Class Certification For Wage & Hour Claims Against Cannabis Dispensaries Granted by California State Court

A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class.  The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.

To read the full text of this article by Seth A. Goldberg and Nick Baltaxe, please visit the Duane  Morris Class Action Defense Blog.

California AG Targets Online Sales of Hemp Synthesized Delta-9 Inhalable Products

Seth Goldberg
Seth A. Goldberg

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.

Is Your Business OSHA-Ready? Health and Safety Implications for Cannabis Industry Workplaces

Kathryn Brown
Kathryn Brown

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”

California Governor Proposes a Cannabis Tax Reduction in an Effort to Shore Up the Legal Market

On Friday, May 13, California Gov. Gavin Newsom introduced proposed revisions to his 2022-2023 budget proposal, which would eliminate the cannabis cultivation tax rate beginning July 1, 2022.

The 15% excise tax on cannabis sales would remain, and the collection and remittance of that tax would be limited to retail sales beginning January 1, 2023. Currently, the cultivation tax rates are $10.08 per ounce of flower, $3.00 per ounce of trim, and $1.41 per ounce of fresh cannabis plant, and these taxes are paid on all recreational and medicinal cultivation of cannabis. Continue reading “California Governor Proposes a Cannabis Tax Reduction in an Effort to Shore Up the Legal Market”

Harborside to Combine with Urbn Leaf and Loudpack to Create StateHouse Holdings

Harborside Inc. (CSE: HBOR), (OTCQX: HBORF) a California-focused, vertically integrated cannabis enterprise, is pleased to announce that it has entered into definitive agreements to acquire UL Holdings Inc. (“Urbn Leaf”),  a top California cannabis retailer with a dominant position in Southern California  and  LPF JV Corporation (“Loudpack”), a leading manufacturer, cultivator and distributor of award-winning cannabis brands in California . Following completion of the Transactions, Harborside is expected to be renamed StateHouse Holdings  (“StateHouse”), subject to shareholder and regulatory approval.

Duane Morris partner Nanette Heide, who led the team that acted as United States legal counsel to Harborside, commented, “We are super proud of Harborside for taking on the challenge of pursuing two opportunities almost simultaneously and delighted to be the legal team that led them through this intense process.”

To learn more about the transaction, please visit the New Cannabis Ventures website.

California’s Governor Proposes Changes to Cannabis Regulation and Taxation

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.

Duane Morris Welcomes Corporate Partner Tracy A. Gallegos in Las Vegas and San Francisco

Tracy A. Gallegos has joined Duane Morris LLP as a partner in the firm’s Corporate Practice Group. She will be resident in the Las Vegas office and also practice in San Francisco. Gallegos further enhances the firm’s corporate, real estate and cannabis law capabilities. Prior to joining Duane Morris, Gallegos was a partner at Fox Rothschild LLP.

“Tracy brings a big-picture understanding of the issues affecting businesses in the real estate, sports, cannabis and entertainment industries,” said Matthew A. Taylor, CEO and Chairman of Duane Morris. “Her collaborative, client-focused approach is a perfect fit with our culture at Duane Morris.”

To read the full press release about Duane Morris partner Tracy A. Gallegos, please visit the Duane Morris website.

California Cannabis Banking Bill – Moving Along with 35-1 Senate Vote in Favor – Brad A. Molotsky, Esq.

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

California Industrial Hemp Registration is Now Open

On April 30, 2019, the California Department of Food and Agriculture (CDFA) made available registration applications to cultivate industrial hemp. The CDFA’s approved regulations require, among other things, a prospective cultivator to register with the county agricultural commissioner where the cultivator is located and pay a $900 registration fee.

However, even though applications are now live, several counties throughout California still restrict or prohibit the cultivation of hemp. The CDFA has identified the following counties as restricting hemp cultivation: Amador, Calaveras, Glenn, Humboldt, Lassen, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Sacramento, San Bernardino, San Joaquin, Santa Barbara, Shasta, Sierra, Siskiyou, Sonoma, Tehama, Trinity, Tulare, Tuolumne, Yolo, and Yuba.

It remains unclear how these current regulations will be affected by the Agricultural Improvement Act of 2018 (2018 Farm Bill). Under the 2018 Farm Bill, the CDFA is required to submit its hemp-production plan to the United States Department of Agriculture (USDA) for approval but as of the date of this post the USDA has not issued regulations relating to that review. Additionally, it is unclear how this program will operate in the interim under the 2014 Farm Bill. We will continue to watch as this program develops alongside the USDA’s 2018 Farm Bill program.

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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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