On August 9, District of Columbia Attorney General Brian L. Schwalb issued a Supplemental Business Advisory regarding restaurants’ obligation to properly disclose service fees and charges to diners. The advisory comes after the Office of the Attorney General’s (OAG) March 2023 consumer alert providing guidance on unlawful restaurant fees.

Among other requirements, the advisory emphasizes disclosing when fees are distributed to employees like tips, or kept by the restaurant to pay staff costs, like employee base wages. Restaurants should therefore ensure that fees and charges are complaint with the OAG’s guidance.

The March Consumer Alert on Fees

Both of the OAG’s restaurant fee guidance documents are derived from the OAG’s authority under the District of Columbia Consumer Protection Procedures Act (CPPA). The CPPA requires restaurants to provide timely, prominent, and accurate explanations of all fees and charges.

In the March consumer alert, the OAG addressed diners’ concerns about restaurant “fees and surcharges.” The alert clarified that, while restaurants may charge additional fees, they cannot hide or obscure them; or disclose them after the diner places an order. The alert also required restaurants to inform consumers why particular fees are being charged, and what they will be used for.

Thus, restaurants must ensure they do not violate the CPPA by following the requirements listed under the alert.

The Supplemental Business Advisory

The March alert caused some confusion in the restaurant industry, leading the Restaurant Association Metropolitan Washington to seek clarification from the OAG. In response, the OAG issued the Supplemental Business Advisory in August, offering illustrative examples of compliant fee disclosures.

While the advisory is clear that compliance is determined on a case-by-case basis, it nonetheless contrasts examples of compliant and noncompliant disclosures. Some of the examples illustrate the following principles:

• Prominently and unambiguously explain how fees and charges will be used.
• Explain whether fees will be distributed like a tip, i.e., on top of employee’s base wages, or retained by the restaurant to pay for operational costs, such as employee base wages or health insurance.
• Disclose the fee or charge before the diners place their order.
• Keep the note about the fee or charge visible — do not bury the information in text or small print; or obscure it by graphics.

While the Supplemental Business Advisory focuses on service fees and charges, it clarifies that all “unclear” fees require timely, prominent, and accurate explanations. Moreover, the guidance documents apply to orders made via online applications, meaning that online platforms must implement their own measures.

The Upshot

In order to avoid enforcement actions, District of Columbia restaurants should ensure that all fees and charges follow both the OAG’s March consumer alert as well as the August Supplemental Business Advisory.

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	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
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