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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Troutman Pepper State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
	Clay Friedman – Co-leader Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
	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 represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in 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 handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Tim Bado Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation.
	Chris Carlson Chris 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 business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
	Namrata Kang Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
	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. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
	John Sample John represents clients in a wide variety of general and complex litigation matters, shareholder disputes, products liability, and privacy claims.
	Whitney Shephard Whitney is an attorney 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. His experience includes serving as a summer associate at the firm in 2021.
	Daniel Waltz An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
	Stephanie Kozol Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.