds solely for that purpose.
About 13% of U.S. fast-food restaurants and 17% of full-service dining places have imposed service fees, according to a report issued by the National Restaurant Association in early 2023. The surcharges have become a popular way of offsetting sharp rises in recent years in food and labor costs.
The New Jersey crackdown was part of what the Consumer Affairs Decision says is a stepped-up effort to protect consumers from being exploited by businesses this holiday season. As part of that drive, the agency also checked the accuracy of the scales that airline employees use to verify the weight of passengers’ luggage. It found that 100 of the 336 devices used at Newark International Airport, the state’s largest, were inaccurate.
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