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City Attorney’s Office To Investigate Restaurants Found Surcharging Customers

A note at the bottom of the menu at the Catania restaurant explains a new 3.7...

Photo by Katie Schoolov

Above: A note at the bottom of the menu at the Catania restaurant explains a new 3.75 percent surcharge to compensate for higher labor costs, Jan. 3, 2017.

The City Attorney's Office announced Thursday that it is looking into the legality of a surcharge being levied on some restaurant customers in response to San Diego's minimum wage increase.

City Attorney Mara Elliott said the investigation was launched after complaints about the practice were received on a consumer hotline. The added cost was not made known to customers beforehand and was falsely billed as being mandated by the government, she said.

The minimum wage in San Diego increased on Sunday from $10.50 to $11.50 an hour, per a law passed by the City Council and ratified by voters last June. The new figure is above what's required statewide, including neighboring cities.

Related: Political Statement Or Transparent Pricing? Wage Hikes Prompt Surcharges At Restaurants

“Some diners are surprised to learn that they're being charged as much as 3.5 percent above and beyond what the prices on the menu indicate,'' Elliott said at a news conference.

“Many of these diners did not learn of this so-called surcharge -- which is not mandated by any governmental entity -- until they received their check,'' Elliott said. “At that point, of course, it was too late to send the food back.''

The City Attorney's Office declined to divulge how many complaints were received, but revealed that more than a dozen establishments could be subjected to an investigation for false advertising under the state Business and Professions Code.

Business owners have had ample time to think through the ramifications of the minimum wage law's ramifications and make necessary lawful adjustments, Elliott said. She said they should consult with their attorneys on how to present the extra charges to customers.

According to the San Diego Union-Tribune, well-known eateries like the Bali Hai, Tom Ham's Lighthouse, the Brigantine and those in the Cohn Restaurant Group -- including The Prado and Corvette Diner -- have added surcharges.

Stephen Zolezzi, president of the Food & Beverage Association of San Diego County -- which advises restaurants on labor costs -- told the newspaper that around 30 restaurateurs planned to add a surcharge.

“These are mandated increases to the cost of doing business that we have absolutely no control over,'' Zolezzi said.

Assistant City Attorney John Hemmerling said he hasn't noticed “any collusion or conspiracy'' among restaurant owners to levy the surcharge.

The city's consumer hotline at (619) 533-5600 operates weekdays from 9 a.m. to 5 p.m. Complaints can also be filed online at sandiego.gov/cityattorney.

Arturo Kassel, founder and managing partner of Whisknladle Hospitality, whom KPBS reporter Andrew Bowen interviewed earlier this week, issued KPBS the following statement Thursday regarding restaurant surcharging:

While this is newish for our industry and an unconventional alternative to simply raising prices, most consumers understand that goods and services are going to cost a little bit more. I'm confident restaurants dealing with the rise in cost in this manner are working towards finding the best possible way to communicate these changes and the reasons for them to their guests.

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