Cheers to a New Year: California’s New Alcoholic Beverage Laws for 2022

As we look forward to 2022, we have summarized key alcoholic beverage legal changes in California from the past year that may affect your business.

The below list of alcoholic beverage laws either went into effect immediately late in 2021 or went into effect on January 1, 2022. The legal changes span from extending pandemic relief to permitting licensed wineries to open an additional off-site tasting room, to legalization of to-go cocktails, to eased restrictions on charitable giving, among many others. If your business involves the manufacture or sale of alcoholic beverages, odds are good these changes affect you. As always if you have any questions regarding these new laws or the potential effect of these changes to your business, facility, or products, please contact our California alcoholic beverage attorneys.

Assembly Bill 61 – Business Pandemic Relief

Bus. & Prof. Code § 25750.5: On October 8, 2021, effective immediately, and for up to 365 days from the date the COVID-19 pandemic state of emergency proclaimed by the Governor is lifted, the Department of Alcoholic Beverage Control (ABC) may permit licensees to exercise license privileges in an expanded licensed area.

Previously, it was unlawful for a licensee of the ABC to sell or serve alcoholic beverages outside of the licensed establishment’s approved footprint, with few exceptions. The ABC, pursuant to emergency orders of the Governor relating to COVID-19, has established temporary relief measures to suspend certain legal restrictions relating to expansion of licensed footprint, sales of to-go alcoholic beverages, and delivery privileges. A.B. 61 specifically authorizes the ABC to permit licensees to exercise their license privileges in an expanded area for up to 365 days after the end of the state of emergency proclaimed by the Governor. This expanded area includes on-sale consumption of alcohol on property controlled by the licensee adjacent to licensed premises. Continue Reading

Washington State Liquor Control Board Extends Pandemic-Related Privileges for Licensees

On December 8, 2021, the Washington State Liquor and Cannabis Board (“LCB”) approved New Rules to extend temporary pandemic-related licensee privileges for to-go orders and permanently amend the food service requirement for liquor licensees. The New Rules are clearly a step towards providing licensees additional flexibility to sell alcohol products in light of the ongoing pandemic.

The New Rules extend and amend endorsements for certain “to-go” products permitting licensees additional flexibility for selling to-go alcoholic beverages. First, the New Rules permit delivery by a third-party instead of only employees of the licensee. Second, the New Rules remove the obligation that breweries, wineries, and distilleries label to-go alcohol products and, for breweries and wineries, permit the sale of prefilled growlers in certain circumstances. Third, the New Rules clarify that payment for to-go wine and cocktails must be processed by a licensee’s direct employee. There are no fees for these endorsements, and they will now expire on July 1, 2023. Continue Reading

Significant Tax Credits for the Alcoholic Beverage Industry

Late last year, the President signed the Taxpayer Certainty and Disaster Tax Act of 2020, which made most of the Craft Beverage Modernization and Tax Reform Act (“CBMTRA”) provisions permanent starting January 1, 2021.  The CBMTRA makes extensive changes to the federal excise taxes on wine, distilled spirits, and beer.

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The Restaurant Revitalization Fund Eligibility and Next Steps

The American Rescue Plan Act of 2021 (the “Act”), signed by President Biden on March 11, 2021, includes within Section 5003 a $28.6 billion appropriation to establish a Restaurant Revitalization Fund (the “RRF”) to provide tax-free federal grants to food and beverage businesses hard hit by the pandemic. These grants may be applied to eligible expenses already incurred and for additional expenses over the remainder of the year (or longer if the covered period is extended by the Small Business Administration (the “SBA”)), and are available to entities ranging from food carts to full-service restaurants and tasting rooms. While RRF applications are not yet available and further guidance is likely forthcoming, we would encourage any entity that hopes to qualify for an RRF grant to take certain steps in preparation, as described further below.

Summary of the RRF and Eligibility

A total of $5 billion of the RRF is set aside for businesses with less than $500,000 in 2019 annual gross receipts, with the remainder to be available for grants in an “equitable manner to eligible entities of different sizes,” with authority granted to the Administrator of the SBA to make adjustments to the distribution of funds based on demand and local market conditions affecting eligible entities.

An eligible grant recipient may be a “restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.” Entities that are not eligible for RRF grants include entities that (i) are operated by state or local government, (ii) as of March 13, 2020, owned or operated, together with any affiliated business, more than 20 locations (regardless of whether the entities share a common name), (iii) have a pending application for or have received a Shuttered Venue Operators Grant, or (iv) are a “publicly-traded company” (here meaning any entity that is majority owned or controlled by an entity that is an issuer, the securities of which are listed on a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. § 78f)).

The term “affiliated business” means a business in which an eligible entity has an equity or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020. Continue Reading

State Water Board to Hold Upcoming Winery General Order Fees Stakeholder Meeting and Public Training Workshop Webinars in March and April 2021

As part of implementation of its Final Adopted Winery General Order, the State Water Resources Control Board (“SWRCB” or “Board”) will be holding a Winery General Order Fees Stakeholder Meeting on March 15 from 1:00-3:00 PM via Webcast. The updated notice for the Fees Stakeholder Meeting can be found here.

In addition to the Fees Stakeholder Meeting, the SWRCB is planning a series of Winery General Order Public Training Workshop Webinars for the public to learn about enrollment eligibility, schedule, and requirements under the Winery General Order. The first Workshop Webinar is scheduled for April 8, 2021 from 5:30-7:00 PM and can be joined by following the zoom link here. The second Workshop Webinar is scheduled to take place on April 21, 2021 from 12:00-1:30 PM and can be joined by following the zoom link here. The third and final Workshop Webinar will take place on April 23, 2021 from 12:00-1:30 PM at the zoom link here. No registration is required for any of the three Workshop Webinars; however, only 300 spots are available per webinar.

Additional information about the upcoming Workshop Webinars and the SWRCB’s Winery General Order can be found at the Board’s Winery Order webpage.

Update: State Water Board Adopts Final Winery General Order

At its January 20, 2021 Board meeting, the State Water Resources Control Board (“SWRCB” or “Board”) adopted its final General Waste Discharge Requirements (“WDRs”) for Winery Process Water (“Winery Order”) and associated Resolution for the California Environmental Quality Act (“CEQA”) Mitigated Negative Declaration.

As a brief background, on July 3, 2020 the SWRCB released a draft Winery Order to the public for comment (see: July 15, 2020 blogpost on proposed General Order and July 20, 2020 blogpost on noticed stakeholder meetings).  The July 3, 2020 draft incorporated feedback from stakeholders regarding administrative draft documents circulated in 2019.  On November 12, 2020 we posted an Update to our prior blog article regarding the SWRCB’s issuance of a revised notice rescheduling the date of its November 17, 2020 Board meeting to December 15, 2020.  Since that time, on December 2, 2020, Board staff publicly transmitted a revised draft Winery Order and draft CEQA Initial Study and Mitigated Negative Declaration. Notable revisions in the December 2, 2020 iteration of the draft Winery Order were made in response to comments received and include changes to design flow ranges used to determine tier designations for coverage under the Winery Order and technical requirements related thereto, among other changes. Continue Reading

Department of Labor Publishes Final Rule Regarding Tip Pools and Tip Credits

After a lengthy and contentious rulemaking process, the Department of Labor (“DOL”) published its final rule revising its tipped-employee regulations under the Fair Labor Standards Act (“FLSA”) last week. The new rules take effect 60 days from their publication in the Federal Register, which will occur shortly.  Here is a summary of the new rules’ most critical provisions:

Tip Credit Provisions. Several provisions of the new rules address the FLSA’s tip credit provision, which allows employers to pay employees a base wage that is less than the federal minimum so long as the sum of employees’ cash wages and retained tips exceed the required threshold.  For example, the rules state that employers that take the FLSA tip credit may not include back-of-the-house employees in their tip pools and address the common scenario in which an employee works in dual jobs (one tip-qualifying, the other non-tip-qualifying) for the same employer.  Oregon and Washington do not allow a tip credit against employers’ minimum wage obligations, so these aspects of the new rules are of limited use for Oregon and Washington employers. Continue Reading

Washington Wine Industry Foundation Offers Scholarships for Students Pursuing Wine-Related Studies

Stoel Rives is a proud annual sponsor of the Washington Wine Industry Foundation (and full disclosure: I am a board member) – a nonprofit, charitable organization that was founded almost twenty years ago with a goal to strengthen the future of the Washington wine industry through growth, education, and sustainability.

Since 2002, the foundation has awarded 185 scholarships totaling $263,000 to Washington students who are pursuing certificates or degrees in viticulture, enology and other wine-related studies. This year, the foundation will offer more than $30,000 in scholarships. Applications are due by May 31, 2021. For more information on the scholarships and to apply, click here.

Update: State Water Board Issues Revised Notice for Board Meeting Regarding Winery General Order

In July, we blogged about the State Water Resources Control Board’s (“State Water Board’) release of proposed General Waste Discharge Requirements for Winery Process Water Treatment Systems (see: July 15, 2020 blog post on proposed General Order and July 20, 2020 blog post on noticed stakeholder meetings).  The State Water Board recently issued a revised notice that changes the dates of its Board meeting and when responses to public comments will be available.

Pursuant to the State Water Board’s revised notice, the Board adoption hearing for the proposed General Order and draft California Environmental Quality Act Initial Study, Mitigated Negative Declaration (“MND”) has been rescheduled from November 17, 2020 to December 15, 2020.  The meeting will begin at 9:00am Pacific Standard Time.  Revisions in response to public comments made on the proposed General Order and MND will be available on the Winery Order website on or before December 1, 2020.

Due to COVID-19, the State Water Board presently intends to hold its Board meeting solely through remote presence.  Further information regarding the meeting will be posted on the State Water Board Calendar page as the meeting date gets closer.

If you have questions regarding water resources or the potential effect of State Water Board actions on your facility, or other environmental, compliance, reporting, or permitting requirements, please contact our California water quality attorneys.

Force Majeure Probably Doesn’t Permit Smoke Taint Rejection

A force majeure clause in a contract permits the suspension, or in some cases, the termination, of performance by a party to the contract upon the occurrence of a force majeure event. Traditionally, a force majeure event is a matter outside of the control of the obligated party that makes it impossible or impracticable for that party to perform one or more of its obligations under the contract. For example, depending on the specific language of the force majeure provision, a labor strike might excuse a party from performing its obligation to manufacture and deliver goods purchased by a buyer.

A typical force majeure provision from a grape purchase agreement is set forth below:

Force Majeure.    Neither Seller nor Buyer shall be liable to the other party, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in performing any term of this Agreement, when and to the extent such failure or delay results from acts beyond the affected party’s reasonable control, including, without limitation: (a) acts of God; (b) flood, fire, earthquake or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot, or other civil unrest; (d) epidemic or pandemic; (e) actions, embargoes or blockades; (f) action by any governmental authority; (g) national or regional emergency; (h) strikes, labor stoppages, or slowdowns or other industrial disturbances; and (i) shortage of adequate power or transportation facilities.

Here, upon a force majeure event, if either Seller or Buyer is unable to perform its obligations under the grape purchase agreement because of an event beyond its reasonable control, that party can claim force majeure and will be excused from performance during the continuance of the force majeure event. So, for instance, if the Seller’s crop is affected by floods that it could not have reasonably foreseen and it can only deliver 50% of its promised crop to its Buyer, it would have a reasonable defense against its obligation to deliver the entirety of the crop.

Okay, the Buyer says, I see “fire” listed above, so does the force majeure provision permit me to avoid purchasing grapes that may be tainted by smoke? Probably not. To understand why, it’s important to understand the Buyer’s obligations under a grape purchase agreement.  Those obligations are actually fairly limited.  First, and most obviously, the Buyer is obligated to pay for the grapes, and second, the Buyer is obligated to physically accept delivery of the grapes.  A buyer may have other obligations as well, depending on the specific language in the agreement, such as directing the timing of harvest, providing bins, and providing wine samples.

Which of the Buyer’s obligations listed above is the Buyer unable to perform because of fire?  If active fires exist in the Buyer’s immediate vicinity so that it is temporarily impossible or impracticable to operate, the Buyer may be able to invoke force majeure to delay accepting grapes until it is safe to reopen.  But what about a winery in an area generally affected by smoke that is able to remain open, and that has a concern about the quality of the grapes it is receiving?  That Buyer is still able to perform:  it can pay for the grapes as long as banks remain able to process transactions, and it can accept the grapes as long as it is safe to remain open.  Of course, a Buyer may not want to accept potentially smoke tainted grapes, but that does not mean that it is impossible or impracticable for it to do so.  Typical force majeure clauses address when a party can’t perform its obligations, not when it might not want to perform its obligations.

Often, grape purchase contracts also include specific quality warranties, including MOG, mold, rot, brix, and perhaps smoke-related metrics, which a Seller is obligated to meet, and which can serve as a basis for rejection by the Buyer if not satisfied.  Whether or not those kinds of quality-related warranties can be used as the basis for the Buyer to reject potentially smoke tainted grapes depends on the specifics of the provision and the facts at hand.  But we believe, based on the language commonly used in grape purchase agreements, that Buyers wondering whether they have the right to reject potentially smoke tainted fruit would be better served looking to their quality warranties rather than to their force majeure provision.