California Assembly Bill 478, also known as the “Honest Pricing Law” or “Hidden Fees Statute,” took effect on July 1, 2024. This legislation aims to increase transparency for consumers and consumer pricing by requiring businesses to advertise prices that include all mandatory fees and charges.
What Does SB 478 Entail?
SB 478 amends the California Civil Code to prohibit businesses from advertising, displaying, or offering a price for a good or service that excludes mandatory fees and charges, with limited exceptions. These exceptions include:
- Government-imposed taxes: Taxes levied by the government on the transaction, such as sales tax, are not required to be included in the advertised price.
- Reasonable shipping costs: The actual cost of shipping a physical good to the consumer can be excluded from the advertised price.
Businesses Impacted by SB 478
SB 478 applies broadly to the sale or lease of most goods and services intended for personal use by consumers. This includes, but is not limited to:
- Event tickets
- Hotels and other lodging establishments
- Restaurants and food delivery services
- Rental car companies
The law does not apply to transactions involving the purchase or lease of goods or services for commercial purposes.
What Businesses Need to Do
To comply with SB 487, businesses must ensure that their advertised prices for goods and services include all mandatory fees and charges that a consumer will be obligated to pay at the point of purchase. This may require businesses to adjust their advertising practices and pricing structures. Here’s a breakdown of the key steps:
- Identify Mandatory Fees and Charges: The first step involves meticulously cataloging all mandatory fees and charges that a customer incurs when purchasing a good or service. This includes service fees, resort fees, fuel surcharges (for rental cars), and any other obligatory charges that are not government-imposed taxes or reasonable shipping costs.
- Evaluate Advertising Materials: Carefully scrutinize all advertising materials, including websites, social media platforms, brochures, flyers, and signage. Ensure that the advertised price incorporates all the identified mandatory fees. This might involve updating price tags, revising online menus, and adjusting e-commerce product descriptions.
- Consider Price Adjustments: Businesses may need to re-evaluate their pricing structures to account for the inclusion of mandatory fees in advertised prices. This could involve raising the base price to encompass all mandatory charges or absorbing some fees into the profit margin.
- Employee Training and Communication: Equip employees with the knowledge to accurately communicate pricing information to customers. Train staff on how to calculate the total price, including mandatory fees, and ensure they can address customer inquiries regarding the new pricing structure.
- Monitoring and Compliance: Establish a system to monitor ongoing compliance with SB 478. Regularly review advertising materials and pricing structures to identify any discrepancies and make necessary adjustments.
As an example, a restaurant that previously advertised a menu item for a specific price, but then added a mandatory service charge at checkout, would now need to advertise the menu item with the total price, including the service charge.
What SB 478 Does Not Require
It is important to note that SB 478 does not dictate what fees a business can charge or how those fees are calculated. Businesses retain the discretion to determine their pricing structure. Additionally, the law does not require the inclusion of:
- Contingent fees: Fees that are not guaranteed and depend on the consumer’s actions, such as delivery or convenience fees.
- Gratuity: Businesses are not required to include voluntary gratuities, such as tipping, in the advertised price.
Potential Consequences of Non-Compliance
Businesses that fail to comply with SB 478 may face various consequences, including:
- Civil litigation: Consumers who are misled by deceptive pricing practices may file civil lawsuits against businesses to recover damages.
- Civil penalties: The California Attorney General’s Office may pursue civil penalties against businesses found to be in violation of the law.
- Injunctions: Courts may issue injunctions to prevent businesses from engaging in deceptive pricing practices.
How Employment Lawyers Can Help Businesses
Employment lawyers who specialize in business compliance can provide valuable assistance to businesses navigating the requirements of SB 478. These legal professionals can help businesses understand the law’s implications, assess their current pricing practices, and develop strategies to achieve compliance.
Here are some specific ways employment lawyers can assist businesses with SB 478:
- Reviewing Advertising Materials: Lawyers can review a business’s advertising materials, such as websites, menus, and social media posts, to ensure compliance with SB 478.
- Developing Pricing Strategies: Lawyers can work with businesses to develop pricing strategies that account for all mandatory fees and charges, ensuring accurate and transparent pricing for consumers.
- Training Employees: Lawyers can advise businesses on how to train their employees about the requirements of SB 478 and how to communicate pricing information accurately to customers.
- Staying Up-to-Date: Employment lawyers can monitor legal developments related to SB 478 and keep businesses informed of any changes or clarifications to the law.
California’s SB 478 represents a significant change for businesses operating in the state. Working with experienced employment lawyers can help businesses ensure they are complying with the law and protecting themselves from potential legal and financial repercussions. marketplace.
