On September 11, 2023, the California Attorney General’s Office filed a Complaint against a handful of manufacturers of “inhalable hemp products” because they contained hemp-synthesized Delta-9 THC and beta-Myrcene. The Complaint alleges that the sales of such inhalable hemp products violates California’s Proposition 65 and California’s Unfair Competition statutes. Although under California’s AB 45 hemp and cannabinoids, extracts, or derivatives of hemp are permitted to be included in food and beverages , dietary supplements, cosmetics, processed pet food, AB 45 explicitly prohibits the sale of inhalable hemp products in California. Likewise, Prop 65 identifies Delta-9 THC and beta-Myrcene as chemicals known to cause developmental harm, and are thus required to be labeled accordingly; Defendants products were not so labeled. Importantly, none of the Defendants are California residents, and all of the products at-issue appear to have been purchased online and delivered from outside California. Thus, this action should send a strong message to hemp synthesized D-9 manufacturers selling inhalable products into California.
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.
A video replay of the webinar “The Impact of COVID-19 on the California Cannabis Market” is available to view.
Gavin Newsom, Governor of California, released his proposal for the State’s budget today, outlining a number of items of importance for the California cannabis industry.
The most noteworthy proposal is regulatory consolidation. In an effort to improve and simplify regulatory oversight of commercial cannabis activity, the Governor’s office is proposing to consolidate the three licensing entities that are currently within the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health, into a single “Department of Cannabis Control” by July 2021.
Such a change would be welcomed by many operators in the State, especially vertically integrated operators who must now contend with multiple state agencies that have different regulatory requirements and interpretations. This may also boost M&A activity in the state, given that it could lead to more consistent regulations regarding ownership changes and a more efficient regulatory approval process. A single regulatory agency would also streamline fee collections and enforcement. More details on this proposal are expected in the Spring of 2020 and we will be watching closely for those updates.
Additionally, the budget looks to “fix” what many consider to be a broken cannabis taxation regime. The Governor states that the goal of the proposal is to reduce the tax collection burden on the cannabis industry and simplify the tax collection process. The proposed changes move the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer.
While no changes to the tax rates are specified, the proposed budget does state that the Governor will consider other changes to the existing cannabis tax structure, including the number of taxes and tax rates. The California tax burden is viewed as one of the major inhibitors of the growth and success of the cannabis market in the state.
We will continue to monitor these developments as they unfold, so please check back for further updates and analysis.
The CA Senate voted 35-1 to allow banks and credit unions to accept cash deposits from marijuana retailers.
Per reporting from the Star Tribune, those banks would be permitted to issue special checks to the retailers that could only be used for certain purposes, including paying taxes and California-based vendors.
State lawmakers are of the view that such banks would make it easier for licensed cannabis retailers to pay their taxes, which fell far short of expectations in the first year after legalization.
“This is as close as we can get until the federal government changes its policy,” said Sen. Bob Hertzberg, a Van Nuys Democrat and the author of the bill that now goes to the Assembly.
Per the Marijuana Law Reporter, Marijuana has been legal in California since January 2018, but it’s still illegal under federal law under the Controlled Substances Act.
-Brad A. Molotsky, Esquire
On January 16, 2019 the California Office of Administrative Law (OAL) approved the final regulations that were submitted by California’s three licensing agencies, the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (CDFA) and the Department of Public Health (CDPH), in December. These new, approved regulations went into effect immediately, meaning the previous emergency regulations (under which the industry has been operating for the past year) are no longer in effect. The regulations can be viewed here.
In a joint press release issued by the three agencies, BCC Chief Lori Ajax stated: ““These approved regulations are the culmination of more than two years of hard work by California’s cannabis licensing authorities. Public feedback was invaluable in helping us develop clear regulations for cannabis businesses and ensuring public safety.”
The California Department of Public Health (CDPH) is the state agency designated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) as responsible for regulating cannabis manufacturing.
The CDPH issued emergency regulations for manufacturers in November 2017, and has now proposed readopting those regulations for another 180 days. Based on feedback from the public and stakeholders in the industry, the CDPH has proposed some changes to these regulations.
This blog post will highlight the changes to the CDPH emergency regulations and identify key issues for manufacturers. In separate posts, we will be describing the changes made by the California Department of Food and Agriculture and the California Bureau of Cannabis Control.
Changes to Emergency Regulations:
- The CDPH has removed the distinction of A and M Licenses and now only requires one application and applicants will only have to pay one licensing fee. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market.
- The readopted regulations have now incorporated the previously released shared-use facility regulations, which allow a manufacturing premises to be used my multiple businesses that take turns utilizing the space and equipment. This allows for operations similar to a commercial kitchen or agreements in which larger manufacturers offer space and use of equipment to smaller manufacturers.
- The CDPH has removed tinctures from the definition of a product containing more than 0.5% alcohol by volume. However, tinctures cannot be sold in a package larger than two fluid ounces and shall include a calibrated dropper or other measuring device
The change to only a single application for both medical and adult-use is a welcome change for manufacturing businesses. Overall, the CDPH did not make significant changes to its regulations.
If you have any questions about the regulations, please contact Justin Santarosa in our Los Angeles office.
The Bureau of Cannabis Control is the state agency designated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) as responsible for issuing licenses to and regulating distributors, retailers, delivery-only retailers, microbusinesses, and testing labs.
The BCC issued emergency regulations in November 2017, and has now proposed readopting those regulations for another 180 days. Based on feedback from the public and stakeholders in the industry, the BCC has proposed some changes to these regulations.
This blog post will highlight the changes to the BCC emergency regulations and identify key issues for distributors, retailers, delivery-only retailers, microbusinesses, and testing labs. In separate posts, we will be describing the changes made by the California Department of Food and Agriculture and the California Department of Public Health. Those posts can be found here and here.
Changes to Emergency Regulations:
- The BCC has removed the distinction of A and M Licenses and now only requires one application and applicants will only have to pay one licensing fee. Additionally, license fees have been reduced. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market.
- A delivery employee may now complete multiple deliveries of cannabis goods if they are prepared by the retailer prior to the delivery employee leaving the licensed premises. The total amount of cannabis goods in the delivery vehicle may be up to $10,000, the previous limit was set at $3,000.
- The definition of owner has been amended to specify that the chief executive officer and/or the members of the board of directors of any entity that own 20% or more of a commercial cannabis business will be considered “owners.”
- The definition of financial interests has been amended to include “an agreement to receive a portion of the profits of a commercial cannabis business.” Commercial cannabis business and service providers will have to review their agreements and applications to determine if certain amendments will need to be made to include other people or businesses as having a “financial interest” in a commercial cannabis business. Interestingly, this change was not made in the definition of “financial interest” under the CDFA and CDPH regulations.
- Retail stores may not sell or deliver cannabis goods through a drive-through or pass-out window and sales cannot be made to people within motor vehicles.
- License applications must now include:
- Cannabis waste procedures; and
- Delivery procedures, if applicable.
These changes show that the BCC and the other regulatory agencies are being responsive to their stakeholders and while not all changes are positive, we believe this is a step in the right direction for cannabis businesses in California.If you have any questions about the regulations, please contact Justin Santarosa in our Los Angeles office.
The California Department of Food and Agriculture (CDFA), through its CalCannabis Cultivation Licensing division, is the state agency designated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) as responsible for issuing licenses to commercial cannabis cultivators in California.
The CDFA issued emergency regulations for cannabis cultivators in November 2017, and has now proposed readopting those regulations for another 180 days. Based on feedback from the public and stakeholders in the industry, the CDFA has proposed some changes to these regulations.
This blog post will highlight the changes to the CDFA emergency regulations and identify key issues for cannabis cultivators. In separate posts, we will be describing the changes made by the Bureau of Cannabis Control and the California Department of Public Health. Click here for those updates. Continue reading “California’s Re-Adopted Emergency Regulations – What Cannabis Cultivators Need to Know”
California took the next big step in establishing its legal cannabis market. It officially launched its online licensing system and is now accepting applications for commercial cannabis licenses for retailers, distributors, microbusinesses, testing laboratories and cannabis events. The online system can be used by applicants to easily apply for a temporary and annual commercial cannabis license, submit payments and track the status of an existing application.
All business owners applying for a medical and/or adult use cannabis business license must be registered and have an active account on the licensing system. In addition, those individuals or companies that are considered “owners” of the applicant business will need to register as well in order to submit the necessary information that is required to be disclosed by each “owner.”
The link to the online licensing system can be accessed here: http://online.bcc.ca.gov/.
Cultivators must apply for a cultivation license with the California Department of Food and Agriculture’s CalCannabis Cultivation Licensing program. CalCannabis expects to launch its online application process later this month. The California Department of Public Health is currently accepting paper applications by mail or email for manufacturing licenses.