Restaurants have started adding a “minimum-wage surcharge” of 3% to 4% to each check. The surcharge has been adopted by fine-dining and upscale-casual restaurants in at least five states so far—Arizona, California, Colorado, Massachusetts and New York (except New York City, where a consumer protection law prohibits administrative fees).
Restaurant owners say the charges are necessary and could continue to spread nationwide because their operating costs have spiked for both wait staff and kitchen help. Since January 2014, a total of 27 states and Washington, DC, have raised their minimum wages, with the highest currently $11.50 an hour in Washington, DC. In New York City, the minimum wage is $11 an hour for most workers and $12 for fast-food workers.
Restaurants are betting that the surcharges will be more palatable to diners than raising prices on individual menu items, although in an attempt to reduce customer pushback, some restaurants are referring to the surcharge—incorrectly—as a “government-mandated” charge in fine print on their menus. Most states and cities do not require restaurants to indicate surcharges on menus or display the policy, so patrons may not be aware of it until they get their checks.
What to do: When you eat out, ask whether any labor surcharges exist even if you don’t see one on the menu. Consider compensating for the higher tab for your meal by adjusting what you order. For example, a couple might opt to share a single appetizer, dessert or glass of wine instead of having two. Keep in mind that the surcharge does not count as a tip because it does not go to the staff—it goes to the restaurant—but decide whether to calculate the tip based on the tab including the surcharge or not including the surcharge. Diners typically base the tip on the total price including the surcharge.