Abstract: A label applicator system, upon detection of a bad label, moves a peel plate away from a platen roller and towards a take-up spool to increase the angle between the path of the liner toward the peel plate and the path of the liner away from the peel plate. The angle increases sufficiently to prevent the bad label from separating from the liner. The movement of the peel plate is approximately parallel to the movement of a tamp pad for moving and affixing a good label to a package. Because the processing of the bad label does not reduce tension in the liner to drop the liner into the path of the tamp pad and the movement of the peel plate does not cross into the tamp pad path, movement of the tamp pad is not hindered by the bad label processing.