Part 3. TEXAS ALCOHOLIC BEVERAGE COMMISSION
Chapter 34. SCHEDULE OF SANCTIONS AND PENALTIES
The Texas Alcoholic Beverage Commission (commission) proposes new Chapter 34, to be titled Schedule of Sanctions and Penalties. Within this new proposed chapter, the commission proposes new §34.1, relating to General Provisions; new §34.2, relating to Schedule of Sanctions and Penalties for Health, Safety and Welfare Violations; new §34.3, relating to Schedule of Sanctions and Penalties for Major Regulatory Violations; and new §34.4, relating to Schedule of Sanctions for Penalties for Marketing Practices Violations.
The Texas Alcoholic Beverage Commission adopted §37.60 relating to a Standard Penalty Chart in 1995. This rule was amended in 2002, and with the adoption of new Chapter 34 and the proposed new rules, §37.60 will be repealed as no longer necessary.
Senate Bill 904, §10, 80th Legislature, Regular Session, 2007, amended Chapter 5 of the Texas Alcoholic Beverage Code (Code) to add new §5.362 to the Code. This new section requires the commission to adopt a schedule of sanctions that may be imposed on a license or permit holder for violations of this Code or rules adopted under the Code. The schedule must:
- Impose a penalty or sanction that is appropriate for the violation that is the basis for disciplinary action;
- Include the number of days a permit or license may be suspended and the corresponding civil penalty under §11.64 for each violation;
- Consider the permit or license held by the person who violates the code;
- Consider the type of violation;
- Consider the violation history of the permit or license holder; and
- Allow for deviations for clearly established mitigating or aggravating circumstances.
The new chapter and sections are proposed to comply with the requirements of this new section of the Code.
Proposed new §34.1 sets out general provisions of the rule relating to legal authority, applicability, and implements the requirements set forth in new §5.362.
Proposed new §34.2 is a table showing the schedule of sanctions and penalties for violations relating to health, safety and welfare violations of the Code. It contains a description of the violation and the number of days and dollar amount to be assessed under the chart for the first, second and third violation of the Code.
Proposed new §34.3 is a table showing the schedule of sanctions and penalties for violations relating to major regulatory violations of the Code. It contains a description of the violation and the number of days and dollar amount to be assessed under the chart for the first, second and third violation of the Code.
Proposed new §34.4 is a table showing the schedule of sanctions and penalties for violations relating to marketing practices violations of the Code. It contains a description of the violation and the number of days and dollar amount to be assessed under the chart for the first, second and third violation of the Code.
Charlie Kerr, Director of Business Services, has determined that for the first five years that the proposed new rule is in effect, there will be no fiscal impact on units of state or local government as a result of enforcing and administering the section as proposed.
Mr. Kerr has also determined that for the first five years that the proposed new rule is in effect, there is no cost of compliance with the rule because the rule affects only persons or businesses that violate a provision of the Code or commission rules. However, there will be a fiscal impact on small and micro-businesses and individuals that are subject to the sections because they violate a provision of the Code or commission rules. In determining the amount of civil penalty to be assessed, the Alcoholic Beverage Code §11.641(b), prohibits the commission from considering the volume of alcoholic beverages sold, the receipts of the business, taxes paid, or the financial condition of the permittee or licensee. As a result of this section, the commission does not have the ability to track or separate out from the entire field of permit and license holders those businesses that are small or micro-businesses.
In fiscal year 2007, under the penalty and sanctions chart found at §37.60, Standard Penalty Chart, which the proposed rule will replace, the commission collected $2,610,400 in fines for violations of the Code or commission rules. This amount excludes civil penalties for administrative cases in the legal division, which are not subject to the standard penalty chart. Although §11.64(a) of the Code provides a range of civil penalties that may be imposed from a minimum of $150 to a maximum of $25,000 per day, the dollar amount for each day assessed under §37.60 is $150.00. This has been the amount assessed per day since 1977 and since the original penalty chart was adopted in 1995. It was felt that this minimum dollar amount should be adjusted to reflect cost of living adjustments. One hundred and fifty dollars in 1977 is equivalent to almost $500 in 2008 dollars (354% increase). One hundred and fifty dollars in 1995 is equivalent to almost $208 in 2008 dollars (38.7% increase).
Another factor in determining how much the dollar amount should be increased is whether the current amount is sufficient to deter violations of the Code or commission rules, and/or approximate the loss of revenue for alcoholic beverage sales to a business for having a permit or license suspended for a day. In assessing whether the amount approximates daily business revenues for sales of alcoholic beverages, it is instructive to observe that a permit holder is three times more likely to pay the civil penalty than serve a suspension, and this includes those violations for which the opportunity to pay a civil penalty as an alternative to suspension is not authorized under §11.64 of the Code.
The proposed new sections have generally increased the range of civil penalties from $150 to $2250 per day. However, the number of days assessed for a first violation has generally been reduced. The day and dollar amounts were increased to a level that the Commission believes will be more effective in deterring violations of the Code or commission rules. The specific dollar amounts proposed take into consideration numerous factors, including the impact a violation has on the public safety, health, and welfare, the ability of a permit or license holder to prevent or control a violation and the ability of the commission to effectively regulate in the face of violations of that type.
For example, the most frequently violated provisions of the Code are offenses relating to minors. Sale to minor alone accounted for 1,609 of the 2,972 administrative cases docketed in 2007. The amount of the penalty for this violation is proposed to increase from $150 to $500 for a first violation. However, the range of days for the first violation has been decreased from 7-20 days to 5-7 days. The current range of penalty for this violation would be from $1050 to $3000 for a first violation. Under the proposed rule, the range of penalty would be from $2500 to $3500. Although this appears to be a more than two fold increase at the lower end, this proposed increase would bring the proposed penalty in line with the amounts assessed for the same violation in 1983, and is less than the same penalty assessed in 1977 for the same violation.
At the same time the commission proposes to increase the cost of violating the Code or commission rules, the commission has undertaken aggressive programs to increase awareness of and compliance with the Code. Because the day and dollar amounts are substantially higher, the commission anticipates that overall violations of the Code will decrease. The combination of increased efforts of the commission to encourage voluntary compliance with the Code, and increased penalties when a violation does occur is expected to achieve or at least further the goal of deterrence.
There is no impact of the proposed new sections on permit and license holders who do not violate the Code or commission rules. The impact of the proposed new sections on permit and license holders who do violate the Code or commission rules could be substantial, depending on the section of the Code violated, the number of prior violations and aggravating and ameliorating circumstances to be considered by the commission under §11.641(a) of the Code.
If the proposed sections have no impact on deterring violations the commission projects an increase of 38% in fines and civil penalties that will be paid as a result of adopting the proposed new sections. Based on fiscal year 2007 fines and civil penalties, this would result in a total estimated impact of $3,602,352. In fiscal year 2007 the commission issued 106,646 licenses and permits. Of this very large number however, only approximately 1,380 violated a section of the Code or commission rule that resulted in a civil penalty under these sections. If all factors remain at or near the same, the average cost for those who violate the Code or a commission rule will be $2,610. For the approximately 105,266 permit or license holders who do not violate the Code or a commission rule, the impact will be $0.
Lou Bright, General Counsel, has determined that for each of the first five years that the new sections are in effect, the public will benefit from the adoption of the rule because the sections are expected to operate as an effective deterrent to violations of the Code and commission rules.
Comments on the proposed new chapter and sections may be addressed to Lou Bright, General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711. Comments will be accepted for 30 days following publication of the repeals and proposed new rule in the Texas Register.
The proposed new chapter and sections are authorized by §5.31 and §5.362 of the Alcoholic Beverage Code (Code). Section 5.31 gives the commission authority to prescribe and publish rules necessary to carry out the provisions of Code. Section 5.362 provides the specific authority to adopt these rules to establish a schedule of sanctions to be imposed on a license or permit holder for violations of the Code or rule of the Commission.
Cross Reference: §§5.31, 5.362, 11.64 and 11.641 of the Alcoholic Beverage Code will be affected by these actions.
§34.1.General Provisions.
(a) This rule relates to §§11.61, 11.64, 11.641 and 106.13 of the Alcoholic Beverage Code.
(b) Agents, compliance officers or other specifically designated commission personnel have authority to settle a complaint issued by the commission against a person for a violation of the Texas Alcoholic Beverage Code (Code), prior to filing a contested case under Government Code, Chapter 2001, Subchapter C (Administrative Procedure Act).
(c) A settlement authorized by this chapter must reflect the number of days a permit will be suspended or the amount of civil penalty authorized per day in lieu of suspension and shall conform to the other provisions of this chapter.
(d) A written warning may be issued for any violation if it is determined by designated commission personnel, to be an effective deterrent from further violations of the Code.
(1) A written warning may be used as an aggravating circumstance for purposes of determining the appropriate sanction under §34.2.
(2) A written warning is subject to the rights and procedures of a contested case under the Administrative Procedure Act.
(3) A written warning is an administrative notice issued by a representative of the commission to the permit or license holder documenting that a violation of the TABC code or rules has occurred.
(e) Any case alleging a sale to a minor or intoxicated person in violation of Alcoholic Beverage Code §§11.61(b)(14), 61.71(a)(6) or 101.63 in which the unlawful sale or service directly or indirectly caused death or serious bodily injury shall be referred directly to the Legal Services Division by district or regional personnel without an offer of settlement or compromise provided to the permittee/licensee. For purposes of this section, "serious bodily injury" means as defined in §1.07(a)(46) of the Texas Penal Code.
(f) Each suspension of a permit or license shall run for consecutive days. A person assessed a suspension by the commission may be provided with an opportunity to pay a civil penalty in lieu of a suspension as provided by §11.64 of the Code. The commission may, in its discretion, allow a licensee/permittee to divide an imposed sanction between civil penalty and suspension.
(g) A subsequent violation of the Code or rule will result in a sanction in the next higher violation level if the subsequent violation:
(1) is for a health, safety and welfare violation and occurs within 36 months of the prior violation, or
(2) is for a violation listed in the major regulatory violation category within 24 months of the prior violation, and
(3) the person has been given written notice of the prior violation, or
(4) the subsequent violation is issued during an undercover operation.
(h) The list of violations in §34.2 is not intended to be an exhaustive list of possible violations of the Code or rules of the commission. A sanction for a violation of the Code or rules that is not listed in §34.2 must be approved by either the assistant administrator for field operations or a division director prior to entering into a settlement.
(i) A person authorized to enter into a settlement under this section is also authorized to recommend a deviation from sanctions in §34.2 when aggravating or mitigating circumstances are found to exist.
(1) A recommendation to deviate from sanctions in §34.2 must be made in writing.
(2) The administrator or his designee must approve a recommendation to deviate from §34.2 before the settlement may be offered.
(j) This section does not apply to a contested case brought under Chapters C and D of the Administrative Procedure Act, or a complaint or violation referred to the legal division of the commission for resolution.
§34.2.Schedule of Sanctions and Penalties for Health, Safety and Welfare Violations.
An act or failure to act which results in a violation of the code or rules that represents a threat to the public health, safety, or welfare will be assessed sanctions and penalties as follows:
§34.3.Schedule of Sanctions and Penalties for Major Regulatory Violations.
An act or failure to act which results in a violation of a major regulatory provision of the code or rules will be assessed sanctions and penalties as follows:
§34.4.Schedule of Sanctions and Penalties for Marketing Practices Violations.
An act or failure to act which results in a violation of a provision of the code or rules relating to marketing practices will be assessed sanctions and penalties as follows:
This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State on May 19, 2008.
TRD-200802612
Alan Steen
Administrator
Texas Alcoholic Beverage Commission
Earliest possible date of adoption: July 6, 2008
For further information, please call: (512) 206-3204