Title of Regulation: 3VAC5-70. Other Provisions (adding 3VAC5-70-250).

Statutory Authority: §§ 4.1-103, 4.1-111, and 4.1-227 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: February 16, 2012.

Effective Date: March 3, 2012.

Agency Contact: W. Curtis Coleburn III, Chief Operating Officer, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4409, FAX (804) 213-4411, TTY (804) 213-4687, or email curtis.coleburn@abc.virginia.gov.

Basis: Section 4.1-227 E 4 of the Code of Virginia provides that the Alcoholic Beverage Control Board shall, by regulation, "establish a schedule of offenses for which any penalty may be waived upon a showing that the licensee has had no prior violations within five years immediately preceding the date of the violation." The choice of offenses to be included in the schedule is discretionary with the board, except that the statute prohibits the granting of a waiver for a licensee's willful and knowing violation.

Purpose: The board has determined that this action promotes the public safety and welfare by encouraging licensees with a long record of compliance with laws and regulations to obtain appropriate training and give renewed attention to compliance when they commit a first violation within five years. The opportunity to avoid suspension or monetary penalty should be a compelling influence toward voluntary compliance with laws and regulations, which is the primary goal of the disciplinary process.

Rationale for Using Fast Track Process: The board expects this rulemaking to be noncontroversial because it has adopted the broadest possible application of the statutory mandate. There should be no controversy as to which offenses have been placed in the schedule of eligible offenses and which have not, since the probation portion of the proposed regulation applies to all offenses. On the other hand, each situation will be reviewed by the board to determine the appropriate application of the policy.

Substance: This action creates a new section 3VAC5-70-250, which provides a schedule of violations for which punishment is waived for a first offense within five years. It also allows for deferral of disciplinary proceedings against a licensee and ultimate dismissal of charges for any other first offense within five years. If the board finds that a violation was not willful and knowing, it will be able to defer further proceedings and place the licensee on probation. Probation will include a requirement of appropriate seller/server or manager training, and compliance with alcoholic beverage laws and regulations. Upon successful completion of probation, the charge will be dismissed.

Issues: The primary advantage to licensed businesses of implementing the new provision is the opportunity to avoid license suspension or monetary penalty in a case of a nonwillful violation when the business has a long history of compliance with the law and regulation. The primary disadvantage to the agency is a possible reduction in revenue from civil monetary penalties.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (Board) proposes a new section 3VAC5-70-250, providing a process whereby licensees charged with a violation of statute or board regulation may be placed on probation and have proceedings deferred and ultimately dismissed in lieu of license suspension or monetary penalty, in cases where the charge represents the first violation by the licensee within five years.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Chapters 135 and 279 of the 2009 Acts of Assembly, which are now codified in Virginia Code 4.1-227, require the board to promulgate a regulation that would "establish a schedule of offenses for which any penalty may be waived upon a showing that the licensee has had no prior violations within five years immediately preceding the date of the violation." The proposed action would implement this Code section.

The proposed changes would allow the Board to waive disciplinary proceedings in situations in which the violation was not willful and knowing, so long as it is the first offense in five years. All offenses would be eligible for consideration. In these cases, the licensee would be placed on probation, which would include mandated seller/server or manager training, and further compliance with Alcoholic Beverage Control laws and regulations. The Board would then dismiss the charges upon successful completion of the probation.

According to the Department of Alcoholic Beverage Control (Department), the Board currently on occasion suspends punishment conditioned upon training or other conditions. The proposed new section would essentially just formalize the current practice. Since the proposal clarifies current practice and does not practically change any requirements, it creates a net benefit. Additional clarity is beneficial for affected entities and the public; and no new costs are introduced.

Businesses and Entities Affected. The proposed amendments potentially affect all holders of licenses issued by the Department. According to the Department, there are approximately 16,000, of which an estimated 90% are small businesses.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposal amendments are unlikely to significantly affect employment.

Effects on the Use and Value of Private Property. The proposed amendments are unlikely to significantly affect the use and value of private property.

Small Businesses: Costs and Other Effects. The proposed amendments do not significantly affect costs for small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed amendments do not adversely affect small businesses.

Real Estate Development Costs. The proposed amendments are unlikely to significantly affect real estate development costs.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The Alcoholic Beverage Control Board concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

The proposed amendment adds a new section that provides a process whereby licensees charged with a violation of statute or board regulation may have all penalties waived, or may be placed upon probation and have proceedings deferred and ultimately dismissed in lieu of license suspension or monetary penalty, in cases where the charge represents the first violation by the licensee within five years.

3VAC5-70-250. Waiver of penalty for certain first-time violations.

A. In accordance with subdivision E 4 of § 4.1-227 of the Code of Virginia, whenever the board finds that a charge against a licensee for a violation listed in this subsection is substantiated, the licensee has had no prior violations within five years immediately preceding the date of the subject violation, and the subject violation was not willful and knowing, the board shall enter an order substantiating the violation without imposing a penalty. The provisions of this subsection shall apply to the following violations:

1. Keeping unauthorized alcoholic beverages on the premises, upon which appropriate taxes have been paid;

2. Allowing an intoxicated person to loiter on the premises;

3. After hours sales or consumption of alcoholic beverages;

4. No designated manager on premises;

5. Invalid check to wholesaler or board;

6. Inadequate illumination;

7. Not timely submitting a report required by statute or regulation;

8. Designated manager not posted;

9. Person less than 18 years of age serving alcoholic beverages; less than 21 years of age acting as bartender;

10. Sale of alcoholic beverages in unauthorized place or manner;

11. Consumption of alcoholic beverages in unauthorized area;

12. Removal of alcoholic beverages from authorized area;

13. Failure to obliterate mixed beverage stamps;

14. Employee on duty consuming alcoholic beverages;

15. Conducting illegal happy hour;

16. Illegally advertising happy hour;

17. Unauthorized advertising;

18. Failure to remit state beer/wine tax (if deficiency has been corrected);

19. Wholesaler sale of wine/beer in unauthorized manner; and

20. Wholesaler sale of wine/beer to unauthorized person.

B. Whenever any licensee who has not had any substantiated violations of regulation or statute within the previous five years is charged with a violation, the board, if the facts found by the board would justify a finding that the charge is substantiated but is not a willful and knowing violation, with the consent of the licensee, may defer further proceedings and place the licensee on probation upon terms and conditions.

As a term or condition, the board shall require the licensee to participate in or provide employees such board-approved seller/server or manager training as, in the opinion of the board, may be best suited to the needs of the licensee based upon consideration of the nature of the violation.

As a condition of probation, the board shall require the licensee to (i) successfully complete the required training program and (ii) comply with all alcoholic beverage laws and regulations during the period of probation.

Upon violation of a term or condition, the board may enter an adjudication that the charge is substantiated and proceed as otherwise provided. Upon fulfillment of the terms and conditions, the board shall dismiss the proceedings against the licensee. Dismissal under this section shall be without adjudication of the charge and is a substantiated violation only for the purposes of applying this section in subsequent proceedings.