States legalizing cannabis are increasingly requiring that cannabis licensees enter agreements allowing unions access to their employees for organization activities. Some states go even further, not only requiring a labor peace agreement (LPA), but that employees agree on the terms of a collective bargaining agreement (CBA) soon after licensure. As we previously reported, such requirements are especially prevalent along the East Coast, with varying labor requirements imposed by New York, New Jersey, Virginia, Delaware, and Connecticut, as well as California. Continue reading “Labor Peace Agreement Mandate Challenged in Federal Court”
On November 7, 2023, Ohio voters will decide the fate of Ballot Issue 2, a citizen-initiated proposed law that would commercialize, regulate, legalize and tax cannabis for adult use. Recent polling data suggests broad support for Issue 2. A majority vote in favor of Issue 2 would make Ohio the 24th state—and the sixth in the Midwest—to make recreational cannabis legal under state law.
If Issue 2 passes, a new chapter 3780 in the Ohio Revised Code called Adult Use Cannabis Control would take effect December 7, 2023. However, the cannabis industry expects sales in Ohio of adult use cannabis to commence in the summer of 2024. Continue reading “Ohio Is Poised To Become The Next State to Legalize Cannabis For Adult Use”
New York’s much-anticipated adult-use cannabis retail licensing process has recently been stuck in a haze since August 18, 2023, when a New York Supreme Court judge ruled that the state Office of Cannabis Management’s (“OCM”) discretionary licensing procedure violates New York’s Marihuana Regulation and Taxation Act (“MRTA”). As Duane Morris previously reported, the judge’s ruling, resulting in an injunction and stoppage of the OCM’s ability to grant additional license applications, is the latest in a number of delays and legal disputes that has New York’s cannabis authorization program far behind schedule. The case involves a group of military veterans who claim New York’s initial round of issuing conditional licenses only to people with prior marijuana convictions, and not also to a wider group of service-disabled veterans and other social equity applications, violated the MRTA. As a result of the injunction, the OCM has appealed the decision and seeks either a temporary stay of the injunction or an expedited appeals court briefing schedule. Continue reading “New York’s Conditional Recreational Cannabis Licensing Process Goes up in Smoke as State Regulators Ask Court to Stay Injunction Order”
Two pieces of legislation were recently introduced in the New York City Council aimed at controlling the unlicensed cannabis market in New York City.
The first bill bill would prohibit knowingly leasing commercial premises to a tenant who uses the premises for distribution or sale of cannabis or cannabis products without a license. The first time that an unlicensed cannabis seller is found to be operating in leased commercial premises, the Sheriff, Police Department, or any other relevant agency would issue a warning to the owner of the premises. If an unlicensed cannabis seller is later found to be operating in the same commercial premises, the owner would be liable for civil penalties. https://legistar.council.nyc.gov/LegislationDetail.aspx?From=Alert&ID=6165428&GUID=33A0F77B-950A-4A9E-8033-F0316A346404&Options=ID%7CText%7C&Search=cannabis
The second bill would require the Department of Health and Mental Hygiene to collaborate with the Department of Consumer and Worker Protection and any other relevant agency to create and implement a public awareness campaign on the dangers of purchasing cannabis or cannabis products from unlicensed cannabis retailers. The campaign would target minors and young adults and focus on the risks of consuming cannabis products adulterated with synthetic cannabinoids and other harmful substances and the risk of purchasing such products from unlicensed cannabis retailers .https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6165413&GUID=59A6FC8D-E54A-43D2-B621-906AA1B706A2&Options=&Search=
In an interview published on March 23, 2023, Green Market Report spoke with Axel Bernabe, the Chief of Staff and Senior Policy Director for the New York Office of Cannabis Management (“OCM”). The interview is significant because Axel Bernabe is one of the leading policymakers in the OCM. The interview ranged over many topics; however, the most-detailed part of the interview was devoted to the proposed True Party of Interest rules (“TPI”) issued in December of last year.
In the interview, Axel Bernabe explained that the focus in understanding the TPI rules should not be on the mechanics of the rules but on their purpose. The purpose of the rules is to prevent ownership or control between the supply tier of the cannabis industry, consisting of cultivation, processing and wholesale distributing, and the retail tier of the cannabis industry, consisting of retail dispensaries, on-site consumption establishments and delivery. This two-tier market structure is fundamental to the New York Cannabis Law. Accordingly, if a person or entity has an ownership or control interest in a business in the supply tier, then that person or entity cannot have any ownership or control interest in any business in the retailing tier. Similarly, if a person has an ownership or control interest in a business in the retailing tier, then that person cannot have any ownership interest in any entity in the supply tier.
Bernabe explained that New York has adopted this policy because suppliers who had an interest in the retailing tier would be able to exert anti-competitive pressures on retailers, which would limit choice and quality of product.
Bernabe admitted that there has been heated criticism that the TPI rules would hobble the ability of dispensary operators to raise funds because many investors want to buy into vertically integrated operation, due to the perceived economic advantages of vertical integration. However, Bernabe seemed dubious about these economic advantages. In addition, he felt that the investors (for the most part) who would be discouraged by the TPI rules would be existing cannabis businesses that are vertically integrated. As a side note, although Bernabe did not mention it, less than half of California cannabis businesses are vertically integrated, which helps his argument that prohibition of vertical integration does not foreclose businesses in the retail tier from finding investors.
Bernabe further argued that barring businesses in the supply tier from dictating to the retail tier would, in fact, further (rather than discourage) the ability of the retail tier to raise investment money from investors new to the cannabis industry. He added that this model has been used in the liquor industry in New York and has produced a market of thousands of profitable, small and often family-owned liquor stores.
In short, from the policy point of view enunciated by Bernabe, the only purpose of the TPI rules is to prevent ownership between the two tiers. The idea is straightforward. If the true person of interest is identified, then prohibited cross-ownership would be easy to detect by comparing whether the same name is appearing on one tier and the other tier. Accordingly, the application for a conditional adult use dispensary license requires both a personal history disclosure form and an entity history disclosure form. (In fact, the TPI definitions in the rules proposed in December of last year are substantially the same as the TPI definitions in the Conditional Adult-Use Retail Dispensary rules, which were adopted in final form on August 3, 2022, and presumably are already affecting investors in positive and negative ways.)
Bernabe stressed that horizontal integration among licensees in a tier is permitted, although subject to certain limitations on size such on the number of acres in a farming facility or the amount of passive investment in multiple retail dispensaries. Accordingly, the horizontal integration rules are much less severe than the absolute prohibition on vertical integration. Bernabe confirmed that out-of-state vertically integrated operators would be free to invest in New York supply operations as long as the operators did not invest or control businesses in the retail sale tier.
Bernabe admitted that the final TPI rules will likely be strict, broad and perhaps mechanical, but that it is necessary to draw a “bright line” to preserve the integrity of the two-tier regulatory regime.
Bernabe did not say when the TPI rules—whose comment period ended on February 13, 2023—would be issued in the final form.
Effective March 22, 2023, New York’s cannabis advertising rules are now in place. These rules aim to protect public health, particularly minors, and ensure that cannabis advertising is truthful and not misleading.
- Cannabis advertisements cannot be displayed within 1,000 feet of a school or daycare center.
- Ads cannot target individuals under 21 years of age or depict minors, toys, characters, or cartoons.
- Advertising cannot claim cannabis is safe or healthy or that it has curative or therapeutic effects unless supported by substantial evidence.
- Ads cannot contain false, misleading, or deceptive information.
- The warning statement “This product may be intoxicating and may be habit-forming” must be included in all cannabis advertisements.
- Promotions, such as giveaways or coupons, are prohibited except in licensed dispensaries.
- Advertising cannot be displayed on any public transportation or property owned or leased by the state or local government.
- All ads must include the New York State Department of Health’s “Know the Facts” educational campaign website address.
As legal adult-use cannabis continues to spread across the country, so does a movement to unionize cannabis workers. The need for dispensary and cultivation workers has rapidly increased, along with the demand for higher wages, improved benefits, diversity and inclusion efforts, and more.
To date, 21 states and the District of Columbia have legalized adult use marijuana. Bills to legalize adult use marijuana are pending in several other states. According to Forbes, cannabis sales in the United States are estimated to reach $57 billion by 2030. The industry shows no signs of slowing down. Labor unions have taken notice and have seemingly set their sights on the cannabis workforce.
The efforts of labor unions have been buoyed by labor peace agreement (LPA) laws. While LPA laws vary by state, they generally require cannabis companies to take a hands-off approach to union organizing efforts as a condition of doing business in the state. This means the company cannot interfere with organizing efforts. However, unions typically also agree via the LPAs not to interfere with the operations of the business. Alternatively, some LPA laws offer preferential status in licensing applications for companies that enter into LPAs.
California, New York, New Jersey, and Virginia all have varying degrees of requirements with respect to LPAs in their states. Pennsylvania and Illinois do not require LPAs, but the states offer certain advantages to companies who enter into LPAs. Several other states, such as Massachusetts, Connecticut, and Minnesota, are contemplating enacting their own LPA requirements.
The apparent enthusiasm of organizing efforts largely paid off for unions in 2022. According to Bloomberg Law’s NLRB Election Statistics report, unions prevailed in 76% of overall elections in 2022, one of the highest success rates on record. The United Food and Commercial Workers Union, which has dubbed itself “the Cannabis Workers’ Union” representing more than 10,000 cannabis members, won 70% of representation elections in 2022. They are not the only ones. The International Brotherhood of Teamsters, which has unionized some cultivation workforces, won 66% of representation elections in 2022.
While there has been some litigation surrounding LPAs and organizing efforts, to date, most cannabis companies do not appear to be challenging these requirements. This has the strategic benefit of allowing cannabis businesses to get licenses and begin operations, rather than engage in what could be a prolonged legal battle. However, as unions expand and tighten their grasp on cannabis workforces, industry groups may start to fight back.
In case you might have missed it with your year end festivities, the U.S. Virgin Islands became the latest U.S. region to legalize adult-use cannabis. Once regulations are finalized, the rules will allow residents and visitors to purchase medical and/or recreational cannabis products from licensed dispensaries. The bill was signed by Governor Bryant and is now effective.
The legislation also includes provisions proposed by Senators Sarauw and Bolques and automatically expunges cannabis possession charges in the territory.
Medical cannabis was previously approved in 2019 but the legislature continues to work on the applicable rules and regulations for the program.
It is estimated by Commissioner Richard Evangelista that it will likely be another 18-24 months before the government can finalize the applicable regulations for medical and adult use.
Sarauw said that even now, with adult-use reforms now heading to the governor’s desk, “we have done absolutely nothing to move cannabis forward.”
At the moment, current rules decriminalize the possession of up to an ounce of cannabis in the U.S. Virgin Islands.
Key Take Away – the USVI has now officially approved adult use cannabis which will likely spark (sorry, could not resist) multiple businesses and business lines to look to establish operations in the Territory. Grow, manufacture, dispensing and businesses supporting these operations are sure to continue their thought processes as to how to engage and become licensed pending final rules to be issued by the Department of Licenses and Consumer Affairs.
Duane Morris has an active Cannabis Team to help organizations and individuals plan, respond to, and execute on your cannabis and hemp initiatives. We would be happy to discuss your proposed project and how these new rules might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, or Tracy Gallegos, Seth Goldberg, or Paul Josephson who co-head the Cannabis Group or the attorney in the firm with whom you in regular contact .
If you employ workers in the cannabis industry, consider including workplace health and safety among your top priorities as you set goals for the new year.
With the rapid growth of the cannabis industry comes increased scrutiny from government regulators, including those charged with enforcing workplace health and safety laws. For example, in December 2022, cannabis producer and retailer Trulieve announced that it reached a settlement with the Occupational Safety and Health Administration (“OSHA”) of a citation issued in June 2022 for alleged violations of the Occupational Safety and Health Act. The citation followed OSHA’s investigation of the death of a Trulieve production worker from asthma-related complications allegedly related to her occupational inhalation of cannabis dust. As part of the resolution of the citation, Trulieve agreed to study the hazards of exposure to ground cannabis dust for purposes of determining whether cannabis dust should be classified as a “hazardous chemical” for OSHA purposes. Expected to be complete in May 2023, the study is likely to have nationwide implications for employers in the cannabis industry. Continue reading “Is Your Business OSHA-Ready? Health and Safety Implications for Cannabis Industry Workplaces”
On October 28, 2022, the New York Office of Cannabis Management (OCM) released forward-looking guidance for those seeking to operate within the state’s recreational cannabis market.
In January, Gov. Kathy Hochul published an extensive State of the State book, laying out New York’s plan for 2022, including $200 million loan fund in support of social equity applicants within the state’s nascent marijuana market.
The state government set a goal of opening dispensaries by the end of the year that will allow New Yorkers to legally purchase cannabis. Hochul told the editorial board of Advance Media, owner of the Syracuse Post-Standard, that the state would open 20 dispensaries by the end of the year, with another 20 opening each month thereafter.
On October 17, Hochul told reporters that New York is “on track” to open some cannabis dispensaries within months.
Under Hochul’s plan, it is up to the state to select and lease locations for the dispensaries, including 70 in New York City. While the state’s OCM has not yet announced any locations for dispensaries anywhere in the state, it recently issued guidance in clear anticipation of this plan unfolding in the near future.
The New York OCM’s “Guidance for Adult-Use Dispensaries” is a series of prospective regulations for Conditional Adult-Use Retail Dispensary (CAURD) licensees and applications and are immediately effective.
The 27-page document includes requirements and operational rules addressing everything from operations and compliance measures to marketing, sales and distribution parameters, while providing insight into the OCM’s plans for issuing licenses when the time comes. This includes topics of record-keeping requirements, required training for staffers, and inventory and tracking requirements, among others.
While these guidelines are not yet formally adopted and enacted as rules, they at least offer both CAURD licensees and regulators a “working” preview of the New York Cannabis Control Board’s (CCB) expectations for the forthcoming dispensaries.
Indeed, the document states that it “serves to provide the framework that will assist CAURD licensees plan for how to operate their dispensary before regulations are formally adopted. . . and provides clarity on what the Office’s expectations are in relation to those regulations and laws currently in place and the regulations that will be promulgated in the future.”
What Does This Mean for CAURD Licensees?
The state and regulators are gearing up for the opening and development of these dispensaries, possibly within the next few weeks, and throughout the next 15 months. CAURD licensees in New York should adhere to OCM’s newest guidance, in addition to existing Cannabis Law and Title 9 of the New York Codes, Rules and Regulations, until a copy of the final regulations is made available on the OCM’s website.
On November 3, a Business of Cannabis: New York panel discussion ensued, where much of the conversations centered on the importance of providing equal opportunities to small business and justice-involved entrepreneurs to participate in the industry. Panel participants included Tremaine Wright, Chair of the CCB, Crystal Peoples, New York State Assembly Majority Leader, and Jeremy Berke, Reporter for Business Insider.
The same day, Wright tweeted, “[New York] is on target to open stores by the end of the year.” Axel Bernabe, Chief of Staff & Senior Policy Director for OCM, who delivered the keynote more specifically assured, “In 15 months, we’ll have a fully established supply chain built on social equity. That supply chain will form the backbone of what we’re going to build on in the future.”
Qualifying New York small business owners and entrepreneurs should keep a close pulse on this evolving regulatory landscape over the coming weeks and months to ensure they remain in legal compliance and best positioned to take full advantage of this next phase of the state’s cannabis initiative.