The March 25, 2020 ABC Guidance: Enforcement Continues; Charitable Giving Remains Subject to ABC Rules; and More – What Does it all Mean?

By: Gillian Garrett, Hinman & Carmichael LLP

On March 25, 2020, the ABC updated the Frequently Asked Questions (“FAQs”) posted on its website, https://www.abc.ca.gov/law-and-policy/coronavirus19/frequently-asked-questions/, to guide licensees dealing with the evolving COVID 19 crisis. The ABC, while it does provide meaningful relief from many onerous regulations, by no means is foregoing its responsibility as a law enforcement agency. Rather, licensees must be cognizant of the limited scope (both temporal and substantive) of the regulatory relief.

ABC Enforcement Is Considered Essential Business; Enforcement Actions Continue

The ABC emphasized the most important news in the first sentence of the notice -- the ABC continues to enforce many provisions of the ABC Act.  It states: 

"Important Notice: All provisions of the Alcoholic Beverage Control Act, including licensing requirements, the prohibition against selling alcoholic beverages to minors and obviously intoxicated patrons, and tied-house and trade practice restrictions, remain in effect and subject to enforcement unless the Department has provided express notice that specific provisions will not be enforced."

This means on and off-premise licensees must remain vigilant about:

·       Preventing sales to minors;

·       Refusing sales to customers who are obviously drunk;

·       Following “tied house” rules (i.e., separating all activity by the three licensed “tiers” -- producers, wholesalers, and retailers -- as required by federal and state law); and

·       Following “trade practice” rules, including the prohibition on consignment sales, bribery, exclusive outlet sales arrangements, and prohibited (i.e., unapproved) things of value given by suppliers to retail licensees and by retail licensees to consumers. (See e.g., 27 U.S.C. 205(a)-(d); Cal. Bus. & Prof. Code § 25500 et seq.; Cal. Bus. & Prof. Code § 25503.)

ABC enforcement agents in plainclothes (not uniforms) are visiting licensed premises to enforce these laws even during the COVID crisis. 

Licensees’ Charitable Giving Must Comply with Federal & State Laws

The March 25, 2020 FAQ addressed four important issues related to charitable giving by licensees, which giving still must comply with federal and state law.  

First, the ABC has not suspended “tied-house” laws to permit licensees to engage in otherwise prohibited charitable activities.  Licensees must ensure their charitable giving cannot be perceived as a gift to a licensee in another “tier” of the industry.  Gifts and donations made in connection with the sale or marketing of alcohol are barred by federal and state law.  (See 27 U.S.C. 205(a)-(d); Cal. Bus. & Prof. Code § 25503.)

Second, donations to restaurant and hospitality workers are compliant if made to an organization not affiliated with a retail licensee and the donation does not identify or involve a particular licensee.  This means licensees cannot contribute to charities benefiting specific licensees, but they can donate to industry-wide organizations, such as the National Restaurant Education Foundation, the U.S. Bartenders Guild, Children of Restaurant Employees (“CORE”) and similar charities.   

Third, gifts and donations to specific retail employees are prohibited.  They are barred by federal and state bribery statutes.  (See 27 U.S.C. 205(a)-(d); Cal. Bus. & Prof. Code § 25503.)

Fourth, gifting a portion of sale proceeds to charity is prohibited.  The ABC considers this kind of donation a prohibited “gift” in connection with the sale or marketing of alcohol.  (See Cal. Bus. & Prof. Code § 25503.)

More Trending Topics Covered by the March 25, 2020 FAQs

The FAQs provide updated guidance about other significant trending issues, including:

·       The temporary nature of the ABC’s COVID policies, which the ABC will provide 10 days’ notice before ending;

·       Resolving conflicts between local and state orders for licensees during the COVID crisis (the stricter order applies);

·       The breadth of the suspension in enforcement of certain credit laws (all debts remain due on their original terms; while the ABC temporarily will not enforce the 30-day credit law the question of licensee negotiated payment schedules after the end of period is still unknown);

·       Whether restaurants and bars can sell alcohol in manufacturer sealed containers without food (they can sell to-go closed bottles of the alcoholic beverages permitted by their license to be sold in the restaurant or the bar);

·       Whether restaurants and breweries can sell manufacturer sealed alcohol “to go” without a food purchase (they can);

·       Whether restaurants, bars and breweries can sell unsealed alcohol (such as traveler cocktails) “to go” without a food purchase (traveler cocktails in unsealed containers must be sold with food, but what food qualifies and how much of the order must be food is not clear);

·       Whether a bar (Type 28, 42 or 48 license) can get temporary approval to act as a restaurant (type 41 or 47 license) (it can’t, unless it already has required local health department approvals, and the applicability of Section 23038 -the bona fide public eating place regulation -remains unclear);

·       Whether bars may sell untapped kegs back to wholesalers (they can);

·       Enforcement of license conditions involving mandatory gross food sales not exceeding alcohol sales (enforcement is discretionary);

·       Guidelines for lids on “to go” containers, including sealing straw holes (seal the hole!);

·       Guidelines for “drive thru” logistics and options (still unclear but expected to be the same as the current alcohol delivery guidelines);

·       Whether wineries can allow customers to pick up at the winery (they can, while maintaining social distancing);

·       Product returns (federal and state product return laws remain in effect, but returns are being permitted until notified otherwise);

·       Guidelines for alcohol delivery (same as existing delivery guidelines);

·       Guidance about off-premise sales by on-premise licensees (generally permitted, so long as off-premise sales are not barred by a specific license condition);

·       License renewal payments (payments still must be made on time); and

·       Dining for hotel guests (all dining must meet social distancing standards; in-room dining is presumably compliant).    

The major licensee concern should be recognizing that adoption of the relaxed regulatory regime is temporary. The ABC has reserved itself the right to revert to the rules and regulations currently in place on 10 days notice.  That is not a lot of time to react if one is not paying attention so, pay attention, book mark the ABC web page and look for notices from the industry trade associations.

If you have questions about the FAQs or the evolving regulatory climate, please contact us.