Category Archives: OLCC

OLCC Names William Higlin as New Licensing Director

OLCC

OLCC Names William Higlin as New Licensing Director.

William Higlin starts as the OLCC Director of Licensing on May 12, 2014.  Higlin replaces Farshad Allahdadi who left the OLCC in February and is now the Retail Contracts Manager at the Oregon State Lottery.

Higlin has substantial state government and private industry experience.  He spent 15 years working at the Oregon State Lottery in a number of positions.  After leaving the Lottery, Higlin became the Director of Regional Marketing at GTECH Corporation before being promoted to Senior Director of Sales for the startup, GTECH Printing Corporation.  This experience should serve him well in his new position at the OLCC.

Steve Marks, OLCC Executive Director had the following to say about Higlin:

Will understands that the economic success of each of our partners begins with solid licensing decisions.  The knowledge he brings to building and maintaining business relationships will aid in building a supportive environment that ensures licensees and their employees are ready and able to responsibly manufacture, sell, and serve alcohol.

 

The OLCC’s announcement can be found here.

OLCC Case Summary: Lotsa Luck Bar & Grill

Case Studies, OLCC

OLCC Case Summary: Lotsa Luck Bar & Grill

“Learn from the mistakes of others. You can’t live long enough to make them all yourself. ”                                                                                                                  –Eleanor Roosevelt

Licensees can learn a lot by reviewing OLCC case decisions.  What mistakes are other licensees making?  What mistakes are the OLCC making?  What lessons can be learned to improve the safety, compliance and success of your business?  Here, I am summarizing one lesson that can be learned from a recent OLCC decision.

The Issue. Is an argument between patrons “disorderly activity” under Oregon law?  The OLCC argued that an argument between a male and female patron of Lotsa Luck Bar & Grill was disorderly activity.

The Law.  OAR 845-006-0347 prohibits licensees from permitting disorderly activities on the licensed premises or in areas that the licensee controls that are adjacent to or outside the licensed premises, such as a parking lot, outdoor seating area, smoking area, area in which patrons wait to enter the premises, etc.  Disorderly activities are defined as those that harass, threaten or physically harm another person.

The Facts.  A male and a female patron drove to the premises.  Video shows that they were arguing from the moment that they exited their vehicle, throughout the time that they were in the premises, and until they exited the premises.  They were in the premises for approximately 15 minutes.  Neither of them had an alcoholic beverage while at the premises and there is no indication that they were intoxicated.  They were arguing in normal voices about everyday issues.  At one point, the man told the woman to “get your shit out of my car.”  Just prior to leaving the premises, the man told the woman that he was going to “beat your ass.”

Discussion.  OLCC staff argued that the “beat your ass” comment constituted disorderly activity.  Such a comment could constitute disorderly activity if interpreted as a threat.  That being said, the testimony and evidence indicated that the comment was made in a normal voice with no suggestion of physical violence or accompanying physical violence.  If the comment would have been followed by physical violence, the statement along with the violence would very likely have been considered disorderly activity.  If the comment was made in a threatening manner, but without the physical violence, it would have been a closer call.

If a comment was determined to be “disorderly activity,” the OLCC would still need to show that the licensee “permitted” the activity.  I’ve previously highlighted what is required for a “permitting” violation.  While that is an issue here, it is not the issue of note.

The Take-Away.  Two patrons arguing with normal voice levels and no physical violence does not constitute “disorderly activity” under current Oregon law.  That being said, licensees should pay careful attention to patrons that are arguing and if there is any indication that the arguing may escalate to include suggestions of physical threat or violence.  While arguing alone will typically not rise to the level of “disorderly activity,” it may be a red flag that things are headed that way.  Intervening early may ensure that the argument remains just that.  As with many things, licensees and their staff must use sound judgment in light of all of the facts in determining what, if any, action is appropriate.  The devil is in the details.  Having well written house policies and regular trainings on how to handle such issues will help ensure that such issues do not escalate to the level of an OLCC violation.

OLCC Rulemaking: Requirement for Liquor Liability Insurance

Laws & Rules, OLCC

OLCC Rulemaking: Requirement for Liquor Liability Insurance

On April 25, the OLCC initiated the rulemaking process to cleanup the existing rule that requires that retail licensees that sell or serve alcohol for on-premises consumption to maintain a minimum level of liquor liability insurance.  It is important to note that the $300,000 minimum required by this rule is not being raised and thus continues to be lower than most (if not all) licensed businesses should carry.  Talk to your insurer to make sure that you have sufficient coverage.

Many of the changes are purely house keeping.  The proposed changes more clearly outline what is required, who is required to do it, and how the OLCC can verify that it is being done.  No problem.

The big change is in the sanctions.  From the perspective of a licensee, there is good news and bad news.  Let’s start with the bad news.

Bad News.  If a licensee fails to provide timely proof of coverage (at renewals or within 10 days of receiving a request from the OLCC), the OLCC may immediately suspend or refuse to renew the liquor license without a hearing.   Presumably, the suspension would only last until such time that the OLCC was provided with proof of coverage.  This may need to be clarified as the rulemaking progresses.  But, in any case, this would certainly catch the attention of any licensed business and provide extra incentive to maintain the required coverage.  An unintended consequence of this sanction would impact licensed businesses that also had retail contracts with the Oregon State Lottery.  Such businesses would be required to notify the Lottery of the suspension.  As a result, the Lottery would turn off the business’s video lottery machines and conduct an investigation into the underlying basis for the suspension.

Good News.  The OLCC has dramatically revised the sanctions for failing to maintain liquor liability insurance.  Previously, failure to maintain coverage resulted in a category I violation (the most serious).  The proposed sanction for a first category I violation within two years is cancellation.  Regardless of how long the lapse was, the proposed sanction was the same.  Tough love.

The OLCC is proposing a penalty schedule for this violation in which the proposed sanction will largely be a function of the length of the lapse in coverage.  This makes sense because the proposed sanction would be in direct proportion to the “threat to public health and safety” posed by the lapse in coverage.  The penalty schedule would be as follows:

  1. A lapse in coverage of no more than 30 days will result in a warning. However, the second lapse in coverage of this duration within a two-year period is a Category IV violation;
  2. A lapse in coverage of 31 days to no more than 60 days is a Category III violation;
  3. A lapse in coverage of 61 days to no more than 90 days is a Category II violation; and
  4. A lapse in coverage of 91 days or more is a Category I violation.

Recall that category I violations are the most serious and each subsequent category is less serious in terms of public safety, sanctions, etc.  For more on priority violations, view my earlier post.

Also note that these sanctions would be in addition to the immediate suspension in cases where the OLCC discovered the lapse in coverage at a time that the insurance was lapsed (as opposed to discovering a historic lapse after coverage had been subsequently put back into place).

You can view and follow the rulemaking here.

 

The TTB Suspends Pending Wine Growler Rulemaking

Compliance, OLCC, TTB

The TTB Suspends Pending Wine Growler Rulemaking.

Good news for Oregon licensees selling wine growlers.  The TTB has suspended its pending TTB Ruling 2014-3 entitled “Bottling Taxpaid Wine in Growlers or Similar Containers for Consumption Off of the Premises.”

In short, the ruling held that the filling of growlers with taxpaid wine for consumption off of the premises (in plain English, “to go”) was a bottling activity subject to the taxpaid wine bottling house provisions of the Internal Revenue Code of 1986.

Thus, the ruling held that businesses filling wine growlers were required to meet a number of requirements:

  1. Apply for approval as taxpaid wine bottling houses,
  2. Label their growlers,
  3. Keep certain records, and
  4. Comply with other regulations regarding their operations.

The end result would be mountains of extra paperwork for licensees and the TTB with virtually no public safety or protection of revenue benefit.  For more information, see my earlier post on the subject.

The TTB was likely inundated with negative feedback from industry members across the country, but particularly Oregon, including from U.S. Senator Ron Wyden.  As a result, the TTB backed away from the ruling, but tried to save face at the same time by stating that “our existing regulations were intended to cover traditional taxpaid wine bottling activities, rather than the filling of wine growlers.”  Agreed.

As a result, the TTB will now engage in formal rulemaking on this issue to “modernize” their regulations on wine growlers.  This will allow the TTB to balance protecting revenue (which was never at stake since the vast majority of wine growlers are being filled by retailers using taxpaid wine) without unduly burdening businesses that want to sell wine growlers (as with beer growlers, just get out of the way).  The rulemaking process will enable all interested parties to provide input.  Expect plenty of input.

Fearless prediction–the TTB’s rulemaking will clear the way for wine growlers across the country.  Wine growlers–great wine with less environmental impact and for less $$$’s.  Everyone wins.

 

Incident Logs: To Log or Not To Log Is a Question All Licensees Should Ask Themselves

Case Studies, OLCC,

Incident Logs: To Log or Not To Log Is a Question All Licensees Should Ask Themselves

The OLCC recommends that licensees maintain incident logs, but licensees must be mindful of how they maintain incidents logs or they could be used against them later.

OLCC Recommendations.  The OLCC encourages you to keep an Incident Log.  Per the OLCC, examples of when you should make an entry in the log include anytime you or your employees intervene to prevent or stop customer conduct such as:

  • Refusing someone alcohol service
  • Cutting someone off or removing a drink
  • Arranging safe transportation home for someone who appears intoxicated
  • Stopping an argument, fight, or assault
  • Stopping other illegal activities
  • Asking a noisy customer to be quiet as they leave or drive away

 

The OLCC also recommends putting other activities in your log, including whenever an incident is reported to the police or OLCC, whenever you receive a complaint from a neighbor, or any other time you think it necessary.  The OLCC argues that the licensee will benefit from keeping an incident log because:

“Sometimes, complaints, investigations, or lawsuits do not surface until weeks, months, or years after the incident occurred. Gathering complete and accurate information immediately after an incident is  one of the best ways to document how you and your employees handled the problem.”

Reason for Concern.  The OLCC could potentially substantiate a history of serious and persistent problems violation solely based on a licensee’s incident log.  In a recent decision, the OLCC made it clear that it considers incident logs to be sufficiently reliable to document a serious incident in a history of serious and persistent problems violation.  In other words, entries in a licensee’s log book can be admitted into evidence at an administrative hearing and can be held against the licensee to prove a history of serious and persistent problems violation.  The proposed sanction for such a violation is license cancellation.

The OLCC reasoned that the incident logs should be considered reliable because they would not be considered hearsay under the Oregon Evidence Code.  Specifically, log entries fall within a hearsay exception as a statement made by a party opponent under ORS 40.450(4)(b) and as business records kept in the ordinary course under ORS 40.460(6).  Because incident logs fall within these hearsay exceptions and would be admitted in civil litigation, the Commission concluded that incident logs are reliable under the applicable evidentiary standard set out in ORS 183.450(1).

The OLCC tries to soften this conclusion by pointing out that evidentiary value of incident logs would be reduced to the extent that there was not corroborating evidence or testimony concerning the events in the incident log.  Even with that being the case, it’s clear that a poorly kept incident log can cost a licensee their license under certain circumstances.

Best Practices.  Keeping an incident log can be very beneficial to operating a successful, profitable and compliant business.  The three most important aspects of keeping a log book are:

  1. Regular review of the log book,
  2. Documentation of proactive steps taken in response to problems, and
  3. Training staff regarding how to draft a log entry.

Regular Review.  To maximize the benefit and minimize the potential downsides, an owner or manager should regularly review log entries and should take appropriate steps in the light of documented incidents and trends in incidents.  The best practice is to review the log books every day.  If there is a serious incident, the owner or manager can investigate while the incident is still fresh in the minds of their staff.  In addition, if the business has video cameras, the owner or manager can review the applicable video records and preserve copies of the videotape before they are recorded over.

Proactive Steps.  If there is a troubling incident or trend in incidents, the business is well advised to take immediate steps to prevent or control the problems.  The scope and nature of the proactive steps will depend on the scope and nature of the incidents.  Getting ahead of problems can potentially prevent expensive and time consuming issues with the OLCC, law enforcement and the local government.

Drafting Entries.  If you do not direct your staff in how and when to prepare a log entry, you should not be surprised if the log entry seems to highlight the severity of a particular incident and fails to mention how it was resolved.  Specifying the basic components to an entry is a good first step, such as date, time, staff name, name of involved individuals, police called or involved, description of incident, proactive steps taken, etc.  Entries in log books should describe the incident in plain English without undue commentary, i.e. “there was a huge fight on the patio tonight, more like a riot.  We totally lost control of the crowd and it looked two people were almost killed …”  The log should focus more on how the business quickly identified and resolved the issue.

Take Away.  There are many reasons why a bar or restaurant should keep an incident log, but merely keeping an incident log without any regular review or follow up may do more harm than good.  Licensees should consider incident logs to be one of many potential tools to run a compliant business, such as regular staff trainings, secret shoppers, video cameras, etc.  Using the tool properly can be beneficial, but keeping an incident log just because you think it’s the right thing to do with no further action probably involves more risk than reward.

I regularly help clients review their compliance practices and would appreciate the opportunity to talk to you about your current practices and how to improve them going forward.

 

OLCC Priority Violations

Compliance, OLCC,

OLCC Priority Violations.  There are 1000’s of licensed businesses in Oregon.  This can be great for Oregonians, but can present a real challenge to the OLCC in terms of monitoring them for compliance.  The OLCC must decide each day how to allocate its enforcement officers and focus its efforts across the state.  In order to maximize the effectiveness and coverage of their enforcement efforts, the OLCC focuses on a subset of licensed businesses and a subset of violations.

Licensees can benefit by understanding how the OLCC prioritizes their efforts.

That doesn’t mean that the OLCC is simply turning a blind eye to other businesses or violations.  For example, the OLCC’s minor decoy program involves visits to randomly selected businesses across the state.  In addition, even if a violation is not a “priority violation,” the OLCC may still take action if the violation is discovered.

The OLCC typically focuses on businesses with documented compliance problems.  The compliance problems may be documented from calls for service from local law enforcement, citizen complaints, or prior warnings or violations from the OLCC.  The take-away for licensees is that they should operate their business in a manner that minimizes calls for service and citizen complaints.  And, maybe even more importantly, licensees should take note if their business starts getting visits from local law enforcement or starts to receive citizen complaints.  These may be early warning signs of problems and provide a licensee with an opportunity to take corrective action BEFORE the issues develop into problems with the OLCC.

The OLCC also has identified what it considers priority violations and include the following:

Category I Violations

• Failure to maintain liquor liability insurance or bond (see Section 200L)
• Licensee convicted of a felony
• History of serious & persistent problems (HSPP)
• Restriction violation
• Unauthorized interest in a business (involves an unlicensable person)
• Operating while suspended

Category II/II(a) Violations

• Interfered with investigation
• Material false statement
• Under the influence of intoxicants on duty
• Failed to call police at Inspector’s request
• Denied Inspector/police officer access to premises (during business hours)
• Failed to promptly admit Inspector/officer (when premises is or appears closed)
• Unlawful drug activity on the licensed premises (II(a))

Category III/III(a) Violations

• Failed to verify the age of a minor
• Permitted minor to consume alcohol
• Sale to VIP
• Allowing VIP to consume alcohol
• Permitting disorderly activity
• Permitting unlawful activity

Licensees should understand the nature of these violations and be vigilant to ensure that they do not occur at their business.  Well drafted house policies, ongoing training efforts and trustworthy management and staff are essential to operating a profitable and compliant licensed business in Oregon.

The TTB Issued a Ruling Regarding “Wine” Growlers

Laws & Rules, OLCC, TTB, , , ,

The TTB issued a ruling yesterday regarding “wine” growlers that should be of particular interest to Oregon licensees because it conflicts with Oregon law.  Oregon passed legislation in 2013 that made it legal under state law for most on- and off-premises licensees to sell growlers of malt beverage, wine and cider.  The OLCC has created an FAQ detailing this law change.  The Ruling is particularly important to any licensee that is currently selling wine growlers without a TTB taxpaid wine bottling house approval.  The OLCC could charge such licensees with permitting unlawful activity for such sales.  Permitting unlawful activity is a category III violation under Oregon law and is subject to the OLCC’s escalating penalty schedule.

The Ruling.  In short, the TTB Ruling has held that the “filling of growlers with taxpaid wine for the purpose of consumption off of the premises is an activity that may be conducted lawfully only by a qualified taxpaid wine bottling house” (emphasis added).  You can view the Ruling here.

Growlers are increasingly popular.  Growlers are increasingly popular with brewers and consumers.  Many, but not all, states allow certain licensees to sell growlers.  States are also increasingly enacting laws that allow brewers and other licensees to sell growlers.  In addition, advocacy groups are pushing to allow the sale of growlers in more states and to expand the privileges in states that already allow growler sales.  This Ruling could substantially impact the continued growth of this trend, particularly for wine and cider growlers.

What is a growler?  A growler is a container used to store, transport and dispense beer.  Growlers are typically made of glass or ceramic materials and have a mechanism for securely closing the container.  Growlers often hold 64 ounces, but can hold more or less than that.  A properly sealed growler can maintain the freshness of beer for a week or more.  The term “growler” is thought to date back to the late 19th century when fresh beer was carried from the local pub to one’s home using a galvanized pail and the sound that the CO2 made when it escaped from the lid as the beer sloshed around sounded like a “growl”.  Consumers can typically bring their own growler to a retailer, or purchase a growler from the retailer at the time that it is filled.

Growlers and federal law.  The TTB has issued formal guidance regarding beer growlers that clarifies that beer growlers are allowed.  The TTB’s Ruling on wine growler explains that federal law is different for the various alcoholic beverage commodities: malt beverage, wine and spirits.  Accordingly, the fact that beer growlers are permitted under federal law does not necessarily mean that they are permitted for other commodities, such as wine.

More on beer growlers.  The TTB makes a distinction between when a growler is a bottle or a large glass.  The determination turns solely on how the growler is filled.  If a growler is filled in advance of sale, it is a bottle.  If a growler is filled at the time of sale, it is a large glass.  The distinction is important because a growler that is considered a “large glass” is not subject to Federal labeling requirements and “bottles” are.  The TTB’s Ruling on wine growlers makes a similar distinction.

For those of us who were looking forward to the wide availability of wine growlers, this Ruling is disappointing.

 

How Can Barbershops and Salons Give Clients Free Beer and Wine Without a Liquor License?

Compliance, OLCC

How Can Barbershops and Salons Give Clients Free Beer and Wine Without a Liquor License in Oregon?

Many barbershops and salons offer this clients free beer and/or wine before, during, or after their service in Oregon.  In many states, this would be illegal unless the business had a liquor license.  Some barbershops and salons in Oregon have liquor licenses that allow them to sell beer and wine to their clients, but that is typically more the exception than the rule.

The OLCC allows business that do not sell food or beverage for on-premises consumption to provide beer and wine free of charge to guests. You primarily see this at barbershops, salons, spas, etc., but there is no reason that an art studio or other business that did not sell food and beverages could not do this provided that they complied with the requirements.

The requirements are as follows:

  1. No sales or charges for the wine;
  2. Wine must be provided to anyone in the business without discrimination.  In other words, there business cannot require that a customer make a purchase to obtain the free beer or wine.  In practice, although such a business must make the beer or wine available to anyone that walks in the door who asks, it typically is limited to customers by virtue of non-customers being unaware of the requirement.  That being said, there is the possibility for abuse;
  3. The business cannot sell food and beverage for on-premises consumption.  Such businesses need to have a liquor license;
  4. The provision of beer or wine at no cost cannot serve as an inducement to purchase entertainment or other services.  In other words, the business cannot offer a one hour service or class for $20 with all you can drink, and then at the end of the service or class, offer another class for $20 with all you can drink, etc.  The provision of free beer or wine must truly be incidental to the primary business which is not food and beverage related.

Any business considering offering free beer or wine in this manner should carefully develop policies for how to do so in compliance with Oregon law and regularly train their staff to ensure that the business does not expose itself to liability.  Such business practices can garner the attention of local law enforcement, the OLCC, or neighborhood associations and can result in regularly problems or general liability if not done correctly.

To see if a barbershop near your offers free beer, you might want read this article.

OLCC Privatization: The 2014 Oregon Legislative Sessions Ends With No Overhaul of the OLCC

OLCC, Privatization, Uncategorized

OLCC Privatization: The 2014 Oregon Legislative Sessions Ends With No Overhaul of the OLCC.

The Oregon Legislature adjourned on Friday March 7th.  Senate Bill 1559 that proposed to “modernize” the OLCC did not even make the list of the session’s biggest issues.

The likely reason for the quiet death of SB 1559 is that Oregon lawmakers signaled early that the proposal was essentially doomed.  In short, the bill would have allowed grocery stores, drug stores, and other retail locations with more than 10,000 square feet to sell distilled spirits while preserving the OLCC’s control over the supply chain.  The bill also would have potentially provided existing liquor stores with a path to continued viability.  This compromise on liquor privatization was apparently too much of a compromise–leaving most stakeholders unhappy without enough to bring them all together.

To be fair, privatization, modernization, or whatever you want to call it will have winners and losers.  Potentially big winners and big losers.  With stakes that involve so much money and the very viability of a business model in some cases, making everyone happy will likely be impossible.  For this reason, the proponents of privatization may have a better chance at the ballot box than the legislature.

The Northwest Grocer Association has filed numerous initiatives seeking to privatize the OLCC and to allow businesses with over 10,000 square feet to sell spirits at retail.  At some point, they will select one version to qualify for the 2014 ballot.  By filing numerous versions, the Association has been able to keep its options open with the goal of building the best coalition possible to back the ballot in the fall.  The initiatives have some commonalities with Washington’s Initiative 1183, which may or may not be a good thing.

 

 

 

 

Can Licensees in Oregon and Washington “Comp” Drinks?

Compliance, OLCC, WSLCB

Can Licensees in Oregon and Washington “Comp” Drinks?  The answer is yes, but …

“Comp” drinks can be a useful tool for licensees in some situations.

120px-Classic_martini_by_Ken30684

While comping drinks is okay under limited circumstances in both Oregon and Washington, advertising “free” drinks or having business practices or promotions involving “free” drinks is generally prohibited.  The OLCC and WSLCB will scrutinize any such program and licensees should take to stay within the rules.

In Washington, comping alcoholic beverages to guests is permitted under limited circumstances, such as:

  1. For special occasions, such as birthdays or anniversaries;
  2. To compensate a guest for a bad meal or poor service; or
  3. To allow the guest to taste the product before purchasing it.

Importantly, free alcohol cannot be used or advertised as a business promotion.

In Oregon, comping alcoholic beverages to guests is permitted under similar circumstances.  That being said, businesses should be careful about establishing sound policies and practices around “comping” drinks to avoid abuse.  For an interesting take on this, read a blog post from Jeffrey Morgenthaler here.

However, advertising free alcoholic beverages is generally prohibited.  Also, alcoholic beverages cannot be offered for free as a “prize” or similar.  Generally speaking, licensees should be mindful of promotions or advertising that involve any reference to “free” and should confirm that they are permitted before moving forward with the program.