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.

Troutman Pepper State Attorneys General Team

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.
Clay Friedman – Co-leader
Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation.
Judy Jagdmann
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen Piepgrass
Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries.
Avi Schick
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Michael Yaghi
Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues.
Tim Bado
Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others.
Chris Carlson
Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia Jacobo
Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work.
Namrata Kang
Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising.
Michael Lafleur
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan Nikdel
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes.
John Sample
John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims.
Whitney Shephard
Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey Smith
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation.
Daniel Waltz
Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom.
Stephanie Kozol
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.