NYC Restaurants Will Soon Be Allowed to Add Up to 10 Percent Surcharge to Diners’ Bills

NY City Council has voted today in favor of a bill that will give restaurants in the city the option to add a surcharge of up to 10 percent to diners’ bills as an economic recovery support measure during the pandemic. The provision will go into effect immediately after the mayor, who is in support of the bill, signs it into law. It will extend until 90 days after indoor dining at full capacity is allowed.

“This bill will give restaurants the freedom they need to increase revenue to help cover rapidly rising labor and compliance costs and keep them in business,” Councilmember and bill sponsor Joseph Borelli, who represents the south shore of Staten Island, said in a statement.

The extra revenue from the surcharge can be put towards any part of the business that the restaurant owner chooses, although it has to be clear to customers that the charge isn’t interchangeable with tips and the money doesn’t go towards staff wages.

Andrew Rigie, the executive director of the New York Hospitality Alliance, said in a statement commending City Council on the vote that the bill will give NYC restaurants “a fighting chance of survival.”

Not everyone is happy with the City Council’s decision. Saru Jayaraman, the president of One Fair Wage, a national organization that advocates for the elimination of the tipped minimum wage, said in a statement that the surcharge could “cut into workers’ already-reduced customer tips” during the pandemic as diners may choose to tip less when they see a COVID-19 surcharge automatically added to the bill.

“While it is critical that we support New York City’s restaurant industry during this unprecedented crisis, we must not forget about the individual restaurant workers who have seen their lives adversely impacted by a severe loss of income over the past six months,” Jayaraman said. One Fair Wage called for City Council to reject the legislation unless the surcharge could only be used by restaurants that don’t use the tip credit and already pay each worker the city minimum wage of $15 per hour.

The COVID-19 recovery surcharge is an evolution of a bill that was originally introduced two years ago by Borelli. In the original bill, Borelli called on the city to allow restaurants to add a surcharge of up to 5 percent to customers’ bills to offset rising rent and other operating costs.

At the time, over 200 restaurants signed a letter in support of adding the surcharge. Eater critic Ryan Sutton argued against a version of the measure that was originally introduced in 2018, saying that the provision would allow restaurants to keep menu prices artificially low and diners would end up with a surprise bill at the end of the night.

Mayor Bill de Blasio was also against the original bill, but is in support of surcharges now in light of the current economic crisis. “The mayor supports the bill and he’ll be proud to sign it,” a spokesperson for the mayor says. “This is an unprecedented emergency, and we’ll do everything we can to support the industry that employs thousands of New Yorkers and makes us the greatest city in the world.” The date and time for when the bill will be signed into law has not yet been set.

Surcharges are already allowed elsewhere in the state and in other U.S. cities including San Francisco and Los Angeles.

In NYC, the bill ultimately didn’t move forward until now, as a reworked COVID-19 recovery measure. City Council has urgently pushed through many emergency support measures for small businesses during the pandemic, including a 20 percent cap on the fees that food delivery services charge to restaurants, and a measure waiving sidewalk cafe fees for a year.

A spokesperson for Borelli confirms that his office will continue to push for a permanent surcharge allowance in the city after the current emergency measure expires.