Restaurant owners have often utilized surcharges to fund employee benefits like health care, with some establishments listing these charges on menus while others made them optional for customers.

However, a new law is causing restaurant owners to adjust menu prices in order to comply. California’s attorney general confirmed to the San Francisco Chronicle this week that restaurant surcharges and fees would be prohibited under this new law, dealing a blow to the industry.

Laurie Thomas, Director of the Golden Gate Restaurant Association, expressed concerns to CBS News Bay Area about the impact of the law on restaurants. She highlighted the dilemma faced by businesses: either reducing employee wages or potentially deterring customers with increased prices.

“So, now, do you take their rate down and do you go to an old-fashioned tip model and say to your servers, ‘You have to tip the whole house, but that drops everybody’s salaries’ or do you raise your prices 20%, 25%?” Thomas explained. “It might make a lot of customers happier. They might say, ‘We understand why prices went up.’ Let’s hope that happens. But I don’t know if our industry can hope that’s what happens. They’re still struggling. It’s been a tough year.”

Food writer Marcia Gagliardi echoed similar sentiments to CBS News Bay Area, foreseeing an increase in consumer prices due to the new law.

“I see restaurants easily raising prices 5%, 15%. It’s going to be tricky,” Gagliardi commented. “We’re going to be seeing even higher prices based on this unfortunate interpretation. But not all is lost. … Things could change.”

These adjustments reflect the complexities faced by the restaurant industry as it navigates the implications of the new legal framework.