Category Archives: OLCC

OLCC Case Profile: The OLCC Dismissed Two “Permitting” Violations in Bradley’s Bar & Grill

Case Studies, OLCC,

The OLCC dismissed two “permitting” violations in Bradley’s Bar & Grill.  In doing so, the case provides some useful guidance to existing licensees.

The Law.  “Permitting” violations requires that the OLCC show two elements.  The first element is a showing that the licensee had knowledge of the proscribed activity.  The second element is a showing that the licensee failed to take reasonable steps to prevent or control the proscribed activity.

The proscribed activity may be unlawful activity, disorderly conduct, or having a minor in an area in which minors are prohibited.  Knowledge may be shown in a number of ways: actual, constructive, or imputed.  Constructive knowledge is where the nature of the proscribed activity was such that it would have been evident to persons working in the establishment.  The knowledge can also be imputed to the licensee from one of the licensee’s agents or employees.

First Alleged Violation.  The first alleged violation was that the licensee permitted unlawful activity when a patron sold drugs to a confidential reliable informant (a “CRI”).  It was undisputed that the employee on duty had no actual knowledge that a CRI was attempting to buy drugs in the bar.  In addition, it was not evident to persons working at the bar that the two patrons talking privately near the bar were negotiating a drug sale.

OLCC staff contended that licensee’s employees should have monitored the private conversation between the patrons and thus should have been aware of the drug sale.  The Commission determined that that was not a reasonable expectation.  Even if the employee in question had stopped performing their duties and focused entirely on drug transaction, the Commission determined that it would have not been evident to a reasonable person that a drug transaction was occurring.

Take Away Point.  Licensees are responsible for taking reasonable steps to prevent drug activity at or adjacent to the licensed premises.  If their employees become aware that such drug transactions are occurring or such activity becomes conspicuous, a licensee is responsible to taking reasonable steps to prevent such drug activity.  That being said, if the drug activity is “surreptitious and subtle” and the licensee does not have actual or constructive knowledge of it, a licensee will not be sanctioned by the OLCC.  The take away is that licensees should take care to train their staff to be observant of their surroundings and to report any criminal or suspicious activity to the manager or owner.  Communication between staff and management is essential and there are a number of tools that licensees can put into place to mitigate risk here.

Second Alleged Violation.  The second alleged violation was that the licensee permitted a minor to be on the licensed premises where minors were prohibited.  For this type of violation, the knowledge element can be met either by showing that the licensee had (1) actual knowledge that the minor was on the licensed premises or (2) sufficient time and opportunity to detect and determine the minor’s presence at the premises.

In this case, it was undisputed that the licensee’s employee was unaware of the minor’s presence at the bar.  As a result, the case turned on whether the licensee’s employee had “sufficient time or opportunity” to discover the minor.

The Commission has determined that 10 or 15 minutes is “sufficient time and opportunity” exists when a premises is busy.  Here, the minor was in the bar for a little over 9 minutes and the bar was busy.  The unique fact presented was that two other patrons that were sitting at the table where the minor was seated caused a disturbance for much of the 9 minutes.   Accordingly, the server’s attention was rightfully focused on resolving the immediate situation.  In this case, the Commission found that the server did not have sufficient opportunity to detect the minor’s presence because of the disruptive behavior of the other patrons.  The disruptive behavior constituted an immediate public safety concern and required the immediate attention of the server.

 

Can an OLCC Licensee Accept a Canadian Driver’s License?

Compliance, OLCC,

Can an OLCC Licensee Accept a Canadian Driver’s License?

Acceptable Forms of ID. Under Oregon law, licensees may accept only the following forms of identification alone as proof of age:

1. A valid state driver’s license with a photo;
2. A valid ID card issued by a state with photo, name, date of birth, & physical description;
3. A valid passport; or
4. A valid U.S. military ID card.
ORS 471.130

Foreign Driver Licensees. The OLCC interprets the word “state” in ORS 471.130(1)(b) to include driver’s licenses issued by US territories and states/provinces of foreign countries including Canada and Mexico. However, if a licensee cannot determine from the license the person’s age or whether the ID is a valid/authentic license from another country, the OLCC recommends that the licensee require another form of ID such as a passport.

The Licensee Assumes the Risk. In short, a licensee takes on the risk when it accepts a foreign driver’s license as the only evidence of age. If it turns out the identification is not authentic, the licensee is at risk of receiving a violation from the OLCC. For this reason, some establishments will not accept foreign driver’s licenses as a matter of policy, but they will accept passports. Generally speaking, most out-of-country visitors to the United States should have a valid passport that they used to gain entry to the US and that can be used as proof of age.

Take Away and Best Practices. In summary, a licensee can accept foreign driver’s licenses as proof of age, but it likely involves more risk because it is more difficult to determine if a foreign driver’s license is authentic or not. If a licensee decides to accept foreign driver’s licenses as acceptable identification, a best practice is to require a manager sign off to ensure that there are at least two sets of eyes on the identification. In addition, or alternatively, a licensee may decide to accept only foreign driver’s licenses for a limited number of countries, such as Canada and Mexico, and obtain resources that describe these forms of identification. The ID book that you currently use may include a section on some foreign forms of identification.

Age Verification Equipment: Should You Agree to Use It to Resolve an OLCC Violation?

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Age Verification Equipment (“AVE”): Should You Agree to Use It to Resolve an OLCC Violation?

The AVE Option. ORS 471.392 allows the OLCC to use AVE as a tool to reduce underage drinking and helps licensees demonstrate that they are responsible business owners. OAR 845-009-0140 allows a licensee to purchase and use AVE in lieu of a civil penalty or suspension for a first sale to a minor or failure to verify age violation. If a licensee did not select the AVE option for a first violation of this type, the OLCC may give a licensee the option to buy and use AVE to partially offset a civil penalty or suspension for a second violation. A licensee can only use this option one time at a particular licensed location.

Process for Selecting the AVE Option. The licensee must notify the OLCC within 15 days of receiving a Notice of Violation of their intention to get and use the AVE. Licensees must be using the AVE within 30 days of receiving the Notice of Violation. Licensees should carefully review the Notice of Violation and diligently follow the instructions listed in the Notice.

AVE Is For Life. Going forward, the licensee must use AVE at every point of sale used to sell alcohol, and the equipment must be used at each point of sale as long as the licensee owns the business. Failure to use the AVE equipment can result in an aggravated penalty for future violations of this type and possible removal from the Responsible Vendor Program. There is no process for eliminating this requirement from a liquor license other than a change of ownership at the location. In other words, a licensee is agreeing to use the AVE at the location as long as the licensee operates at the location and is subject to aggravated penalties for any subsequent violations if the AVE is not appropriately used. In addition, the licensee will need to pay for upgrades or otherwise insure that the AVE meets the OLCC’s standards for the same time period.

AVE Equipment. The AVE must meet all of the following standards:

(a) The equipment must trigger an age verification process or the equipment itself must verify the age. In either case, the equipment must indicate to the licensee or employee if the customer is of legal age to purchase alcoholic beverages;

(b) The equipment must have a memory function and must be capable of producing a hard copy printout of the results of any verification transaction within the last seven days, either directly from the equipment or through a computer;

(c) The equipment must be able to perform the age verification function for identification from all states in the United States, via either the equipment reading the identification automatically or manual entry of the information; and

(d) The equipment must have the capacity to be updated or upgraded.

Final Verdict. Licensees should carefully consider whether or not AVE is right for them and their business. And, even if using AVE at the business makes sense, licensees should determine whether it makes sense to be permanently bound to using AVE going forward. The short term benefit of an elimination or reduction of a sanction may not outweigh the potential long term burdens of complying with the AVE requirement. Determining how to respond to an OLCC violation requires careful deliberation. Even if settlement is the right option, the details of the settlement matter. In addition, when determining how to respond to an OLCC violation, it is essential to consider the longer view. AVE may not be the best option for all licensees. Understanding your options, what to expect going forward, and how best to ensure future compliance is essential to your business’s continued success when operating in the heavily regulated alcohol regulatory environment.

Last OLCC Retail Innovations Meeting: Privatization Will Create Winners and Losers

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I attended the last of the OLCC’s Retail Innovations meetings on Friday January 24, 2014 and privatization was not surprisingly the main topic of discussion. The meeting took place just following the OLCC’s Commission Meeting at their main offices. Importantly, it was the first meeting since the Northwest Grocery Association filed the first of many initiatives to privatize the OLCC. Since the filing of the initiatives, the OLCC helped put forward a draft piece of legislation to modernize the OLCC and to be a counter to the NWGA’s many initiatives. Given the many divergent interests of the many stakeholders, almost everyone has found something that they don’t like about the proposed legislation. We can anticipate fixes in the near future. You can take a look at the draft legislation here. To learn more about the OLCC to put this into context, you can view a recent powerpoint presentation given to the Senate Business and Transportation Committee and the House Business and Labor Committee here.

An important theme for the meeting was that any changes to the OLCC, whether through legislation or initiative, would result in winners and losers. Owners of existing liquor stores may have the most to lose, but Oregon’s craft distilling industry, Oregon cities and counties dependent on OLCC revenues (and the taxpayers that benefit from their services), and certain industry members also have a lot at stake. Consumers and Oregon’s restaurants and bars may also see a price increase.

More to come …

The Northwest Grocery Association Filed Initiatives to Privatize the OLCC

OLCC, Privatization, ,

We live in interesting times. Following the privatization of the Washington State Liquor Control Board in 2011/2012, many have anticipated that a similar initiative would follow in Oregon. The OLCC itself anticipated such a move and tried to provide an alternative through a Retail Innovations Task Force that it initiated. The Task Force brought together the stake holders to discuss what privatization and/or modernization would look like. As mentioned in an earlier blog, the OLCC recently asked for more time to more fully develop the concepts.

Today, the Northwest Grocery Association filed five versions of an initiative to privatize the OLCC. I will be reviewing those shortly and posting with more details in the near future.

You can access copies of the initiatives here.

Marvin Revoal was Sworn In as Fifth OLCC Commissioner at the Thursday Commission Meeting.

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Governor Kizthaber recently appointed Marvin Revoal to the Oregon Liquor Control Commission Board of Directors and the Senate confirmed the appointment. Marvin was sworn in today at the OLCC’s Commission meeting.

The OLCC has been operating with only four commissioners for some time now. The 4th Congressional District position has been vacant, but is now filled.

From his LinkedIn profile, Marvin Revoal is a senior principal at Pacific Benefit Planners. He leads the company as it designs and manages self funded and fully insured employee benefits, worker compensation and general liability services for small and mid sized companies. He has a strong background in civic engagement and leadership, including serving as the Chairman of the Board for the Eugene Area Chamber of Commerce. He also studied criminology at the University of Missouri–go Tigers!

Marvin looks like he could be a strong contributor to the Commission.

The OLCC’s Retail Innovations Task Force: Initial Impressions

OLCC, Privatization, , , , ,

The OLCC’s Retail Innovations task force has been meeting since October 4, 2013. The purpose of the task force is bring the various stakeholders together to discuss how the OLCC’s retailing and distribution of distilled spirits may be changed, improved, or modernized. The group has met five times and was scheduled to meet for a sixth time on December 13, 2013. The OLCC recently postponed the meeting date for the upcoming meeting for a date to be determined in January.

The task force has selected a very complicated problem to resolve. The problem is complicated by the fact that some don’t even see a problem to be solved. The threshold question of whether the current system is broken or not can easily sidetrack discussions. That being said, the real reason that the problem is so difficult to nail down and, at times, even discuss is that there is so much at stake. There is the potential for there to be big winners and big losers, particularly from a financial perspective.

The task force has identified the following as key considerations (not necessarily in any particular order):

• Revenue stream to the state;
• Consumer access and experience;
• Public safety; and
• The interests of industry members.

OLCC Revenues. The OLCC distributed $202.6 million to the state during the fiscal year of 2012-2013, including$115.4 to the state general fund, $78.8 million to cities and counties, and $8.1 for mental health, alcoholism and drug services. The state, cities, counties and social service providers do not want their revenues to be cut and would even like a bigger slice of the pie, if possible.

Consumer Access. Oregon has fewer liquor stores per capita than other comparable states and some have suggested that the nature and quality of the retail experience at Oregon liquor stores could be enhanced. Others have suggested that a majority of Oregon consumers are happy with the status quo and are not demanding change. Washington’s ongoing experience with privatization is not a secret and many Oregonians may be reluctant to follow suit.

Public Safety. The public must be protected and any changes must not expose the public, law enforcement, or any other group to increased risk or danger. All parties agree on this issue and any major changes will likely include a renewed focus on public safety efforts, including increased financing.

Industry Members. The interests of the various industry members must also be considered. Existing industry members have all invested heavily in their Oregon operations and their investment should be considered. Any change to the current system for distributing or retailing distilled spirits will have winners or losers, at least financially speaking, particularly if state revenues must be preserved. Industry members include retail agents (the operators of liquor stores), manufacturers, wholesalers, and retailers. Even within a particular category of industry member, interests can diverge dramatically. More on this in later posts.

The pink elephant in the room is a potential initiative that would privatize the OLCC, similar to what happened in Washington with I-1183 in 2012. Many anticipate that such an initiative will appear in the near future. In addition, broad policy considerations involving the free market economy, prohibition, tied house issues, the appropriate role of the state in economic activities, and even the legalization of marijuana surface in discussions.

OLCC staff are currently working on putting together models of various alternatives to the current system and it was anticipated that they would be unveiled at the December 13th meeting. Given the complexity of the task, a delay in producing these models is not surprising.

Look for future posts about the potential alternative models and other thoughts on potential changes to the OLCC.

For more information, go to the OLCC’s website here.

OLCC Rulemaking: OBWDA Seeks Modest Increase in Allowance for Supplier Provided Bins and Racks

Laws & Rules, OLCC, , ,

The Oregon Beer & Wine Distributors Association recently initiated OLCC rulemaking to increase the allowed cost for a bin or rack provided by an alcohol supplier to an Oregon licensed retailer. Oregon’s tied house laws prohibit alcohol suppliers from providing bins or racks to retailers absent an exception. The proposed rulemaking increases the allowed cost from $100 to $200. While such as increase may appear steep at first glance, increases to the cost are fairly infrequent due to the time and resources required to go through the rulemaking process. As anyone who buys things knows, costs are always going up. This change makes sense because it will allow suppliers the reasonable opportunity to promote their products by providing quality bins and racks to Oregon retailers subject to the existing requirements and safeguards.

The comment period ends on January 6, 2014. You can find the petition and related information here.

OLCC Case Profile: The OLCC Canceled the Liquor License of Liquid Club & Lounge in Bend, Oregon for License Restriction Violations

Case Studies, OLCC, , , , ,

The OLCC canceled the liquor license of the Liquid Club & Lounge located in Bend, Oregon in later October. The basis for cancelling the liquor license was that the licensee violated a number of license restrictions imposed on the license when it was issued. It serves as a good case study about the risks of having a liquor license with restrictions. Here, the OLCC imposed restrictions on the liquor license because the previous licensee had its license cancelled for a history of serious and persistent problems.

The OLCC can impose restrictions on a liquor license when there is a basis for denying an applicant’s application. The denial basis may be related to characteristics or the compliance history of the applicant, or it may be related to recent compliance problems at the location to be licensed. Applicants should carefully consider whether to accept a license with restrictions. Depending on the situation, it may make sense to appeal the restrictions or simply walk away from the business opportunity. If an applicant decides to accept license restrictions, they need to take great care to ensure total compliance with the restrictions going forward.

The reason that license restrictions are so serious is that the standard penalty for a first license restriction violation is license cancellation. The license restrictions at issue here were as follows:

• Licensee shall limit each person to possessing no more than one container of alcohol at one time and limit the amount of alcohol in a container to no more than 16 ounces of malt beverage, 6 ounces of wine, or 1.5 ounces of distilled spirits.
• Licensee shall ensure that the parking lot area under the licensee’s control and the outside area adjacent to the premises are patrolled on Friday and Saturday at lease every five minutes starting at 10:00 pm and continuing until 30 minutes after the close of business to discourage loitering and illegal activity.

The OLCC showed that the licensee violated the license restrictions on five separate occasions. In order to cancel the license, the OLCC must show that restriction violations are substantial enough to warrant cancellation. The Commission considers four factors in determining whether a restriction violation is substantial enough to warrant the presumed penalty of cancellation.

• Timing—with breaches soon after the license issues considered to be more serious. Here, the violations occurred almost immediately.
• Willful—restriction violations that are committed willfully by the licensee are considered to be more serious. Here, the licensee was found to be aware of the restrictions and voluntarily allowed them to be violated.
• Number of violations—five separate violations are considered to be more serious than an isolated incident.
• Hardship—breaches that strike at the heart of the restriction are considered to be more serious than more peripheral violations.

In this case, the OLCC found that all four of these factors weighed against the licensee and that license cancellation was thus warranted.

Licensees that currently have license restrictions should consider requesting their removal as soon as is practical, but should take care that they have a plan for ensuring 100% compliance while the OLCC is considering the request. The OLCC will typically not seriously consider requests to remove restrictions if the restrictions have been in place for less than one year. The burden is on the licensee to show that the original basis for imposing the restrictions no longer exists and explaining how they will ensure compliance going forward. Applicants that are facing a decision about whether to accept a license with license restrictions should also think carefully about the practical realities of operating with license restrictions and what other business opportunities are available.

OLCC Rulemaking: Proposal for Biennial Liquor Licenses Makes Sense

Laws & Rules, OLCC, , , , ,

ORLA’s proposal for biennial liquor licenses makes sense. The Oregon Restaurant and Lodging Association recently proposed a rule change that would give Oregon licensees the option to obtain a liquor license with a two year term, rather than a one year term. This is a good idea and makes sense because it will result in time and administrative savings for both licensees and the OLCC. The licensing fees are the same in either case. The fee for a biennial license would simply be double the fee for an annual license.

The rule change has a safe guard that would prevent certain licensees for which the local government recommended against renewing their license from obtaining a biennial license. In addition, local governments, citizens, and anyone else negatively impacted by a licensee’s operation can always reach out to the OLCC or local law enforcement with their concerns.

The comment period for this proposed rule change is December 26, 2013. For more information, click here.