Mandatory fees added to customer checks have become one of the more aggressively litigated areas in California consumer and employment law. Restaurants are the most visible target, but the issue reaches any California business that adds a line-item charge to customer invoices — event venues, hotels, salons, fitness studios, delivery services, and beyond. The framework is layered: local ordinances, a statewide gratuity statute interpreted broadly by the Court of Appeal, and the Consumers Legal Remedies Act as amended by SB 478 and SB 1524. Here are five considerations for California employers.

1. Raising menu (or service) prices is the cleanest path.

The cleanest legal approach is generally to raise prices rather than add a separate fee to customer checks. Price increases are not subject to local service-charge ordinances, are not covered by the gratuity analysis under O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, and avoid the disclosure traps of SB 478. Economically, the approach achieves the same result as an across-the-board house-retained fee without the regulatory exposure. The Santa Monica City Attorney’s office has publicly identified price increases as the safest path.

Bottom line: If the goal is to recover costs across the board, building those costs into the listed price is materially less risky than collecting them through a separate fee.

2. Several California cities require mandatory service charges to be paid to employees — and the coverage rules reach beyond city-based employers.

Santa Monica (SMMC § 4.62.040), West Hollywood (WHMC § 5.130.050), Berkeley (BMC § 13.99), and Oakland (OMC § 5.92), for example, each have ordinances requiring mandatory service charges to be distributed to non-managerial employees who contributed to the chain of service. Santa Monica treats violations as strict liability. Both Santa Monica and West Hollywood apply their ordinances to any employee performing as little as two hours of work per week within city limits, regardless of where the employer is headquartered — a coverage trigger that catches employers operating across Los Angeles County. West Hollywood goes further on healthcare-related surcharges: within seven days of collection, the surcharge revenue must either be deposited into employee-controlled accounts (FSAs, HSAs, or POP cafeteria plans) or paid directly to employees as wages, and the employer cannot retain any portion.

Bottom line: Employers with operations in any of these jurisdictions should assume that mandatory service charges will need to be distributed to non-managerial employees and must understand these heightened regulations.

3. The O’Grady “reasonable customer” test still applies statewide.

The O’Grady decision held that a mandatory service charge can constitute a “gratuity” under Labor Code § 351 — meaning the employer must distribute it to non-managerial employees — if a reasonable customer would believe the charge is for the server’s work. The court rejected the prior view that mandatory service charges are categorically not gratuities, and emphasized that the analysis turns on the customer’s reasonable expectations rather than the label. Plaintiffs’ firms have since filed putative class actions and PAGA claims against California restaurants and hospitality employers asserting that house-retained fees are gratuities under O’Grady. The risk is not limited to jurisdictions with local ordinances.

Bottom line: O’Grady establishes a statewide gratuity exposure for any mandatory fee a customer might reasonably believe is for the employee’s service — regardless of what the fee is called or where the business is located.

4. If a fee is retained, the label and structure have to do real work.

A business that adds a mandatory fee and retains it must navigate both the local ordinances (where applicable) and the O’Grady test. Labels suggesting the fee compensates employee service — “service charge,” “auto-gratuity,” “kitchen appreciation fee,” “living wage fee,” “hospitality fee,” “healthcare surcharge,” “benefits surcharge” — fall directly within the local ordinance definitions and are highly likely to be treated as gratuities under O’Grady. A retained fee has a meaningful chance of surviving challenge only if (i) it is described with specificity as offsetting a defined non-labor cost (for example, credit card processing or a specific non-labor regulatory cost), (ii) it is actually used for that stated purpose — not commingled with payroll, (iii) it is disclosed clearly and conspicuously before the customer orders, on menus, online ordering pages, and receipts, and (iv) the disclosure expressly disclaims being for employee services. Internal accounting should track fee revenue against the disclosed purpose.

Bottom line: A retained fee is defensible only if the label, the disclosure, the actual use of the funds, and the recordkeeping all align — the label alone will not save it.

5. SB 478 and SB 1524 add a separate statewide transparency layer that reaches beyond restaurants.

Effective July 1, 2024, SB 478 amended the Consumers Legal Remedies Act (Civ. Code § 1770(a)(29)) to prohibit advertising or listing a price that does not include all mandatory fees and charges, often referred to as drip pricing, with limited exceptions for government taxes and reasonable shipping. The law applies to virtually every California business that sells goods or services to consumers — not just restaurants. Restaurants, bars, and certain food businesses received a carve-out under SB 1524, but only if mandatory fees are clearly and conspicuously displayed with an explanation of their purpose on any menu, advertisement, or other display showing the price of a food or beverage item. As of July 1, 2025, the “clear and conspicuous” disclosure must meet the technical standards in Civil Code § 1791(u) — text in larger or contrasting type, font, or color, or otherwise visually set off from the surrounding text. Violations of SB 478 can be enforced as CLRA claims, including on a class basis, with damages of the greater of actual damages or $1,000 per violation, plus restitution, punitive damages, and attorneys’ fees.

Bottom line: Any California business — restaurant or otherwise — adding mandatory fees to customer transactions should review its pricing displays, online checkout flows, and menu disclosures against SB 478 and the July 1, 2025 technical requirements to avoid a CLRA class action layered on top of the underlying service-charge exposure.

Mandatory fees are now subject to a complex analysis in California: local service-charge ordinances, the statewide O’Grady gratuity test under Labor Code § 351, and the SB 478/SB 1524 transparency framework under the CLRA. Each layer carries its own private right of action. Employers should periodically review their customer-facing fee structures, disclosures, and internal accounting against this framework.

The post Friday’s Five: Mandatory Fees and Service Charges in California — What Employers Should Know appeared first on California Employment Law Report.

The magnesium titanium supply chain is one of the most critical and least understood dependencies in American defense manufacturing — and a single facility closure in Utah may have compromised it for years.

Titanium is essential to advanced aerospace manufacturing. An F-35 fighter is approximately 25% titanium by structural weight. Titanium is also used extensively in naval vessels, missile casings, and satellite components. It is strong, lightweight, and resistant to heat and corrosion in ways that no common substitute replicates at aerospace-grade performance levels.

Producing titanium metal from ore requires magnesium as a chemical reducing agent in the Kroll process — the dominant industrial method for titanium production. Without sufficient magnesium input, titanium output is constrained regardless of how much titanite ore you have in the ground. The magnesium titanium supply chain is sequential and non-negotiable: no magnesium, no titanium metal, no F-35 airframe.

US Magnesium operated a production facility on the shores of the Great Salt Lake in Utah — for decades the primary domestic magnesium producer and a critical node in the defense supply chain. The facility was environmentally problematic, generating significant air and water pollution. Under ESG pressure and facing bankruptcy, it was purchased by the State of Utah and retired. The environmental case for closing it was real. The national security case for keeping it open was also real. The ESG narrative won, and the magnesium titanium supply chain lost a domestic anchor it has not replaced.

Craig Tindale used this as a case study in the gap between ideological policy optimization and mechanical systems thinking. We closed a polluting facility without first building its replacement. We broke the supply chain and then declared victory over pollution. India experienced exactly this failure mode during a titanium production run — ran out of magnesium mid-process and had to halt output. We have arranged for the same vulnerability domestically. The F-35 program office knows this. The public doesn’t.

A hard asset investing strategy built around physical scarcity is not a contrarian bet in 2026 — it is the logical conclusion of thirty years of Western deindustrialization meeting the most material-intensive technology buildout in history.

Let me state the framework plainly. The paper economy — equities, bonds, derivatives, financial instruments of every variety — has expanded to approximately $400 trillion in notional value. The physical industrial economy that actually produces the goods, energy, and materials the world depends on represents roughly 1 to 2 percent of that figure. That ratio is historically anomalous. It was produced by three decades of financialization, cheap money, and the systematic underinvestment in physical productive capacity that Craig Tindale documented in detail in his Financial Sense interview. It will not persist.

The normalization of that ratio — whether gradual through rotation or abrupt through crisis — is the defining investment theme of the next decade. Physical assets that the industrial economy cannot function without will appreciate relative to financial instruments whose value rests on assumptions about perpetual growth in a system that is hitting material constraints.

The specific hard asset investing categories I’m watching: physical gold and silver held outside the banking system; uranium through vehicles like the Sprott Physical Uranium Trust; copper royalty companies with exposure to projects in stable jurisdictions; critical mineral processors building Western midstream capacity; and agricultural land in water-secure regions. Each of these positions reflects the same underlying thesis: the physical world is reasserting its primacy over the financial world, and the repricing will be substantial.

This is not a trade. It doesn’t have a price target or a twelve-month horizon. It is a structural allocation to the thesis that what is real, scarce, and essential will outperform what is abundant, financial, and derivative. History supports that thesis. The supply chain math demands it.

The gap between defense budget and industrial capacity is the central structural weakness of American military power in 2026 — and it is widening faster than Washington acknowledges.

Defense budgets are expressed in dollars. Industrial capacity is expressed in tonnes of steel, thousands of trained workers, operational smelters, functioning supply chains, and years of manufacturing lead time. These are not interchangeable units. You cannot convert a dollar appropriation directly into a naval vessel, an artillery shell, or an F-35 airframe unless the physical production infrastructure exists to receive that funding and convert it into hardware.

The financialization of the defense sector over the past thirty years has systematically prioritized the financial ledger over the material ledger. Defense contractors optimized for share price, not surge capacity. R&D budgets went toward next-generation concepts rather than manufacturing floor maintenance. Supply chains were outsourced to the lowest-cost producer — which frequently meant Chinese-controlled materials processors — because the quarterly earnings model rewarded cost reduction, not strategic resilience.

Craig Tindale documented the result in his Financial Sense interview: a backlog of proposals to rebuild heavy rail supply capacity, specialty metals processing, and industrial chemical production sitting in Pentagon and Congressional approval queues while the strategic window narrows. The ideas exist. The funding could exist. The bureaucratic and structural machinery to translate funding into capacity does not move fast enough to matter.

The artillery shell shortage exposed during the Ukraine conflict was a preview. The United States could not produce 155mm shells at the rate the battlefield consumed them — not because of budget constraints, but because the industrial base to manufacture them at scale had been allowed to atrophy. Budget authorization without industrial capacity is a number on a page. And numbers on pages don’t win wars.

The tantalum shortage facing Nvidia and other AI chip manufacturers is one of the most underdiscussed constraints on the artificial intelligence buildout — and the math is stark enough to stop the conversation cold.

Tantalum is used in capacitors throughout advanced semiconductor devices, where it functions as an electrical insulator that manages power distribution across circuits. It is not substitutable in high-performance applications at current technology levels. Total global tantalum production runs at approximately 850 tonnes per year. Forty percent comes from the Democratic Republic of Congo. Twenty percent from Rwanda. The supply base is geographically concentrated, politically fragile, and expanding slowly.

Craig Tindale did the bottom-up materials analysis on Nvidia’s product roadmap and crossed it against global tantalum supply. The conclusion: Nvidia alone, based on its published growth forecasts, would consume the entire current global annual output of tantalum. That is before accounting for AMD, Intel, Qualcomm, Samsung, TSMC’s other customers, or the defense electronics sector. The AI chip industry is collectively planning to consume several times the material that currently exists in annual supply, on a timeline that the mining and processing sector cannot physically match.

This is not a financial constraint. It is a physical one. Tantalum mines cannot be opened on a quarterly earnings schedule. Processing capacity cannot be tripled through a capital raise. The material either exists in sufficient quantity at sufficient purity, or the chips don’t get built at the planned volumes.

The investment implication cuts both ways. For AI infrastructure bulls, the tantalum ceiling is a genuine risk to growth forecasts that isn’t reflected in current valuations. For materials investors, tantalum producers and processors with permitted capacity in stable jurisdictions are positioned at the exact bottleneck of the most capital-intensive technology buildout in history. That is not a speculative position. That is arithmetic.

Marine fuel desulfurization climate effects are now measurable in satellite data — and they point to one of the most consequential unintended consequences of environmental policy in modern history.

In 2020, the International Maritime Organization mandated a dramatic reduction in sulfur content in marine fuels globally. The stated goal was to reduce air pollution from shipping — a legitimate objective. Sulfur dioxide emissions from ships cause respiratory illness and acid rain in coastal communities. Removing sulfur from fuel was a straightforward environmental win. Except it wasn’t straightforward at all.

Sulfur particles in the atmosphere serve as cloud condensation nuclei. Raindrops and clouds don’t form from pure water vapor — they form around microscopic particles that act as nucleation sites. Sulfur emissions from the massive global shipping fleet had been inadvertently seeding clouds over the world’s major shipping lanes for decades. Remove the sulfur, remove the cloud seeding, reduce cloud cover, increase solar radiation reaching the ocean surface.

Craig Tindale flagged this in his Financial Sense interview as a prime example of ideological policy making without mechanical systems thinking. We optimized for one variable — sulfur in the air — without modeling the downstream effects on cloud formation, ocean albedo, and sea surface temperatures. Satellite measurements since 2020 show accelerated warming in shipping lane corridors that aligns with the timing and geography of the desulfurization mandate.

This is not an argument against clean air. It is an argument for understanding complex systems before intervening in them at scale. We are now running uncontrolled experiments on the planetary climate system in the name of environmental protection, without adequate modeling of second and third-order effects. The honest answer is that we don’t fully understand what we’ve done — and the oceans are warming faster than any model predicted.

The fertilizer supply chain crisis is one of the most underreported national security stories of our time — and its choke point runs directly through the Strait of Hormuz.

Most people don’t think about fertilizer until food prices spike. By then the supply chain damage has been accumulating for months or years. The connection between Middle East energy geopolitics and American grocery bills is not abstract. It is chemical. Ammonia-based nitrogen fertilizers — the inputs that underpin roughly half of global food production — are produced using natural gas as both feedstock and energy source. Disrupt the natural gas flows through Hormuz, and you disrupt fertilizer production. Disrupt fertilizer production, and you disrupt yields. Disrupt yields globally, and you have a food security crisis that cascades through every import-dependent economy on earth.

Craig Tindale raised this directly in his Financial Sense interview: a potential 25% drop in fertilizer availability from a Hormuz disruption. That number should be front-page news in every agricultural economy. It isn’t, because the chain of causation is too long and too indirect for the news cycle to follow.

The Iran dimension makes this more acute. Iran sits astride Hormuz. A war with Iran — even a contained one — creates insurance risk, shipping risk, and supply disruption risk that ripples through the ammonia and urea markets within weeks. We are currently engaged in military operations against Iran while simultaneously importing the energy inputs that feed the fertilizer supply chain that feeds us. The strategic incoherence of that position is extraordinary.

For investors, the fertilizer supply chain story points clearly toward domestic nitrogen producers, potash miners in stable jurisdictions, and agricultural input companies with vertically integrated supply chains. Food security is not a soft issue. It is the hardest of hard assets — and its supply chain is far more fragile than most people understand.

The first week of this month I took a much-needed technology free vacation. I was hiking and staying in national parks with spotty WiFi and was blissfully ignorant of current events.

When I logged back online, I saw that once again, sexual harassment was very much in the news, this time in politics. Regardless of your side of the aisle, the news was just plain disturbing. And this comes on the heels of recent revelations leading lawmakers in our state to unanimously pass legislation renaming Cesar Chavez Day on March 31st to Farmworkers Day. News reports involving minors (young girls) leading to that decision were simply heart-wrenching.

It seems that every couple of years post #metoo I write a blog post about ongoing harassment issues in the news. There was this one in September 2023 about common misconceptions in harassment claims, and this one from March 2021 appropriately titled Why Are We Still Talking About Sexual Harassment? Because People Are Still Acting Creepy, That’s Why.

Recent political stories, and related resignations, demonstrate that these issues continue; influential people often rise to power despite allegations of some pretty darn awful conduct.

Remember, sexual harassment is about power, and using that power in a way that makes others uncomfortable.  If only people could remember that if you don’t want to trigger a claim (or damage your career), then don’t do anything you wouldn’t want done to your child or to your parent.  It is as simple as that.

I look forward to the day when I don’t feel compelled to blog on this issue. Until then, California employers keep vigilant with your harassment prevention training, and your prompt and effective investigations (and corrective action) when issues arise.

When Tim Cook stands in front of a camera and announces that Apple is expanding manufacturing in India or the United States, the financial press reports it as a supply chain diversification story. It isn’t. What’s being diversified is assembly — the final step in a production process whose upstream inputs remain exactly where they were before.

Craig Tindale identified this as one of the central conceptual errors driving Western industrial policy. We have confused assembly with manufacturing, and we have confused manufacturing with sovereignty. They are not the same thing at three different levels of abstraction. They are three completely different capabilities, and possessing one tells you almost nothing about whether you possess the others.

The Foxconn model is precisely this confusion made institutional. Foxconn assembles iPhones. The components inside those iPhones — the display drivers, the memory chips, the RF components, the battery management ICs, the precision machined metal casings — are manufactured by hundreds of suppliers, the vast majority of which are in Asia, many of which depend on Chinese-processed materials at the input stage. Moving Foxconn’s assembly lines to India moves the final screwdriver turn. It moves nothing else.

Real manufacturing sovereignty requires the ability to produce the inputs, not just to combine them. It requires the smelters, the chemical plants, the specialty material processors, the precision tooling manufacturers, the trained workforce that understands how all of it fits together. The United States had most of this forty years ago. We dismantled it in the name of price efficiency. Reassembling it is not a matter of announcing a new factory. It’s a decade-long industrial project that has barely started.

Until we understand the difference between assembly and manufacturing, every reshoring announcement is theater. Good theater, perhaps. But theater nonetheless.