Title of Regulation: 3VAC5-10. Procedural Rules for the Conduct of Hearings before the Board and Its Hearing Officers (amending 3VAC5-10-220).

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

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: January 21, 2022.

Effective Date: February 7, 2022.

Agency Contact: LaTonya D. Hucks-Watkins, Senior Legal Counsel, Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@virginiaabc.com.

Basis: Section 4.1-103 of the Code of Virginia enumerates the powers of the Alcoholic Beverage Control Authority Board of Directors, which includes the authority to adopt regulations and to do all acts necessary or advisable to carry out the purposes of Title 4.1 of the Code of Virginia. Section 4.1-111 of the Code of Virginia provides the board of directors with the authority to adopt reasonable regulations to carry out the provisions of the Alcoholic Beverage Control Act (§ 4.1-100 of the Code of Virginia) and to amend or repeal such regulations.

Purpose: The Virginia Alcoholic Beverage Control Authority recognizes that the regulation needs to be revised because although the regulation currently references § 2.2-4019 of the Code of Virginia, the pre-trial conferences are not being conducted for those purposes. To eliminate any confusion on the behalf of licensees and applicants participating in these conferences, the regulation is being revised to remove that citation. Additionally, the regulation is being amended to rename the proceeding as a "pre-hearing conference" so that it is not confused with the term "informal conference" as it is used in § 2.2-4019. Revising the regulation will achieve consistency with the regulation and statute. It is in the public interest for the regulation to mirror the actual process, which the amendments allow. The amendments add a provision for virtual and telephonic proceedings, which are beneficial to the public especially during the pandemic.

Rationale for Using Fast-Track Rulemaking Process: The regulatory action is not controversial because the amendments consist primarily of changing the name of the proceeding from "informal conference" to "pre-hearing conference." The changes to the regulation reflect processes that have already been implemented for years; however, the regulation references § 2.2-4019 of the Code of Virginia, which does not accurately represent the agency's actual process. The change to regulation does not change current agency process, it just corrects regulatory text so that it aligns to agency process.

Substance: The regulation is amended to change the name of a proceeding to "pre-hearing" conference and to remove a citation to § 2.2-4019 of the Code of Virginia.

Issues: The primary advantage to the public and the Commonwealth is that this amendment will revise the regulation to more accurately represent the authority's pre-hearing procedure and prevent any confusion that the citation to § 2.2-4019 of the Code of Virginia may create. The primary advantage to the Commonwealth is that the regulation will actually mirror the current process and will not create any confusion with the licensed community. There are no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

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 Code of Virginia (Code) and Executive Order 14 (as amended, July 16, 2018). The analysis presented represents DPB's best estimate of these economic impacts.¹

Summary of the Proposed Amendments to Regulation. The Virginia Alcoholic Beverage Control Authority Board of Directors (Board) proposes to remove the citation to § 2.2-4019 of the Code of Virginia, which is part of the Administrative Process Act (APA). The cited section addresses pre-hearing conferences and would be removed because the Virginia Alcoholic Beverage Control Authority's (Authority) pre-hearing conference procedure slightly differs from the procedure referenced in the APA.

Background. The purpose of this action is to amend the regulation so that it comports with how the Authority conducts its pre-hearing conferences in practice. The current regulation states that the Authority will conduct an informal conference for the reasons set forth in § 2.2-4019, which states in part:

"A. Agencies shall ascertain the fact basis for their decisions of cases through informal conference or consultation proceedings unless the named party and the agency consent to waive such a conference or proceeding to go directly to a formal hearing. Such conference-consultation procedures shall include rights of parties to the case to (i) have reasonable notice thereof, which notice shall include contact information consisting of the name, telephone number, and government email address of the person designated by the agency to answer questions or otherwise assist a named party; (ii) appear in person or by counsel or other qualified representative before the agency or its subordinates, or before a hearing officer for the informal presentation of factual data, argument, or proof in connection with any case; (iii) have notice of any contrary fact basis or information in the possession of the agency that can be relied upon in making an adverse decision; (iv) receive a prompt decision of any application for a license, benefit, or renewal thereof; and (v) be informed, briefly and generally in writing, of the factual or procedural basis for an adverse decision in any case."

In practice however, the Authority's pre-hearing conference procedure departs from the statute in two aspects regarding clauses (ii) and (iv). First, the Authority conducts pre-hearing conferences also virtually or telephonically in addition to in-person meetings. Second, the Authority may not issue a decision at the pre-hearing conference. The proposed amendments account for these two differences and more accurately reflect how the pre-hearing conference is conducted in practice.²

Estimated Benefits and Costs. Since the proposed amendments more accurately describe how the pre-hearing conferences are already conducted in practice, no economic effect is expected other than improving the accuracy of the regulatory text.

Businesses and Other Entities Affected. This revision will impact applicants for Alcoholic Beverage Control (ABC) licenses and current ABC licensees. According to the Authority, there are 20,728 active licenses. They are all subject to the APA and would be impacted by this amendment if they were to go through the hearing process with the Authority. In 2021, there were 44 pre-hearing conferences conducted by the Authority. None of the ABC licensees appear to be disproportionately affected.

The Code of Virginia requires DPB to assess whether an adverse impact may result from the proposed regulation.³ An adverse impact is indicated if there is any increase in net cost or reduction in net revenue for any entity, even if the benefits exceed the costs for all entities combined. As noted, the proposed changes to the regulatory text would more accurately reflect the current practice with no other significant economic impact expected. Thus, an adverse impact is not indicated.

Small Businesses⁴ Affected.⁵ The majority of ABC licensees are believed to qualify as a small business. However, the proposed amendments do not appear to adversely affect small businesses.

Localities⁶ Affected.⁷ The proposed amendments do not affect localities.

Projected Impact on Employment. The proposed amendments do not affect total employment.

Effects on the Use and Value of Private Property. The proposed amendments do not affect the use and value of private property or real estate development costs.

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¹Section 2.2-4007.04 of the Code of Virginia requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the analysis should include: (1) the projected number of businesses or other entities to whom the proposed regulatory action would apply, (2) the identity of any localities and types of businesses or other entities particularly affected, (3) the projected number of persons and employment positions to be affected, (4) the projected costs to affected businesses or entities to implement or comply with the regulation, and (5) the impact on the use and value of private property.

²The Authority cites § 2.2-4000 B of the Code of Virginia and states that the APA is meant to supplement an agency's basic laws in deciding cases, not supersede them. Based on this interpretation, the Authority believes its pre-hearing conference procedure in the proposed regulation is allowed to depart from § 2.2-4019 B of the Code of Virginia in the two aspects as discussed. The Office of Attorney General has certified the Board's authority to promulgate this regulation and concluded that the proposed amendments do not appear to conflict with the Constitution of the United States or the Constitution of the Commonwealth of Virginia, nor do they appear to conflict with any federal or state law currently in effect. See https://townhall.virginia.gov/l/GetFile.cfm?File=2\5856\9447\AGmemo_ABC_9447_v1.pdf

³Pursuant to § 2.2-4007.04 D: In the event this economic impact analysis reveals that the proposed regulation would have an adverse economic impact on businesses or would impose a significant adverse economic impact on a locality, business, or entity particularly affected, the Department of Planning and Budget shall advise the Joint Commission on Administrative Rules, the House Committee on Appropriations, and the Senate Committee on Finance. Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation.

⁴Pursuant to § 2.2-4007.04, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

⁵If the proposed regulatory action may have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include: (1) an identification and estimate of the number of small businesses subject to the proposed regulation, (2) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents, (3) a statement of the probable effect of the proposed regulation on affected small businesses, and (4) a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation. Additionally, pursuant to Code § 2.2-4007.1 of the Code of Virginia, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules shall be notified.

⁶"Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

⁷Section 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

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

Summary:

The amendments (i) change "informal" conferences to "pre-hearing" conferences; (ii) remove the requirement they be conducted for the reasons set forth in § 2.2-4019 of the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia); (iii) stipulate that the pre-hearing conference may be held virtually or telephonically and at least five days prior to the formal hearing; and (iv) allow that the pre-hearing conference may be held, when practical, at the county or city in which the establishment of the applicant or licensee is located.

3VAC5-10-220. Informal Pre-hearing conferences.

A. An informal conference A pre-hearing conference will be conducted when an applicant for a license or a licensee who is the subject of a disciplinary proceeding does not waive its right to such a conference. A waiver may be verbal or in writing. Unless the parties are advised otherwise, the agency will automatically waive the informal pre-hearing conference when the applicant or licensee does so. When the applicant or licensee is offered an informal a pre-hearing conference and fails to respond within 10 calendar days after the date of such offer, the informal pre-hearing conference will be deemed to be waived.

B. The informal conference will be conducted for the reasons set forth in § 2.2-4019 of the Code of Virginia. The informal conference may not be used for purposes of agreement fixing a period of suspension or license revocation. The informal pre-hearing conference will serve as a vehicle to acquaint the interested party, in a general way, with the nature of the charges or objections, the evidence in support thereof and to hear any matters relevant thereto presented by the interested parties and to explore whether (i) administrative proceedings or objections should be terminated or (ii) the case should proceed to formal hearing and stipulations can be reached. The conference will be open to the public, but participation will be limited to the interested parties, their attorneys-at-law or other qualified representatives, and designated board representatives. The pre-hearing conference may be held virtually or telephonically, and at least five days prior to the formal hearing. The conference will may be held, when practical, at the county or city in which the establishment of the applicant or licensee is located. Reasonable notice of administrative charges or objections and the date, time, and place of the conference shall be given to the participants. The failure of the applicant or licensee to appear at a scheduled conference will be deemed a waiver of the informal pre-hearing conference. The informal proceeding pre-hearing conference will not be recorded. Sworn testimony will not be taken, nor will subpoenas be issued. Any initial decision will include a summary of the informal pre-hearing conference.