City of Los Angeles Restaurants Receive Relief in the Form of Cap on Third-Party Delivery Charges

By Joshua Schneiderman and Imeabasi Ibok

On June 5, 2020, Los Angeles Mayor Eric Garcetti signed into law an ordinance which temporarily limits third-party food delivery charges to local restaurants and other eat-in and carry-out service companies as part of the City of Los Angeles’ comprehensive COVID-19 response. This ordinance, which was unanimously approved by the Los Angeles City Council, caps delivery fees to 15 percent and all other non-delivery fees to 5 percent of the price of the order, as listed on the restaurant’s menu. This ordinance came into effect immediately on June 5, and will remain in place through Sunday, August 30, 2020, which is 90 days after Los Angeles lifted its prohibition on on-premises dining.

In addition to the cap on delivery and other non-delivery fees, third-party food delivery companies are prohibited from:

1. Charging a local restaurant any amount designated as a “delivery fee” for an order that does not involve the delivery of food or beverages;
2. Charging a customer any price for a food or beverage item that is higher than the price set by the restaurant on the third-party food delivery company’s platform, or, if no price is set on such platform, the price listed on the restaurant’s own menu; and
3. Retaining any portion of amounts designated as a tip or gratuity. All tips and gratuities shall be paid by the third-party food delivery company to the delivery person.

If a restaurant believes that a third-party food delivery company has violated this ordinance, the restaurant is required to provide the third-party delivery company the right to cure the alleged violation by sending the delivery company written notice of the violation citing the provision of the ordinance which was violated and the facts to support the violation. If the third-party food delivery company does not cure the alleged violation within 15 days after the date of the written notice, the restaurant has the right to bring a civil action in the Superior Court of the State of California to recover actual damages and reasonable attorney’s fees.  

Relief may also be on the way for local restaurants outside of the city limits of Los Angeles, but within the County of Los Angeles. The Los Angeles County Board of Supervisors has asked various departments representing restaurants and small businesses to collectively prepare a draft ordinance for the Board to review which would approve measures similar to the ordinance approved by City of Los Angeles. Beyond what was passed in the City of Los Angeles ordinance, the Board has asked the departments to investigate and provide recommendations on the following: (i) imposing a fee on third-party food delivery companies to create a fund to assist certain food establishments and their workers; and (ii) prohibiting third-party food delivery companies from violating the spirit of the ordinance by “reducing compensation paid to delivery service drivers” or “garnishing any of the gratuities paid to delivery service drivers” in order to escape the effects of the planned caps.  

A cap on delivery fees is just one of a number of policies and ideas the City and County of Los Angeles has put forth to help local small businesses weather the storm brought on by this pandemic. If you are a local restaurant or small business in the City or County of Los Angeles, you are encouraged to review the toolkit provided by the City of Los Angeles. Please also consider subscribing to Snell & Wilmer’s Legal Alerts where we frequently discuss new developments in the law that could affect your business.