Points For Trying: Obtaining Significant Reductions in Administrative Penalties for Liquor and Cannabis Licensees
Liquor and cannabis licensees are required to navigate complex provincial legislation, regulations and policies, or risk non-compliance, enforcement actions, and associated penalties. Non-compliance by a licensee or its employees can attract harsh fines and license suspensions. Section 121 of the Alberta Gaming, Liquor and Cannabis Act (the “Act”), provides that where a licensee can establish that they took all reasonable steps to prevent a contravention, they may obtain relief from regulatory sanctions. Equivalent provisions appear in the liquor and cannabis legislation of other provinces, including British Columbia and Ontario.
This blog examines three recent decisions from the Alberta Gaming, Liquor and Cannabis Commission (the ”AGLC”) and the factors that the AGLC takes into consideration in determining whether a licensee had taken all reasonable steps to comply with the Act. These recent decisions illustrate that licensees can obtain partial relief from the harshest of regulatory sanctions, provided they can show genuine efforts to maintain compliance.
AGLC Policy on Administrative Sanctions
Administrative sanctions imposed by the AGLC’s Regulatory Services Division (the “RSD”) range from written warnings, financial penalties, licence suspensions, and even licence revocation. Many contraventions attract temporary license suspensions, which can be served by payment of a monetary penalty equivalent to $250 per day, at the licensee’s option.
The harshest monetary sanctions, up to $10,000 (or a 40-day suspension) for a first offence, are reserved for serious contraventions including: sale of liquor or cannabis to minors; over-serving patrons; improper storage and record keeping; and conduct of unauthorized operations.
A licensee sanctioned by the RSD without a hearing is entitled to apply for a hearing before an AGLC panel (the “Panel”). The Panel has the authority to confirm or revise administrative sanctions imposed, including in accordance with section 121 of the Act.
AGLC Board Decisions
In Plantlife Cannabis, the licensee was charged with selling cannabis to a minor. The RSD imposed an administrative sanction of $10,000 (or a 40-day license suspension). At a hearing before the Panel, the sanction was reduced to $1000 (or a 4-day license suspension).
In Plantlife Cannabis, the licensee was able to show the contravention was not the norm. The licensee argued that its history of compliance, and attempts at maintaining compliance, ought to relieve it of the sanctions imposed. In the specific instance of the alleged contravention, the licensee’s employee requested identification from the minor, and carefully observed the minor’s fake identification, but failed to recognize the identification as invalid. The Panel noted that the photograph on the identification card closely resembled the minor. The licensee also pointed out that it conducted weekly meetings to discuss and update its employees regarding AGLC policies. Following the incident with the minor, the licensee voluntarily followed up with the RSD, implemented leadership training in its stores across the province, and continued, at the time of the hearing, to explore further options for offering “refresher training” to its employees at regular intervals.
The robust training that the licensee offered to its employees, a history of compliance and cooperation with with AGLC over the prior five year period, and efforts to prevent future contraventions, all contributed to the Panel’s decision to reduce the administrative sanction imposed.
Liquor Point Ltd.
In Liquor Point the Panel reduced a monetary penalty of $11,000 (or a 44-day license suspension) imposed by the RSD to $6,000 (or a 24-day suspension). The licensee, a liquor store located in Canmore, was sanctioned for selling liquor to a minor, after failing to request identification. The employee on duty stated that they had not requested proof of age as they recognized the minor from a previous instance in which the minor had provided identification. It later came to light that the identification provided on the prior occasion was fake.
During the hearing it also came out that three days prior to the contravention, the licensee had sold liquor to a minor; however, that incident went unreported. The licensee argued that they had read AGLC policies and attempted to train their staff through bulletins and verbal reminders. The licensee argued that, because they operate a liquor store in a tourist town, there was high labour turnover making it difficult for employees to gain real world experience, including assessing the age of patrons, despite the licensee’s best efforts at staff training.
The Panel found that the licensee took some reasonable steps to prevent employees from contravening the regulations. However, they took issue with the fact that the licensee had not provided training sessions for employees and was not fully informed about the operating procedures in accordance with AGLC policies, nor were they personally certified to sell liquor or supervise and provide security measures for the store.
The licensee obtained a smaller reduction in their fine as compared to Plantlife Cannabis, above, where the store was sanctioned for the same contravention. This difference in result may be attributed to the higher degree of diligence demonstrated by the licensee in Plantlife Cannabis prior to the offending incident. The licensee in Liquor Point, by contrast, lacked a robust training program before the offending incident occurred, but took subsequent steps to establish training and education opportunities for its employees.
Surekha’s on the Snye
In Surekha's on the Snye the Panel reduced a monetary penalty of $10,000 (or a 40-day license suspension) imposed by the RSD to a $750 fine (or 3-day suspension). This was the second time the licensee was sanctioned for the same type of infraction: selling liquor at a festival without the correct licence. The licensee was able to show multiple attempts at compliance, including contacting the AGLC to inquire about their licence status and conditions prior to the festival.
The licensee held a Class-A restaurant licence, however, to participate at the festival they needed a Special Event License (“SEL”) or a caterer’s extension to their existing license. SELs are issued only to charitable or non-profit organizations. The licensee was informed that under the SEL there could only be one participant selling liquor at the event. The licensee approached the event organizers and obtained permission to purchase liquor under the organizer’s SEL, and the organizer confirmed that they would be the only participant selling liquor. What was not communicated properly was that selling liquor under the authority of a liquor licence issued to another licensee is prohibited. Thus the SEL holder was the only participant at the event that was permitted to sell liquor.
The AGLC Panel found that the licensee took reasonable steps to avoid the contravention, including consulting and coordinating with the RSD, the SEL licensee, festival organizers, and the liquor supplier prior to participating in the event. The licensee even obtained a copy of the SEL, which they believed to be sufficient, and which was accepted by the liquor supplier. The Panel found that the communication from the RSD was not as clear as it could have been in providing guidance to the licensee.
A liquor or cannabis licensee facing significant administrative penalties may obtain shelter from, or at least obtain a reduction in, the penalties imposed, provided they can demonstrate genuine, good faith attempts to maintain compliance. Such attempts may include:
- Implementing robust employee training during on-boarding and at regular intervals, including as regulations and policies change;
- Maintaining records of incidents, including for example when sales are denied on the basis of age or lack of identification, or when service is denied due to a patron’s intoxicated state;
- Making appropriate enquiries of the regulatory authorities where the policies or guidelines are vague and the licensee is operating in a “gray area”;
- Maintaining good relations with the regulators by cooperating with inspections and audits, and responding to the regulator’s inquiries in a timely manner.;
- Staying up to date with polices including through, periodic review of handbooks, websites and keeping copies of the provincial regulator’s material at the licensed premises, available for employee review;
- Taking steps to remedy issues promptly and proactively after a contravention, such as conducting employee training or retraining to avoid future contraventions;
- Maintaining careful records of transactions including, if appropriate, camera footage. For Cannabis retailers, in particular, it is essential to submit Federal Compliance reports.
McCarthy Tétrault regularly advises and represents participants in regulated product industries, including liquor and cannabis licensees. We are also available to assist clients in regulated industries with the development of compliance policies and training protocols, and to advise on engagement with regulators.
 Plantlife Cannabis (31 Match 2023), online: AGLC <https://decisia.lexum.com/aglc/dec/en/item/521149/index.do?q=plant+life>
 Liquor Point (21 March 2023), online: AGLC, <https://decisia.lexum.com/aglc/dec/en/item/521161/index.do?q=liquor+point>
 Surekha's on the Snye (21 March, 2023), online: AGLC <https://decisia.lexum.com/aglc/dec/en/item/521160/index.do?q=Surekha%E2%80%99s+on+the+Snye>