Bipartisan House Bill Shows Feds May Be Relaxing Stance on Marijuana in Employment Decisions

Although several states have relaxed their stances on marijuana, and in turn protected employees’ lawful off-duty use of marijuana, employees (and often contractors) of the federal government are usually excluded from these protections.  Marijuana remains a Schedule I substance under federal law, and thus is unlawful, without exceptions.

However, the federal government is starting to take steps towards softening its stance on marijuana, which may be welcomed news to many considering that the federal government is the largest employer in the United States.

On July 27, 2023, Representatives Jamie Raskin (D-MD) and Nancy Mace (R-SC) introduced bipartisan legislation in the U.S. House of Representatives that would allow job applicants who are current or former marijuana users to receive federal security clearances and have access to federal job opportunities.  The Act, titled the Cannabis Users’ Restoration of Eligibility Act, or the “CURE Act,” would amend the Intelligence Reform and Terrorism Prevention Act to prohibit current or past use of marijuana from being a consideration with respect to a person’s eligibility for security clearances or eligibility for employment with the federal government.

Individuals who are denied security clearance or employment will also be afforded the opportunity to have that decision reviewed by the applicable federal agency under the Act.  If it is determined that current or past marijuana use was the reason for the denial, the agency is to reconsider the same.

The Act, in its current form, is silent as to whether federal agencies can continue to test current employees for marijuana, and what actions, if any, agencies can take against current employees who test positive for marijuana.

The CURE Act has a ways to go before it becomes law, and it is likely to meet significant resistance along the way.  Nevertheless, the progress marijuana has made in becoming more acceptable and mainstream is evident, and those on Capitol Hill are taking notice.

FDA Issues Warning Letters Against Delta-8 THC Gummies

Seth Goldberg
Seth A. Goldberg

I previously wrote about the American Trade Association for Cannabis & Hemp’s policy paper that called for the federal and state regulation of hemp -synthesized intoxicants like Delta-9 and Delta-10 THC, issued on June 24, 2023.   Last week, the FDA issued warning letter to six different manufacturers of gummies containing Delta-8 THC:  Delta Munchies, Dr. Smoke LLC (also known as Dr. S LLC), Exclusive Hemp Farms/Oshipt, Nikte’s Wholesale LLC, North Carolina Hemp Exchange LLC and The Haunted Vapor Room. 

The warning letters explain that the products at issue are adulterated under the Food, Drug and Cosmetics Act, because Delta-8 THC has not been authorized by the FDA as a “food additive.”  They note that the FDA has received numerous adverse event reports pertaining to products containing Delta-8 THC, especially such products ingested by children, and emphasize the FDA is particularly concerned about the marketing of gummies containing Delta-8 to children.   In this connection, the warning letters also claim the products at issue were marketed in a deceptive manner in violation of the FTC Act.  

The manufacturers were told to cease and desist the sale of the allegedly offending Delta-8 containing products.  The warning letters will likely result in further investigation by the FDA and a process by which the manufacturers will work with the FDA to resolve the issues raised in the warning letters.

Bi-Partisan Legislation to Legalize Cannabis in Pennsylvania Proposed

Seth Goldberg
Seth A. Goldberg

Pennsylvania Senators  Dan Laughlin (R) and Sharif Street (D) have proposed legislation to legalize cannabis in Pennsylvania.  Senate Bill 84 includes an 8% sales tax, 5% excise tax, restrictions on marketing to youth, expungement of prior cannabis convictions, and other social justice measures, such as social and economic equity licenses.  Given the legalization of cannabis in Pennsylvania-border states, such as New York, New Jersey, Delaware, Maryland, and Ohio, the legalization of cannabis in Pennsylvania is necessary to ensure PA cannabis consumers purchase their products in state, which will allow the Commonwealth to enjoy the associated tax revenue, and PA residents to enjoy the economic benefits, such as more jobs and construction, associated with expanding the current medical marijuana program.

ATACH Calls for the Regulation of Hemp-Synthesized Intoxicants

Seth Goldberg
Seth A. Goldberg

Since the legalization of Hemp under the 2018 Farm Bill, a market has grown  for products that synthesize Hemp-derived compounds into intoxicants that provide a high for consumers.  Manufacturers of such products claim they are legal because they were synthesized from federally legal Hemp.  Because FDA and most states do not have regulations specifically addressing such Hemp-synthesized intoxicants, products containing Delta-8, Delta-10 and a synthesized version of Delta-9 are being marketed widely, and with little, if any, federal or state regulation.  Consequently, such products propose a health and safety risk to consumers, and undermine state-legal cannabis programs throughout the U.S.  Last week, the American Trade Association for Cannabis & Hemp issued a comprehensive policy paper calling for the regulation of Hemp-synthesized intoxicants.  ATACH urged federal and state lawmakers, as follows:

    • Amend the definition of hemp to account regulation for final product

    • Adopt standards for all intoxicating cannabinoids, whether from marijuana or hemp

    • TTB should regulate intoxicating products in adult-use settings

    • FDA should provide a pathway for non-intoxicating cannabinoids such as CBD

    • State labs should be provided with federal technical assistance

    • Retail sales should be limited to adults 21 or over anywhere intoxicants are available

    • Intoxicating cannabinoid products should be regulated in marijuana programs

    • Regulators should adopt uniform testing and labeling standards

    • Enforcement efforts should be supported, and regulations should promote public health and safety



Maryland Legalizes Adult-Use Sales, Effective July 1

Effective July 1, 2023, adults 21 and older will be able to possess, consume, and purchase adult-use cannabis throughout Maryland. Maryland Governor Wes Moore signed House Bill 556 on May 3, 2023, after the Maryland House of Delegates and Senate passed the legislation. Upon the governor’s approval, the law replaced the Maryland Medical Cannabis Commission, a board made up of 13 commissioners that regulated medical cannabis, with the Maryland Cannabis Administration (“MCA”), an autonomous agency. MCA is now working to issue medical cannabis licensees processors with expanded licenses that will permit them to produce and sell cannabis flower, pre-rolls, edibles, and other authorized products to both the medical and recreational markets.
MCA now reports that more than 90 medical dispensaries across the state have received these expanded licenses and will be eligible to sell to the recreational market on July 1.

The law also expands Maryland’s social equity efforts by establishing a new Office of Social Equity, an independent office charged with “promot[ing] and encourag[ing] full participation in the regulated cannabis industry by people from communities that have been disproportionately impacted by the War on Drugs.” The new Community Reinvestment and Repair Fund will direct tax revenues from adult-use sales to community-based initiatives designed to benefit low-income communities.

The law also creates a forum between the regulator and the licensed industry through establishment of the Advisory Board, which will be chaired by the MCA’s executive director. By law, members of the board will be appointed by the governor and include current licensees, experts in cannabis law, science, or policy, and public health experts, among others. Once appointed, the Advisory Board will be empowered to provide recommendations to MCA on policy and regulations.

Although providers currently in the medical cannabis market will be the first to offer adult use products to adult consumers, the new law authorizes the MCA to issue additional grower, processor, and dispensary licenses – including microlicenses for smaller-scale producers. This summer, the MCA and the Office of Social Equity will conduct outreach and provide training for aspirants to the new market.

The 30-day application window for new licenses will open in September 2023.

Expanded Equity Funding for NJ Licensees Heads to Governor’s Desk

A sea change in the funding of New Jersey cannabis businesses has been approved by New Jersey’s Legislature and is pending on Governor Murphy’s desk awaiting his signature.  Duane Morris attorneys assisted in the conception and drafting of this legislation.

That legislation, A4151, will allow far greater levels of investment in minority, women and disabled veteran owned adult use cannabis businesses by those best positioned to invest in them on equitable terms – current licensees and cannabis funds. The bill will increase the equity stake a licensee or investment fund may have in these diversely owned businesses from 5% to 35%, and allow them to invest in up to 7 diversely owned licensees. This will also allow capital stacks to rely more heavily towards equity, reducing the debt component at high interest rates that burn cash flow new operators need to get their businesses on solid footing. To date, these terms have only been available to New Jersey small universe of diversely owned medical cannabis licensees.

The bill protects against predatory conduct by preventing investors from acquiring a majority interest in the diversely owned business, even in cases of default. In the event of default, majority ownership by diverse interests must be maintained.  Terms must be commercially reasonable as determined by the Cannabis Regulatory Commission.

Context: Hundreds of New Jersey conditional licensees are struggling to raise the $250,000 to $1 million initial investment they need to fund even a simple dispensary given high real estate, labor, tax and compliance costs in New Jersey. Without funding, they simply cannot complete the steps needed to convert to annual licensure (i.e., secure real estate and municipal approval and complete their operational plans and SOPs) and open for business.

Without funding, many of those conditional licensees will be forced to abandon their efforts and in many cases wipe out their personal investments to date, which often are funded out of 401(k) and other savings accounts.

Diversely owned cannabis businesses and equity investors alike interested in learning more about this opprtunity should contact Paul Josephson, Tracy Gallegos, or Michael Schwamm.

New Jersey Federal Court Blocks Job Applicant and Employee Lawsuits Regarding Recreational Marijuana Adverse Action, Urges Legislative Intervention

Duane Morris Takeaways: In Zanetich v. Walmart, Inc., Case No. 1:22-CV-05387 (D.N.J. May 25, 2023), a case of first impression, the Judge Christine O’Hearn of the U.S. District Court for the District of New Jersey found the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”), the 2021 law legalizing recreational marijuana use in the state, does not allow job applicants and employees to file lawsuits alleging adverse actions based on marijuana use.  The ruling is a boon for employers across New Jersey, who will not face the possibility of private lawsuits filed by applicants and employees based on adverse employment actions by employers for their workers’ off-duty marijuana use.  However, the victory may be short-lived, as the Court invited re-examination of the law by way of legislative amendment, enforcement guidance, or New Jersey state court clarity on application of the state’s common law “failure to hire” theory to claims under the CREAMMA.

Case Background

On January 21, 2022, the plaintiff applied for a job with defendants in the Asset Protection Department in one of defendants’ New Jersey locations.  A few days after his January 25, 2022 interview, on January 28, 2022, defendants offered plaintiff the job, beginning on February 7, 2022, “subject to him submitting to and passing a drug test.” Id. at 2. Plaintiff alleged that at the time, the defendants had a Drug & Alcohol Policy that stated “any applicant or associate who tests positive for illegal drug use may be ineligible for employment,” which included marijuana. Id.

After plaintiff took a drug test on January 21, 2022 and tested positive for marijuana, he contacted defendants on February 10, 2022 for an update on his application.  Two days later, defendants informed Plaintiff that his job offer would be rescinded.  When plaintiff asked for the reason for this decision, he was advised it was because he had tested positive for marijuana.

To read the full text of this article, please visit the Duane Morris Class Action Defense Blog.

The Cannabis Chamber of Commerce’s “The State of Cannabis: 15 Key US Markets 2023 Annual Report”

Duane Morris partners Michael D. Schwamm and Paul P. Josephson contributed sections on New Jersey and New York to the Cannabis Chamber of Commerce’s “State of Cannabis: 15 Key US Markets 2023 Annual Report.” Also involved were partner Katelynn Gray and associate Deanna Lucci for the New York section, and associate Miranda Bovit for the New Jersey section.

Read the full white paper at the Cannabis Chamber of Commerce website.

D.C. Superior Court Rules In Favor of Plaintiff in Landmark Case—Finds Neighbor’s Cannabis Smoke To Be a Private Nuisance

The District of Columbia (D.C.) Superior Court has ruled in favor of a homeowner who has long complained that her neighbor’s use of cannabis was to blame for her chronic nausea and other ailments.

Josefa Ippolito-Shepherd, plaintiff, a public health scientist in D.C.’s Cleveland Park neighborhood, filed a private nuisance action against her neighbor in 2020. The plaintiff and defendant live in a duplex, sharing a wall. The defendant neighbor rents the ground unit apartment to Thomas Cackett, who purchases medical cannabis with a doctor’s authorization and testified that he smokes cannabis at night to help him fall asleep.

Ippolito-Shepherd claimed that the smoke permeated her house constantly and caused her to lose sleep, prompted digestive problems and vomiting. Claiming that Cackett and his landlord knew about the “intoxicating fumes” coming from their home since July 26, 2019, Ippolito-Sheppard previously tried to convince her landlord neighbor to evict Cackett and asked Cackett to stop smoking inside the house. Both refused. When Ippolito-Sheppard first sued to 2020, the trial court dismissed the case, concluding that because smoking in one’s home was not illegal, Ippplito-Sheppard could not maintain a nuisance claim. Ippolito-Sheppard persisted, stating that she “has the right to breathe fresh air in [her] home.”

The D.C. Court of Appeals disagreed with the trial court’s dismissal, finding that although smoking in one’s home was legal in D.C., this did not preclude a private nuisance action and remanded the case for trial.

After a closely watched bench trial, the first of its kind in the D.C. area, on June 5, 2023, Judge Ebony Scott ruled in Ippolito-Sheppard’s favor. Although Cackett was legally authorized to use cannabis, she ruled that Cackett “does not possess a license to disrupt the full use and enjoyment of one’s land.” Judge Scott’s order prohibits Cackett from smoking or burning cannabis in any way that emits an odor, either at his home or anywhere within 25 feet of Ippolito-Sheppard’s address. Judge Scott further wrote that “the public interest is best served by eliminating the smoking nuisance and the toxins that it deposits into the air, toxins that involuntary smokers have no choice but to inhale.” However, the court did not find that Ippolito-Sheppard sufficiently proved that marijuana smoke was the cause of her illness and denied her monetary damages.

D.C.’s newly reconstituted Alcoholic Beverage and Cannabis Administration (ABCA), under D.C.’s new medical cannabis law, has not yet issued any public statement on the case. Since March 2023, ABCA has jurisdiction over both licensed medical cannabis operations and less-regulated cannabis gifting shops that operate under Initiative-71 (I-71), a successful 2014 referendum which decriminalized possession and use of cannabis in D.C. for anyone 21 years or older. I-71 also prohibits use of cannabis in any public place. Local activist Adam Eidinger urges local government to instead provide reasonable rules for smoking in public, believing that such guidelines would curtail these next-door neighbor conflicts instantly.

ABCA is currently accepting applications for new medical cannabis licensees to cultivate, process, and dispense cannabis, in brick-and-mortar storefronts and through online sales and delivery. ABCA will also eventually offer I-71 shops the opportunity to receive full licenses as medical dispensaries under the new medical cannabis law, which permits patients to self-certify their need for medical cannabis.

Up in Smoke: Cannabis TM Rejection Shows Need for Caution

On May 3, the TTAB affirmed the USPTO’s previous decision to reject an application for ‘Bakked’. The filing was intended to cover an essential oil dispenser and was submitted by cannabis company National Concessions Group (NCG). […]

[T]he USPTO examiner, as the TTAB reaffirmed, found that the “primary intended purpose” was to dispense cannabis-based oil to a vaping or smoking device.

Hazy Descriptions

Christiane Schuman Campbell, partner at Duane Morris in Philadelphia, says the word “primary” is significant. Continue reading “Up in Smoke: Cannabis TM Rejection Shows Need for Caution”

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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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