'What in the world is this?': Woman shocked by 4% health fee added to LA restaurant bill to keep 'employees healthy and happy.' Are surcharges going too far?

Extra fees tacked onto bills

A number of L.A. restaurants have been adding a health-care surcharge to help cover their employees’ medical insurance costs since at least late 2013, according to this Los Angeles Times article.

Under the rules of the Affordable Care Act (ACA), small businesses with 50 or more full-time equivalent employees are required to offer minimum essential health insurance coverage to workers. But that coverage is expensive. On average, U.S. households spend 8% of their annual income on health care, according to the Bureau of Labor Statistics. By adding a health surcharge, restaurants may simply be trying to offer meaningful benefits to employees without eating into their profits.

But that doesn’t necessarily change diners’ appetites toward being charged for more than they asked for, and only finding out about it on the bill after a meal. Another thing to consider, particularly in L.A., is the fact that California just increased its minimum wage to $16 per hour, effective Jan. 1, 2024. Fast-food employees will also get an extra pay bump to $20 per hour starting on April 1, 2024.

California does not have a separate minimum wage for tipped workers.

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FTC targets restaurant junk fees

If you ask the Federal Trade Commission (FTC), such health surcharges might be considered “junk fees” that bite into the earnings of hard-working Americans.

On Oct. 11, the Biden administration and the FTC expanded their efforts to “ban businesses from charging hidden and misleading fees” that increase the total cost for consumers. Instead, they want businesses to adopt a more transparent pricing model.

After a round of public comments, the FTC has suggested that instead of itemizing fees and service charges on the bill, restaurants could increase menu prices and present customers with one total all-in sum. Alternatively, restaurants could “maintain menu prices and eliminate mandatory service fees with the expectation that consumers would maintain the traditional tipping model.

These suggestions have landed like a lead balloon with the National Restaurant Association (NRA). Discussing the FTC’s proposals in a webinar for restaurant owners on Dec. 19, the NRA warned that consumers may suffer menu price shock and restaurant profits may suffer as a result.

“If your hamburger or cheeseburger starts at $15 and you are all-of-a-sudden overnight required to increase that price on your menu by 20-25% … it’ll really create a sense of sticker shock among some of your customers,” Brennan Duckett, Technology and Innovation Policy Director, National Restaurant Association, said during the webinar.