What Minnesota's new 'junk fees' law means for purchases — and tipping at restaurants

Minnesota will soon ban businesses from tacking on so-called "junk fees" at the end of a purchase, a move supporters hope will provide transparency for people buying concert tickets, booking a hotel room and eating at restaurants.

Gov. Tim Walz signed the measure into law this week, his first act after the Legislature adjourned the 2024 session. Consumer Reports estimates the average American family spends thousands of dollars annually on junk fees. The law takes effect in January.

"All of us have seen this, especially online," Walz said before signing the bill. "Seeing a price but then by the end of it there's all kinds of things that have been added on to it and then there's a countdown clock that tells you need to get it and do this now."

The practice was widely criticized when fans tried to purchase tickets to Taylor Swift's Eras Tour and were hit at the end with surprise fees that dramatically increased the total cost. The state passed a law this year addressing that as well.

The bill's sponsors said junk fees are everywhere, from most online purchases to additional charges added to restaurant bills, such as health and wellness fees, that have become common practice in the Twin Cities since the pandemic.

"We said we really need a whole-of-the-economy approach, because junk fees aren't just for Taylor Swift concerts anymore," said Rep. Emma Greenman, DFL-Minneapolis, one of the sponsors of the bill.

"Call it a convenience fee, call it a usage fee, call it a facility fee, call it an inflation fee, call it whatever you want," she added. "It's a junk fee if you have to pay it in order to get the good or service but you're not told about it until the end."

Those fees have now been added to the state's Deceptive Trade Practices Act, and any mandatory fee or surcharge must be included in the advertised or list price for goods and services. Supporters say that will allow people to see the total price up front and allow comparison shopping.

For restaurants, it bars surprise service charges and fees, but it still allows them to add an automatic gratuity at the end of the bill. The law requires automatic tipping to be clearly labeled on the bill, and those fees must go to restaurant workers, not other business costs.

Lt. Gov. Peggy Flanagan said that will make it less confusing for customers, who see fees added to a bill and don't know if it goes to their server or whether they need to tip on top of the charge. She said tipped-wage workers will benefit because there are no "secrets on the bill."

"You should tip your server, and tip them well, but we need to have transparency in those bills," she said.

The state-level push is happening at the same time the federal government is trying to crack down on these types of fees. Representatives from businesses asked Minnesota lawmakers to wait until the federal government had finished its rule-setting process.

Hospitality Minnesota, which represents roughly 2,000 businesses, said restaurants "are already required to disclose fees on the menus and receipts with specific guidelines on font size and style." They're also struggling with how to pay staff and provide benefits amid rising costs and state wage and tip laws, creating an imbalance in earnings among staff.

"Many of our members use these service fees to address disparities between tipped and non-tipped employees," said Angie Whitcomb, president and CEO of Hospitality Minnesota. "For these employers, service fees are the lifeline that allows them to keep essential kitchen staff who would otherwise seek opportunities elsewhere. This new law will take money directly out of the pockets of hardworking hospitality employees in Minnesota."

Greenman said restaurant owners came to her office this year and said "people aren't going to want to pay $15 for a hamburger."

"I told them 'they're already paying $15, you're just telling them it's $12 and putting the $3 at the end,'" she said. "Now people will know how much the hamburger costs before they decide to buy it."