By John Hinman and Gillian Garrett
On Friday, June 5, 2020, the California Department of Alcoholic Beverage Control notified licensees that the onerous Emergency Regulations it proposed in May have now been “approved” by the California Office of Administrative Law (the “OAL”) for use through January 26, 2021. The new regulations, which now appear on the ABC’s website, raise as many questions as they answer.
Although the ABC characterized its proposed regulations as “approved,” the OAL significantly changed the ABC’s proposed text for the new Emergency Rules. Neither the OAL or the ABC explained the decision-making process, however, or provided a response to any comments.
The full text of the ABC’s notice is available here, and the text of the Emergency Rules is available here.
For those that saw our earlier comment blogs (here, and here) on the development of this emergency rulemaking, the good news is the OAL appears to have heard at least some comments we made, including our concern about the Emergency Rules being in place for an indefinite period. The OAL specified the Emergency Rules apply only until January 26, 2021.
The bad news is the ABC can apply the new Emergency Rules in any cases the ABC characterizes as “involving an immediate threat to the public health, safety or welfare that requires immediate action.” (See Cal. Government Code § 11460.30(a).) Although the ABC had proposed nine specific categories of violations be subject to the Emergency Rules, the OAL revised the regulations to state only:
(a) The department may issue an emergency decision temporarily suspending a license, temporarily suspending specific licensed privileges, or temporarily imposing conditions on a license in situations involving an immediate threat to the public health, safety, or welfare that requires immediate action, pursuant to the provisions of Article 13 of Chapter 4.5 of Part 1 of Division 3 of Title 2 of the Government Code (commencing with section 11460.10).
(b) If occurring on a licensed premises, or on any adjoining property rented or leased by a licensee, and directly connected to the operation of a licensed business, the department has determined the following circumstance constitutes an immediate threat to the public health, safety, or welfare that requires immediate administrative action through an emergency decision:
1. The licensee or an employee or agent of the licensee acts in violation of a rule established by an order of a federal, state, or local official during a state of emergency to protect the public health, safety, and welfare.
The vagueness of the new Emergency Rules (including what property the new standards apply to in light of the “connected to the operation of a licensed business” language in (b) above) should concern all licensees because the term “public health, safety or welfare” applies to (and is a predicate to) all ABC laws, regulations and rules. Under this interpretation, the newly approved minor decoy program aimed at delivery personnel likely would be included in the emergency hearing procedure.
What we do know is that the harsh “Emergency Rules” strip licensees of due process protections and will make defending against unjust agency determinations much more difficult. Licensees accused of violations related to public “health and safety” over the next six months will face potentially dire consequences, including license suspensions and license revocations.
When and How will the ABC use the new “Emergency Rules”?
The ABC will apply the new Emergency Rules in cases the ABC perceives as “involving an immediate threat to the public health, safety or welfare that requires immediate action.” (See Cal. Government Code § 11460.30(a).) It remains to be seen how broadly the ABC will attempt to use its Emergency powers. There have been no clarifying statements from the ABC.
If the ABC’s proposed regulations are a clue, then the ABC may attempt to use the new Emergency Rules in cases involving allegations of drug use (including cannabis use) on licensed premises; “disorderly house” charges; allegations involving violations of health and safety rules, including temporary pandemic-related rules; and in other cases (including alleged sales to minors and complaints from neighbors about licensees use of their winery, brewery, restaurant, bar, hotel or other venue for activity that the neighbor does not like).
If you receive a notice or accusation from the ABC, immediately seek legal advice to protect your rights as a licensee.
What is the effect of the new “Emergency Rules”?
The Emergency Rules strip licensees of due process protections when accused of violations related to “public health, safety and welfare.” Although the Emergency Rules require the ABC to conduct a hearing, licensees only will receive notice of the hearing five days before the hearing itself and then only “if practicable.” Even when licensees receive notice, they likely will have little time to prepare. Licensees who do not receive notice of a hearing will not have an opportunity to present evidence or object to the ABC’s evidence. The hearing will proceed without their input or knowledge.
To improve the likelihood you will receive notice of any hearings involving your license, verify your address, phone number and email address on file with the ABC are current and accurate.
The ABC’s Emergency decision, including any penalties, will be effective when issued or when specified by the ABC. Although licensees may ask the Superior Court to review the emergency decision within 15 days, seeking Superior Court review will be expensive, and licensees will face the “double whammy” of enduring suspensions while they ask the Superior Court to correct any errors the ABC has made. (See Cal. Government Code §§ 11460.10- 11460.80.)
10 days after the Emergency decision is issued, the ABC either will register the formal accusation and commence the standard accusation procedure (which includes the right to appeal to the ABC Appeals Board) or hold an additional emergency hearing. This means that even if licensees choose not to appeal to the Superior Court, they can wait for a formal accusation, eventually retry the case, and appeal any errors to the Appeals Board. By this point, however, licensees likely will have fully served any suspensions ordered by the ABC. This means punishment first, due process second; which is obviously shaky constitutional ground.
Will the Emergency Rules Go Away in January 2021?
Although the OAL only approved the Emergency Rules for use through January 26, 2021, the ABC wants to make them permanent. The ABC notified licenses it “anticipates seeking to make the regulations permanent under a certificate of compliance later this year.”
What Can Licensees do?
First, if an ABC order is received immediately get counsel so whatever remedies are available are preserved. Second, call your Assemblyperson or State Senator and report the action. The only body capable of calling the ABC to account is the legislature and the only executive with power over the ABC is the Governor.
This blog is dedicated to occasional (and hopefully interesting) reports of state and national alcoholic beverage regulatory developments that we encounter in our practice. Booze Rules (and any comments below) are intended for informational use only and are not to be construed as legal advice. If you need legal advice please consult with your counsel.