The Legal Implications Surrounding "Palcohol"

On March 10, 2015, the Alcohol and Tobacco Tax and Trade Bureau ("TTB") approved a controversial product called Palcohol for sale in the United States.  Palcohol is a powdered alcohol that is meant to be mixed with water or other liquids and will have the same alcohol content when mixed with the appropriate amount of liquid. Think instant coffee, only replace the coffee with vodka, rum, or a tequila/margarita mix.

There is immediate uproar surrounding the approval.  Sen. Charles Schumer has already introduced legislation to ban powdered alcohol on a federal level. Based upon the wording in the 21st Amendment to the Constitution, the states also have the power to regulate alcoholic beverages. Many delegate that right to local government.  Several states have already taken action to prevent the distribution - Alaska having outright banned it, and Louisiana, Nebraska, Pennsylvania, South Carolina, Vermont and Virginia having taken regulatory action against it. 

Concerns over the safety of the product are abundant.  Many are concerned about the potential for individuals to snort it, to mix it with the wrong quantity of liquid making drinks extremely potent, the ease to conceal the product, the potential for underage use, and the potential to mix with other illicit drugs.

Besides safety, the regulation of this new technology will be incredibly difficult to coexist with existing laws and regulations for alcohol.  While many state and local governments ban open containers, it will put a whole new responsibility on those enforcing open container laws. Drinking and driving laws may also be implicated, as it would be even more difficult to identify illegal activity with a dry and scentless powder.  Many states have regulations for bars and restaurants to enforce underage drinking, but imagine how difficult that would be when an individual merely orders a water or coke, and mixes their own cocktail. Would insurance companies have to account for this and raise premiums for Dram Shop insurance?  Likely so. It will also certainly be easier to sneak into establishments, public events, concerts, or other places where bringing your own alcohol is currently not permitted.

In the next few months, it will be interesting to watch how state and local governments react to the federal approval of powdered alcohol.  If it's not on their radar, it should be as it could really shake up all of the existing laws and regulations they have put in place to prevent the abuse of alcohol.

Enforcement Has Begun - Illinois Food Handler Certification

All establishments serving food in Illinois must have their employees that handle food complete an Illinois Food Handler Certification course.  As of January 1, 2015, the Food Handling Regulation Enforcement Act is in effect and being enforced by Public Health Inspectors. All employees that handle food, food equipment, or food utensils, must be certified by an accredited program within 30 days of hire.  See 410 ILCS 625/1, et seq.  .  Illinois Public Health Inspectors have already begun citing establishments for failing to have certified employees, and the fine is $250/violation. Businesses are required to maintain records of certification, and the certifications must be renewed every three years.  

The Illinois Restaurant Association is providing courses to those that need certification - please visit http://www.illinoisrestaurants.org/?page=FoodSafetyChangesHdl

Illinois Pregnancy Accommodation Act Now In Effect!

The Pregnancy Accommodation Act went into effect in Illinois on January 1, 2015.  The statute protects women who are pregnant or have recently given birth from violations in the workplace in six general areas:

1. Failing to make requested reasonable accommodations that pose no undue hardship to the employer;

2. Denying employment to pregnant applicants;

3. Taking adverse action based on the need to create reasonable accommodations;

4. Forcing pregnant women to accept unrequested accommodations;

5. Forcing leave if reasonable accommodations can be provided for; and

6. Failing to reinstate the employee to an original or equivalent position, pay, seniority, and benefits

The Act applies to pregnant women, those who have recently given childbirth, and those with medical or common conditions related to pregnancy.  The statute has a requirement that the employer post information about the Act along with the other required notices.

The poster can be found here: http://www2.illinois.gov/dhr/Publications/Pages/Pregnancy_Rights_Notice_Requirement.aspx

If you have any questions regarding the statute, its effect, or how to comply with it, please contact me.

Article Featured in Bar Business Magazine

A full article is printed on page 25 of this month's Bar Business Magazine, my article entitled "Time & Money, Is a Wage & Hour Class Action Secretly on Your Menu" is featured in the How To Section. 

http://issuu.com/barbusinessmagazine/docs/january_2015_bar_business/1

Congress Introduces Bill to Lower Tax Burden on Craft Brewers

A bill was recently introduced in Congress that would substantially reduce the tax burden on small and craft brewers that produce less than 6 million barrels of beer in a calendar year.  Currently, the TTB taxes all barrels at the rate of $18/barrel. The proposed amendment would lower the tax to $3.50 for the first 60,000 qualified barrels, and then to $16 for 1,940,000 barrels.  The first 2 million barrels would be taxed at the substantially reduced rate. The bill was introduced by bipartisan members of Congress who admitted that the federal excise taxes are outdated and put a substantial burden on small brewers.  The hope is that the tax relief will help the continued expansion of the craft brewery boom and help the small businesses add jobs and grow.


The text of the proposed bill can be found here: http://paulsen.house.gov/uploads/Small%20BREW%20ACT3.pdf

Qui Tam - Illinois' New Form of Ambulance Chasers Targeting the Wine Industry

An Illinois Plaintiff's lawyer has recently been targeting the wine industry in qui tam class action suits alleging that wineries with direct ship sales have been breaking the law by deliberately disregarding the Illinois tax code. The Illinois False Claims Act (IFCA), formerly known as the Whistleblower Reward and Protection Act, derives from the Federal False Claims Act. 740 ILCS 175/1, A provision allows a private citizen to bring a civil suit on behalf of the government in the name of the government to recover damages for the government.

The Plaintiff in this case is the lawyer himself, Stephen Diamond of Chicago. Diamond is suing on his own - claiming he made the purchases and discovered the act - and thus not sharing in any recovery. Diamond has filed over 300 suits against out of state retailers.  Some of those claim that Illinois wine retailers are defrauding the Illinois government because they do not charge tax on the shipping and handling portion of the sales. The Illinois Department of Revenue has addressed the shipping charges, and does not require shipping charges if the shipping charges are separate from the price of goods or if the shipping charges are equal to the cost to the retailer of using the common carrier. Ill. Dept. Rev. Reg. Title 86 Part 130 Section 130.415. The shipping charges are taxable if the shipping charges exceed the cost to the retailer of using the common carrier, or if the shipping charges are included in the price. 

So if the Code is pretty clear, how does the Plaintiff have a leg to stand on? The Illinois Supreme Court held in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, (Illinois 2009) that the tax on shipping charges was part of the “selling price” according to 35 ILCS 105/3-10 (2006), and 35 ILCS 120/1 (2006).  The Court concluded that because internet purchases must be delivered, that shipping was an inseparable part of the transaction. The court held that “under the Retailers Occupation Tax Act, that the shipping charge is inseparable of the Internet “selling price,” and tax must be assessed on the shipping charge.

While there are defenses, the litigation has been costly to those affected. Because Diamond is filing on his own behalf, he is actually making purchases himself.  Most of the cases have settled on terms favorable to Diamond as opposed to litigating the defenses.  The Illinois Attorney General has not yet gotten involved to make a determination, and the legislature has not yet addressed the disparity in the tax code and the Supreme Court ruling.  Until then, if you're a direct to consumer seller, it is advisable to beware and take precautions to avoid being a target of the suit. 

The Clark Hill Food and Beverage Team is well-equipped to help if you have questions about these actions, or how to avoid these actions. Please contact Jonathan Boulahanis, jboulahanis@clarkhill.com if you have questions.

Chicago Bars Face De Ja Vu This New Year's As Crackdown on Happy Hour Violations Continue

The City of Chicago Department of Business Affairs and Consumer Protection has investigators racketing up to enforce the Illinois Happy Hour Law of 1989 again this New Year's Eve.  Last year, the City cited over 80 establishments for violations of the Happy Hour Law by promoting open bar packages. The Happy Hour Law only allows an open bar during a set period of time for a private event like a wedding or private fundraiser.  It came as a surprise to many of the establishments, as the State of Illinois Liquor Control Commission previously had been the exclusive regulatory authority for all intents and purposes until that point.   The establishments faced fines from the City in the range of $5,000, and included threats to revoke their liquor license for repeat offenders.  It is expected that the City will again cite establishments, and that the City has already started investigating establishments that are advertising such packages on social media. 

If your bar or restaurant has questions about your event, or compliance with the Illinois Happy Hour Law, Clark Hill's Food and Beverage Team is ready to assist.  Contact Jonathan Boulahanis at jboulahanis@clarkhill.com


http://chicago.eater.com/2014/12/17/7410623/new-years-eve-chicago-liquor-crackdown-open-bar

http://www.cityofchicago.org/city/en/depts/bacp/supp_info/top_tips_for_liquorlicensees.html