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 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 rules.

Although the TABC is now proposing 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 businesses 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 certificate within 7 days of hire, requiring proof none of its employees had any lapses in seller-server training the prior 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 of its changes to chapter 34 of its rules would make how the TABC imposes penalties and suspensions for violations of the less transparent and more ambiguous.

For example, the TABC is trying to change the language of 34.1(g) to say that a subsequent violation of a Code provision or rule will now result in just a “higher sanction” and remove current language in the rule that the 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 attempting to add language to rule 34.2(a) stating that sanctions and penalties for violations of the Code 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 shutdowns. The change to the above rules, and others in the proposed draft of Chapter 34, would create less consistency and transparency if implemented, not more as the legislature and sunset committee both 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 highlighting our concerns and opposition to these proposed rules was 23 pages. 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 rules@tabc.texas.gov or participating online at the Stakeholder Meeting this Friday, February 11, 2022 between 10:00am and 11:30am.