TABC's Proposed Rule Changes Will Increase Costs For TX Businesses and Push out Small Operators
Updated: Jun 6, 2022
This upcoming Friday, February 11, 2022, the TABC is hosting a Stakeholder Meeting regarding potentially dramatic changes to its rules relating to the safe harbor defense and how the agency imposes sanctions for TABC violations. The proposed rules, if implemented, will most likely lead to higher liquor liability insurance costs and push out small businesses operating in Texas.
Safe Harbor Defense
The safe harbor defense is essential for Texas businesses operating in the alcoholic beverage industry - it is the reason why employers require their servers to be TABC certified. It is an affirmative defense to an allegation of the following Texas Alcoholic Beverage Code violations:
sale to intoxicated person;
sale to minor;
permitting a minor to consume; and
sale to non-member (for private clubs).
Essentially, if a business meets certain requirements, they can assert the safe harbor defense and any of the above alleged violations will not be attributable to the permit holder. The business also will not receive a suspension or penalty for the alleged violation. The TABC is attempting to add to the requirements to be eligible for the safe harbor defense with its proposed rule changes.
Although the TABC is now proposing to keep section 34.4 of it's rules after industry backlash at the stakeholder meeting back in October of 2021 (you can find our blog post we posted prior to that meeting here), the Commission is still attempting to impose additional restrictions on when a business can qualify for the safe harbor defense by attempting to adopt Chapter 49 into its Rules.
The additional restrictions include, among other things, requiring proof that an employer requested seller-server certificates within 7 days of hire, requiring proof none of its employees had any lapses in seller-server training in the last 24 months, and expanding situations in which a business could be found to have indirectly encouraged a violation of the TABC Code to negate the defense. While the TABC characterizes proof of compliance with these additional requirements as voluntary, they are requirements in reality due to clever wordsmithing and omission of important language from the existing rule.
Changes to TABC suspensions and penalties
TABC's draft changes to sections 34.1 & 34.2 of its rules would make the manner in which TABC imposes penalties and suspensions for violations less transparent and more ambiguous.
For example, the TABC is attempting to change the language of 34.1(g) to say that a subsequent violation of a Code or Rule provision would now result in just a "higher sanction," and remove current language in the rule that the higher sanction will be subject to the "next violation level" of the standard penalty chart - something the Texas legislature required the TABC to implement in an effort to create transparency and consistent regulation across the industry.
Further, the TABC is proposing to amend how sanctions and penalties for violations will be assessed under 34.2(a) by adding language that violations will either be assessed in accordance with the standard penalty chart "and/or a license or permit suspension or cancellation." The added language to the existing rule 34.2(a) would potentially give the TABC the discretion to throw the standard penalty chart out the window and impose any suspension or penalty it felt like on Texas businesses still struggling from Covid-19 pandemic shutdowns.
The changes to the above rules, along with others in the proposed draft of Chapters 34 & 49, would create less consistency and transparency if implemented, not more as both the Texas Legislature and Sunset Commission requested. This blog post is just a brief overview of some of the potential changes the TABC is attempting to implement with its draft rules; our official written comments to the TABC outlining our concerns and opposition to these proposed rules was 23 pages (which is attached below). You can find all of the draft rules the TABC is proposing to implement here.
If you disagree with any of the TABC's proposed rule changes, make your voice heard by submitting public comments to email@example.com or participating online at the Stakeholder Meeting this Friday, February 11, 2022 between 10:00am and 11:30am.