Liquor License Advisor's Blog

A recent story in the Riverside Press-Enterprise by Sarah Burge about the arrest of a pizza shop manager caught my attention. This manager is accused of embezzling more than $1.3 million from the pizza shop. The thefts occurred over several years. He was actually also a “minority investor” in the business and managed the company’s finances. Until a business partner contacted the police.

If you have a business licensed by the Department of Alcoholic Beverage Control (ABC), screening your employees and managers is vital for two reasons. First, to protect your business. Second, it is actually against ABC law for an On-Sale licensee (i.e., restaurant, bar, hotel, nightclub) to knowingly employ any person who does not have the qualifications of a holder of the license.

What is a “manager,” according to the ABC? A manager is “a person to whom a licensee has delegated discretionary powers to organize, direct, carry on or control the operations of a licensed business.” If the person can hire or fire employees, contract for purchases or disburse funds (other than for replenishing stock), make or help in making policy decisions, then that person is a manager. And he or she must possess the same qualifications of a licensee.

How do you know whether your manager is qualified? Well, you may apply to the ABC, pay a $100 fee, and have the person fingerprinted (another $63). I say “may apply” because it is not mandatory. The ABC then investigates the person and if the person is qualified, the ABC provides you and your manager with a Notice of Qualification of Manager. If the person is found to be unqualified due to an adverse police record, then ABC will provide a Notice of Disqualification of Manager. If ABC finds your manager to be disqualified, then you have a right to a hearing before an Administrative Law Judge.

With the large investment of money, time and effort businesses make in their liquor license and business, $163 is a small price to pay for peace of mind.

Photo Courtesy of Wikipedia

TMZ recently reported 19-year-old actor Alexander Ludwig, star from the Hunger Games, was spotted being illegally inside The Sayers Club in Hollywood.

To be or not to be in a bar or club. That is the question.

The Sayers Club is at 1645 Wilcox Avenue, Los Angeles, does, in fact, have a Type 48, On-Sale General Public Premises license. It was issued February 3, 2011 according to the ABC’s online records. And it was issued with conditions. (More on that later.)

A Type 48 license does not permit any person under 21 (“minor”) to enter and remain in the premises at any time—without lawful business. To do so would violate Section 25665 of the CA Business & Professions Code. To help prevent this, a Type 48 licensee is required by Rule 107 to post signs, “No Person Under 21 Allowed.” One sign at or near each public entrance and one on the inside.

The signage rule is very specific. The sign must be at least 7 x 11 inches with lettering at least 1” in height. The same law holds true for a Type 42, On-Sale Beer & Wine Public Premises, and a Type 61, On-Sale Beer Public Premises license. No minors are allowed, except for lawful business, and signs must be posted per Rule 107.

What is “lawful business?”

Lawful business would be things like an underage delivery person, a repair person, or a musician (there are rules for underage musicians, too). Also, there is no exception for things like underage spouses or a baby being held in its parent’s arms.

What can happen as a result of a violation? If ABC gathers the evidence and proves the violation, first, an ABC penalty. If a Type 48 business permits a minor inside, the liquor license is subject to suspension or revocation.

What does it mean to “permit” a minor to be inside the premises? Well, licensees have an “affirmative duty” to ensure no minors enter or remain inside. Passive conduct is the same as “permitting” a minor to be present. This means staff must be aware at all times and monitor what is going on. If someone looks under 30, check ID carefully. If the person is underage or has a fake ID, send them packing immediately.

ABC decides each penalty on a case-by-case basis. However, ABC uses penalty guidelines. There is a “standard” penalty” for each different type of violation, whether it be underage drinking, gambling, narcotics, or what have you. In this case, if the violation is proven, the owner could face the standard 10-day suspension of the liquor license. If the required signage was not posted, then ABC could tack on another five days.

Depending upon the case, the ABC might increase or decrease the number of days of the suspension. For example, if a business has had “priors,” the ABC may up the number of days. In this case, Sayers Club has no priors. If, on the other hand, a business can prove it has trained its staff in safe and legal serving practices, ABC might reduce the number of days. And in some cases, the ABC may permit a business owner to pay a fine instead of serving a suspension. Fines range from $750 to $20,000, depending upon the owner’s past record and his gross sales of alcohol. A higher-volume business will pay a greater fine.

We don’t know what the license conditions are for The Sayers Club–although a copy may be obtained upon request from the ABC. However, any violation of conditions is a separate matter. If proven, this carries a separate ABC penalty.

The second thing is a criminal penalty. If the ABC can prove the minor was inside and management or employees did not do anything to determine his age or remove him, then the owner or employee can be cited into criminal court. This carries a maximum $1,000 fine and/or six months in county jail.

As far as an underage patron goes, he, too, may be held criminally liable. This means a citation which, if found guilty, carries a fine of at least $200.

As always, the time to fix the roof is before it rains. If you have a Type 42, 48 or 61 license, post your “minor warning signs” as required, train your staff well, have a written safe alcohol policy and be vigilant about keeping minors out.

California state liquor law generally prohibits a retail licensee from donating alcoholic beverages.

But there are a few exceptions.

The exceptions involve donating to certain organizations holding a temporary license. Those organizations a retailer may donate alcoholic beverages to are:

1. A member-supported television station, which is also a non-profit charitable corporation, holding a temporary off-sale beer and wine license OR a non-profit charitable corporation that receives and administers donations for public television holding a temporary package off-sale beer and wine license.

In either case, the temporary license only entitles the temporary licensee to sell the donated beer and wine at auction. (Section 24045.2 Business & Professions Code)

2. A women’s educational and charitable organization, which holds a temporary off-sale beer and wine license, “that is a part of a national organization having at least 10 chapters in California at least one of which has been incorporated since 1928, whose purpose is to foster interest among its members in the social, economic and civic conditions of their community and to give effective volunteer service.”

In addition, the temporary license only entitles the women’s organization to sell the donated beer and wine at auction for charitable purposes. The law further states, “None of the funds realized from this auction shall be used for administrative expenses of the auction and all funds shall be placed in trust for a charitable purpose.” (Section 24045.3 Business & Professions Code)

3. Certain non-profit corporations who have a special temporary on-sale or off-sale wine license. The temporary licensee may only sell the donated wine to a consumer and to any person holding a license authorizing the sale of wine.

This license is good for up to 15 days. If the license is issued for a period more than two days, then it can only be used “solely for retail sales in conjunction with an identifiable fundraising event sponsored or conducted by the licensee and all bottles of wine sold under this license shall bear a label prominently identifying the event.”

The ABC may only issue three of these special licenses to any corporation in a calendar year. (Section 24045.6 Business & Professions Code)

4. A member-supported television or broadcasting station who has a temporary on-sale beer and wine license. The retail licensee may also serve that beer or wine he/she donated at any event so licensed.

The ABC may only issue one such temporary license (valid for 30 days) to the television or broadcasting station per calendar year. (Section 24045.9 Business & Professions Code)

In summary, there aren’t many situations where a retail licensee can donate alcohol. And although the laws cited above permit a retail licensee to donate alcohol to the above organizations, the laws specifically say the donation cannot be made in connection with a sale of an alcoholic beverage. 

When someone applies for a liquor license and the application is protested by the community, what recourse does the applicant have while he or she waits for the ABC hearing and any appeals? After all, ABC’s investigation of a protested application and waiting for the hearing can take six months or longer. This can create financial hardships for some.

For example, I recently read an editorial at Santa Ynez Valley Times online about the Chumash Casino, owned by the Santa Ynez Band of Mission Indians. The casino has had a full liquor license since 2005 and has applied for another one for other areas of their property. The editorial writer didn’t understand why, after the tribe’s liquor license application was protested, the ABC “issued an expanded license with no public notice.”

Well, the ABC issued Interim Retail Permits.

Since 1993, the law allows ABC to issue an Interim Retail Permit to an applicant when an application has been protested and ABC has determined, based upon its investigation, that the license should be issued. An Interim Retail Permit is good for 120 days and may be extended. Unlike the permanent liquor license application, an Interim Retail Pemit does not require a public notice.

ABC cancels any Interim Retail Permit when a final decision is made regarding the protests or when the application is withdrawn. Any conditions for which the applicant has petitioned apply to any Interim Retail Permit. The protest hearing will typically be held within 60 days of the ABC investigator submitting his/her report to ABC HQ in Sacramento.

Any questions as to the status of a licensing investigation can be directed to the local ABC district office. ABC’s final decision as to whether the license should be issued may be appealed up to the State Supreme Court.

In this post, I will discuss the Type 68 Portable Bar Counter license and the Duplicate license and how they differ. Both of these licenses are “non-master” type licenses. In other words, they do not stand alone. They require a master license to operate; e.g., Type 47 or 48, On-Sale General (permitting the sale of beer, wine and spirits for on-premise consumption). Both the Type 68 Portable Bar Counter and the Duplicate license are for  premises with more than one room, such as a hotel.

 First, some concepts. A person licensed by the California Department of Alcoholic Beverage Control (ABC) may not exercise his license privileges in any area not licensed. How do we know what areas are licensed? When an applicant first applies for a license, he must submit a diagram of his licensed premises. The ABC keeps the diagram on file, and the licensee cannot make any alterations or changes to the building as shown on the diagram without prior written permission from the ABC. Rule 64.2, California Code of Regulations, describes what physical changes a licensee cannot make without the ABC’s permission. It’s rather involved, so I won’t get into it here.

 In any event, the ABC may license a building, buildings, portion of a building(s), or contiguous property. Contiguous property includes spaces like patios, pavilions and pool sides. In all cases, the license applicant must have sole control over the sales and service of alcoholic beverages and is responsible for any activities, legal or illegal, going on in those spaces.

What is a Duplicate license? It is a non-master license for an establishment with more than one room. It is needed by any On-Sale General licensee who regularly maintains a fixed counter or bar or service bar in a room at which patrons consume spirits. The licensee must obtain a Duplicate license for each room where these counters or bars are placed. It is not uncommon for a licensee to have several Duplicate licenses. Regularly maintains means the business uses the bar at least 26 days per calendar year.

 The ABC may issue the Duplicate license as a public premises, meaning only guests age 21 and older may enter the room, or as a bona fide eating place where full meals are required and guests under age 21 are, in fact, allowed. It depends on what the licensee wants. Upon request, the ABC may also issue a Duplicate license for use by designated persons.

Duplicate licenses fees range from $292 to $697. The exact fee depends on the population of your city. The higher the population, the greater the fee. Section 24042 of the Business and Professions Code governs Duplicate licenses.

Whereas, the Duplicate license has been around since the 1950s, it wasn’t until 1988 that the ABC began issuing the Type 68, Portable Bar Counter license. This newer type of license allows for more flexibility. It is an option for a licensee who does not want a Duplicate license to cover an entire room. But rather, the licensee wants the ABC to license a portable bar counter. This portable bar counter, as the name suggests, can be moved from room to room. If the business uses two or more portable bar counters in the same room, at the same time, the ABC licenses only one of them.

Type 68 license fees run $245 to $526 per year. Like the Duplicate license, the fee is based upon population. Section 24042.5 of the Business and Professions Code governs Type 68 licenses.

In calendar year 2010, the ABC issued 72 and renewed 827 Type 68 licenses statewide. In addition, it took ABC an average of 220 days to issue a Type 68 license. This is according to the ABC’s 2010 Annual Report to the Legislature. The report does not show how many Duplicate licenses it issued or renewed or how long they took to issue.

 To apply for either a Duplicate license or a Type 68 Portable Bar Counter license, contact your local ABC District Office. You must submit Form ABC-239 along with the required fee.

Underage Drinking, Over-Service and Fights Can Create Liability

Liquor liability insurance is a type of insurance for businesses that sell alcoholic beverages. For example, a convenience store, a night club, bar/tavern or country club. Organizers of special events may, too, want or need liquor liability insurance.

Why would a business obtain this insurance? Because selling alcoholic beverages is inherently risky. The greatest (but not the only) risks are service to underage or obviously intoxicated patrons—and fights (assault and battery). Some businesses are at greater risk than others, based upon the type and size of the business and their alcohol-serving policies and practices. For example, a huge night club with live entertainment that caters to a young crowd has more risk than a café.

Liquor liability insurance is designed to defend a business against a lawsuit due to an injury, death or property damage from negligent and/or illegal alcohol service.

Having insurance doesn’t prevent liability, though. Licensed businesses are only insured to a certain level of coverage. Beyond that, the licensee is responsible for paying the claim.

In applying for liquor liability insurance, an insurance company may ask you about these or other issues:

• Entertainment (live band, etc.)
• Dance floor
• Gross annual revenues of food vs. alcohol
• Square footage of business
• Average age of patrons
• Drink promotions and happy hours
• Responsible beverage service training for all employees
• Age verification procedures
• Type of clientele (local workers vs. college students, etc.)
• History of alcohol-related problems at the business

Liquor liability insurance is important, but a business needs more to guard against liability. Implementing responsible business practices is the best protection against liability. The main responsible business practices include:

1. Discouraging intoxication
2. Promoting non-alcoholic beverages and food
3. Promoting safe transportation alternatives
4. No drinking on duty
5. Responsible promotions and marketing
6. Implementing comprehensive training
7. Maintaining adequate number of employees to properly monitor patrons
8. Having a standard hiring system
9. Having a system for rewarding and disciplining employees
10. Implementing and enforcing written alcohol management policies and signage

Some insurance give discounts up to 20% for businesses that implement training and responsible business practices. A qualified insurance professional can provide you with details, such as cost, discounts and coverage.

The US Festival, Organized by Steve Wozniak, 1983

Street Fairs are a popular tradition in California and elsewhere, sometimes drawing tens of thousands of visitors. Street fairs typically provide food vendors, silent auctions, raffles, and live music. Some are focused narrowly as “beer and wine festivals.”

Non-profit 501c3 organizations often sponsor street fairs and festivals. Sponsors might include the “XYZ Street Fair,” a Chamber of Commerce or a business association, with proceeds going to charitable causes important to the community, such as Multiple Sclerosis.

Some street fairs and festivals collect entry fees, which go directly to the beneficiaries. Ticket price might include a discount at beverage booths, food tickets, commemorative wine glass, “goodie bag,” etc. Others offer entry at no cost. Often, for-profit or non-profit organizations rent beverage booths. There are even consultants who specialize in managing street fairs.

Qualified organizations that receive the proper license or permit from the California Department of Alcoholic Beverage Control (ABC) may sell alcoholic beverages at a beverage booth, beer garden or beer/wine garden.

There is no type of “blanket” liquor license the non-profit organizer obtains to allow others to sell alcohol. Rather, each organization running a booth or beer/wine garden obtains their own license or permit. All licensing or permitting for alcohol sales is subject to prior approval by the ABC, local law enforcement and the property owner.

The licensing options are:

SPECIAL DAILY LICENSE (“Temporary License”) – Authorizes the sale of beer and/or wine for consumption on the premises (e.g., street fair or festival) where sold. Issued only to existing non-profit organizations.

DAILY ON-SALE GENERAL LICENSE (“Temporary License”) – Authorizes the sale of beer, wine and distilled spirits for consumption on the premises (e.g., street fair or festival) where sold. Issued only to political parties or affiliates supporting a candidate for public office or a ballot measure or charitable, civic, fraternal or religious organizations.

CATERING PERMIT (“Type 58″) AND AUTHORIZATION (Form ABC-218) – Authorizes Type 41, 42, 47, 48, 57, 75 and 78 licensees (and certain catering businesses) to sell beer, wine and spirits for consumption at approved events (e.g., street fair or festival) off their licensed premises.

WINE SALES EVENT PERMIT (Type 81) - Authorizes Type 02 (Winegrower) licensees to sell bottled wine produced by the winegrower for consumption off the premises where sold and only at fairs, festivals or cultural events sponsored by designated tax exempt organizations.

The organization who obtains a liquor license or permit must receive all of the net proceeds from the sale of the alcohol. If there is an admission charge and it entitles patrons to obtain wine, beer and/or distilled spirits, then the net proceeds from the sale of alcoholic beverages must go to the non-profit organization. If the licensee charges a separate admission and/or sells advertising specialties (T-shirts, hats, etc.), the net profits from these sales may go to someone other than the non-profit organization.

There are numerous laws that apply, including those that prohibit sales to minors and obviously intoxicated patrons. There are also more obscure laws specific to special events. For example, the role of winegrowers, beer manufacturers and wholesalers. Participating organizations should be aware of these laws to prevent the suspension or revocation of a license or permit. The goal is a safe, legal and responsible event.

Timelines for temporary licenses and permits depend upon the license you are applying for. In general, you should apply no later than 10 days before, and no sooner than 30 days before, the event.

The forms and information for getting a special event license or permit can be found on ABC’s website. For information about getting a license or permit at certain location, you should contact the ABC district office nearest the proposed site.

I was browsing CraigsList today and ran across this post in the discussion forum.

“Can someone please advise me where to sell a rare bottle of wine? It is a Mostagel Velho de Torna-Viagem is stamped with Rio De Janeiro 1922. I have done some research on the bottle and found some interesting stuff, I’ve even seen a bottle selling on a Portugese website for 1800 euros. I’ve already tried eBay but can’t post without a liquor license.”

What I told the person is that he may sell his vintage bottle of wine under the following conditions:

23104.6. (a) Any nonlicensed person owning bottled vintage wine purchased by that person at retail, is authorized to sell that wine to a licensee authorized to sell that wine if each bottle has a permanently affixed label stating that the wine was acquired from a private collection.

(b) “Vintage wine,” as used in this section, means bottled white, rose, or sparkling wine which is not less than five years old or bottled red wine which is not less than 10 years old. (California Business & Professions Code)

A first step might be to contact a company like Wine Societies, which “provides direct online channels for wineries to sell all wine and fine wine collectors to sell vintage wine to California licensed buyers of alcohol.”

Where alcoholic beverages are involved, there is a law for most every situation. Knowing what the laws are, and how they apply to you, is the key to staying safe and legal.

Halloween is almost here and many bars, nightclubs and other licensed establishments are getting creative with their events and marketing of alcoholic beverages.

If you’re having a costume contest at your establishment, be careful what you give away as prizes. I just read about a winery whose Halloween bash includes a “frightfully exciting” costume contest, with the winner receiving a bottle of wine.

Things could get more frightening than they planned if the ABC finds out. While retailers are allowed to sponsor contests at their premises and give prizes to contestants, there are some restrictions:

First, the prizes can’t be alcoholic beverages.

Second, the contest can’t be conditioned on the purchase, sale or consumption of alcoholic beverages.

Third, the contest does not involve the consumption of alcoholic beverages (e.g., beer pong).

Any one of these three issues would be a violation of Rule 106(l)(1) of the Business and Professions Code and could result in the ABC taking disciplinary action against the licensee.

As to drink specials, an establishment cannot offer complimentary or free alcoholic beverages, but may offer packages that include alcoholic beverages, provided the total charge to the customer covers their cost of acquisition (to prevent a free goods violation).

Nor can they offer alcoholic beverages at “two for the price of one, “buy one, get one free,” “all you can drink,” or in any other manner where a patron is required to buy more than one drink at a time in order to received a reduced price.

Stay safe and legal at Halloween and always.

A free Responsible Beverage Service workshop is being held in Concord, CA on Monday, April 26, 2010. This workshop is for those working in the restaurant industry.

The workshop is co-sponsored by Monument Corridor Anti-Drug Coalition / New Connections, Concord Police Department and Center for Applied Research Solutions (CARS).

I highly recommend it. The trainer, George Vasquez, is also bi-lingual (Spanish) and is excellent. For more information, click here.