California Joins Growing List of States to Protect Employees’ Off-Duty Use of Marijuana

By Jennifer Kearns and Danielle Dwyer

Starting January 1, 2024, employers in California will be prohibited from interfering with their employees’ off-duty use of marijuana.  On September 18, 2022, Governor Gavin Newsom signed into law Assembly Bill 2188 (AB 2188), which amends California’s Fair Employment and Housing Act (FEHA) to add protections for employees by prohibiting employers from refusing to hire, firing, or otherwise taking an adverse action against an employee based on the employee’s “use of cannabis off the job and away from the workplace.”  Although medicinal marijuana has been legal in California since 1996, and recreational marijuana legal since 2016, the FEHA did not previously provide workplace protections for employees’ permissive use of marijuana.

AB 2188 also amends the FEHA to prohibit discrimination in hiring or any term or condition of employment based on employer-required drug screening tests that detect “nonpsychoactive cannabis metabolites” in the employee’s “hair, blood, urine, or other bodily fluids.”  The California legislature stated that because most marijuana tests can only detect whether cannabis metabolites are present, and have “no correlation to impairment on the job,” employers will need to instead rely on alternative tests to determine whether an employee is under the influence at work.  These alternative tests can include “impairment tests” that “measure an individual employee against their own baseline performance,” or tests that “identify the presence of THC in an individual’s bodily fluids.”

Although the law does not specify what constitutes an “impairment test,” it is possible the legislature was referencing tests that measure an individual’s motor functions, the visual effects of being high, and/or obvious cognitive impairments such as impaired gait or mobility, glassy eyes, changes in speech, and/or reasoning ability.  However, at this time, there is no universal definition, legally or medically, of what constitutes “impairment.”  Employers wishing to utilize impairment tests should develop a protocol that identifies the signs of impairment that will be assessed and that includes training supervisors on recognizing and documenting signs of impairment.

It is also not immediately clear upon which bodily fluid tests employers can rely given that THC can remain detectable in a person’s system weeks after use and such tests might not be able to provide objective data as to whether an employee is impaired at a specific time.  The intent of AB 2188 is to protect an employee’s off-duty use, so if an employee partakes on a Saturday and fails a drug test on a Wednesday, but is not impaired on Wednesday, taking action against that employee would be discriminatory and unlawful.  Employers that rely on physical drugs should consider incorporating impairment tests into their drug testing procedures.  A two-fold approach may better protect an employer from liability under AB 2188.  Employers should also confirm with their drug testing providers that the provider tests for the presence of THC and not nonpsychoactive cannabis metabolites.

Importantly, AB 2188 does allow employers to prohibit marijuana use on the job and/or at the worksite and specifically states that there is a “consensus” that employees “should not arrive at a worksite high or impaired.”  Employers would also still be permitted to maintain drug-free workplaces and prohibit the possession of marijuana at the workplace.  The bill exempts employees “in the building and construction trades,” and positions which require federal drug tests and/or background tests.

With the amendments to the FEHA, California joins a growing list of states that have enacted employee protections for the recreational use of marijuana including Connecticut, Illinois, Montana, New Jersey, New York, and Rhode Island.

RICO Claims Against Cannabis Companies Are Evolving

A few years ago, a trend began to emerge — driven by the anti-cannabis lobby — of civil claims being asserted against state-licensed cannabis operators under the Racketeer Influenced and Corrupt Organizations Act.

The suits were brought in an attempt to curtail operators’ state-legal cannabis activities based on the allegation that such activities violated the federal Controlled Substances Act and thereby satisfied the predicate act requirement under RICO.

In all such cannabis-related RICO cases, the plaintiffs’ bid for a civil judgment failed, and the trend of civil RICO claims against cannabis operators seemed to vanish as quickly as it appeared.

Recently, a putative class action, Plumlee v. Steep Hill Inc., was filed in the U.S. District Court for the Eastern District of Arkansas against four state-licensed cannabis operators, asserting civil RICO claims arising out of allegations that the operators falsified the amount of THC in their cannabis products.

To read the full text of this article by Duane Morris attorneys Ethan Feldman and Seth Goldberg, please visit the firm website.

Lifting the Haze: New Jersey Cannabis Regulatory Commission Issues Interim Guidance on Drug Testing

On September 9, 2022, the New Jersey Cannabis Regulatory Commission issued interim guidance for employers on drug testing employees for cannabis. Since the legalization of recreational marijuana for adults 21 years of age or older, New Jersey employers are expected to follow certain procedures associated with drug testing employees based on reasonable suspicion of impairment. Until specific regulations are issued, the commission has provided interim guidance to clear some of the haze for employers trying to navigate compliance with New Jersey’s cannabis law.

To read the full text of this Duane Morris Alert, please visit the firm website.

Duane Morris Attorneys Named to Top 200 Cannabis Lawyers List

Duane Morris partners Paul P. Josephson, Michael D. Schwamm, Tracy Gallegos and Seth A. Goldberg have been named to Cannabis Law Report‘s Top 200 Cannabis Lawyers for 2022/23.

Cannabis Law Report compiled the list from the publication’s annual survey of clients and lawyers in the cannabis legal services sector “as well as our personal editorial decisions based on our reporting of the industry on a daily basis for the past six years.”

For more information, please visit the Top 200 Cannabis Lawyers website.

New York Cannabis Control Board Approves 19 Adult Use Conditional Cultivator and 15 Adult Use Conditional Processor Licenses; Retail Dispensary License Applications Open August 25

By C. Neil Gray

On August 15, 2022, the New York Cannabis Control Board (the Board) held a public meeting via real-time stream to consider a number of agenda items.  Among the most notable of the topics taken up was the approval of conditional adult use cultivator licenses and conditional adult use processor licenses.

Chair Tremaine Wright opened the meeting by providing an update on the Seeding Opportunity Initiative (SOI) that was launched in Spring 2022.  Through the SOI, the Board has granted 223 adult use conditional cultivator licenses, resulting in the first farms cultivating regulated adult use cannabis in New York State.  Chair Wright also noted that the Board visited three of these farms in July and were encouraged by the progress and creativity demonstrated in such a short window of time.  After some additional opening remarks, the Board moved on to “further steps to advance the Seeding Opportunity Initiative” to “continue to build out New York’s Adult Use Cannabis supply chain.” Continue reading “New York Cannabis Control Board Approves 19 Adult Use Conditional Cultivator and 15 Adult Use Conditional Processor Licenses; Retail Dispensary License Applications Open August 25”

Reflections of a Former Regulator: Three Thoughts on a Budding Industry

By Matthew J. McCarthy

Beginning in 2019, I served as the lead prosecutor in regulatory enforcement actions at the Maryland Medical Cannabis Commission, where I worked closely with the Commission’s investigators and compliance professionals to develop enforcement procedures to help guarantee a safe and reliable medical cannabis marketplace. During my time as a cannabis regulator, I had an invaluable opportunity to help shape the local regulatory landscape, foster productive relationships between government and industry, and observe emergent cannabis regulatory systems across the Northeastern and Midwestern U.S. I hope that the three notes below can provide some insight as to how licensees can orient themselves for a productive present and profitable future. These observations are mine alone.

Continue reading “Reflections of a Former Regulator: Three Thoughts on a Budding Industry”

New York Regulators Approve New Rules on Packaging, Labeling, Advertising and Testing As Part of Its Adult-Use Retail Market Launch

By Steven Perelman

The Cannabis Control Board (“CCB”) of New York State’s Office of Cannabis Management (“OCM”) held an important special board meeting in which it approved several resolutions implementing New York’s Marihuana Regulation & Taxation Act (“MRTA”).  Signed into law on March 31, 2021, the MRTA legalizes adult-use cannabis (also known as marijuana, or recreational marijuana) in New York State. Continue reading “New York Regulators Approve New Rules on Packaging, Labeling, Advertising and Testing As Part of Its Adult-Use Retail Market Launch”

California Targets Cannabis Businesses over Unpaid Taxes

Duane Morris partner Tracy Gallegos was quoted in this article in MJBizDaily.

California’s business tax collector is ramping up enforcement against unlicensed and licensed cannabis companies, which owe the state nearly $200 million in unpaid taxes. […]

Tracy Gallegos, a corporate partner in the Las Vegas office of the Duane Morris law firm, said many of her clients entered the regulated industry with high aspirations, but naiveté and poor, early business decisions compounded problems. Continue reading “California Targets Cannabis Businesses over Unpaid Taxes”

Cannabis Product Mislabeling Leads to Investigation and Recall in Oregon

The Oregon Liquor and Cannabis Commission (OLCC) is conducting an ongoing investigation into Curaleaf regarding an alleged mislabeling of a nonpsychoactive cannabidiol (CBD) product, which actually contained psychoactive delta-9 tetrahydracannabinol (THC). Curaleaf operates 101 retail cannabis dispensaries in 16 states. The OLCC investigation revealed that the alleged mislabeling resulted from an employee’s confusing the CBD bottles with the THC bottles in preparing the Curaleaf cannabis products at issue. The incident caused consumers ingesting those products to have experienced a “high” they did not anticipate, and ultimately led to the recall of approximately 500 bottles of tincture from the Oregon market. At least three of those consumers went to the emergency room due to the high, one consumer was hospitalized and one consumer’s estate brought a claim for wrongful death.

To read the full text of this Duane Morris Alert, please visit the firm website.

Seth Goldberg is a Team Lead of Duane Morris’s Cannabis Industry Group, a cannabis business advisor, and a trial attorney with experience in products liability and consumer fraud claims. Ethan Feldman is an associate in the firm’s Trial department, with experience in products liability and consumer fraud.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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