Our Los Angeles cannabis business lawyers also practice employment law, so this is doubly good news.

After Senate Bill 700 cleared the state senate, it passed the Labor and Employment Committee, and then also the Judiciary Committee by a margin of 8-2. Now, it goes to the Appropriations Committee. If it passes there, it can advance to the floor. If the Assembly approves the measure, it will then be sent to the governor’s office for consideration. If it does manage to pass, its effective date would be Jan. 1, 2024.

But why was such a bill even necessary?

Proponents explained that despite an increasing number of employers becoming more accepting of recreational cannabis use among employees, a fair number still follow zero tolerance policies with respect to cannabis use – even if that use occurred long ago and before they ever considered working for that company. A recent analysis by Quest Diagnostics, one of the biggest drug testing companies in the U.S., revealed recreational cannabis use among workers reached “historic” highs in 2021.

On the one hand, companies may be shooting themselves in the foot with such a practice because they’re likely going to get fewer qualified candidates even applying for the position in the first place – which is especially unwise in a tight labor market. They might also disqualify a qualified candidate who otherwise would be a stellar asset – and they’re probably going to be reducing team diversity. On top of that, it creates a situation wherein applicants may be tempted to be dishonest in order to get the gig. So employers may be turning away people who are honest and upfront, while welcoming those who may be less forthright – and for what?

But the issue really comes down to how this impacts workers. Adults who engage in legal recreational cannabis use shouldn’t be turned down for jobs they’re qualified to take, proponents say.

Revamping employment cannabis policies isn’t a trend unique to California. A number of other states and federal government agencies have been switching things up as well.

Among those:

• Michigan is looing to stop pre-employment drug testing for cannabis for most government job applications. At the same time, those already sanctioned for positive marijuana tests would be provided a means to have those penalties rescinded retroactively.
• Washington State now protects prospective workers from discrimination over lawful marijuana use.
• Nevada bars discrimination of job applicants who test positive for marijuana.
• New York law protects adult employees who use legal cannabis while not working.
• The U.S. Department of Transportation just finalized a rule altering its drug testing policy, easing restrictions on airline pilots, truck drivers, and U.S. transit workers who use marijuana recreationally on their off time.
• Those applying for jobs with the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosions are no longer automatically disqualified if they previously grew, manufactured, or sold marijuana in compliance with state law. However, those who did so in violation of state marijuana laws will still be denied employment.
• The U.S. Secret Service no longer automatically disqualifies prospective agents solely on the basis of prior marijuana use.

There are also rumbling among some federal lawmakers of putting together a bill that would shield federal employees from denial of security clearances over cannabis consumption. This aligns with the country’s largest federal employee union, which is actively advocating for the government to drop penalties against federal workers who legally consume marijuana during their time off.

According to one survey by the Intelligence and National Security Foundation (INSF), nearly one-third applicants 18-30 who have applied for federal jobs with security clearances had to withdraw their application due to strict security clearance requirements.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Legal Weed Drives Companies to Relax Their Drug Testing Policies, July 14, 2023, By Khorri Atkinson, Bloomberg News

More Blog Entries:

California Workers Won’t Need to Worry About Weed Use Off-the-Clock, Oct. 6, 2022, Los Angeles Cannabis Employment Lawyer Blog

Earlier this year, Twitter became the first social media company to allow cannabis companies to market their brands/products to customers in the U.S. Prior to that, the company had allowed advertising for hemp-derived CBD products – and only topical ones at that.

Now, Meta, the parent company of Instagram and Facebook, as well as new social networking platform Threads, announced it will allow cannabis advertising – but only for non-ingestible CBD products. Restrictions on hemp advertisements on these platforms are also easing. In a written statement announcing the new approach, the company said so long as the CBD products contain no more than 0.3 percent THC per the federal standard, it can be advertised – subject to certain rules.

Among the Meta rules for CBD and related products advertising for CBD companies:

• No targeted marketing of CBD products to people under 18.
• Be in full compliance with all local laws and regulations, as well as industry guidelines.
• Products are certified with Legitscript, a company that oversees/approves lab testing by third parties.
• Meta has given its written approval for such advertisement.
• Avoid claims – express or implied -that CBD products can cure, treat, prevent, lessen, or diagnose any medical condition or disease in people or animals.

As for non-ingestible hemp products, such as fiber and seeds, businesses will no longer need to obtain written approval to run marketing campaigns of their products in the U.S., Mexico, or Canada.

The company is also no longer requiring that CBD ads serve the purpose of educating, advocating, or giving public service announcements, as was the previous policy, so long as they aren’t selling any illegal CBD products.

As for cannabis, Meta is still currently prohibiting any promotions that advertise cannabis products containing more than 0.3 percent THC or any related psychoactive elements.

Google, meanwhile, has also relaxed its cannabis marketing rules – at least as it relates to FDA-approved CBD pharmaceuticals and hemp-derived topical CBD with less than 0.3 percent THC content. Legitscript certification is also required for Google Ads, and if you mention words like “cannabis,” “weed,” “marijuana,” and a few others, you can be penalized by the algorithm.

This move aligns Meta more closely with the policies of other social media platforms, with one big exception: TikTok. While there are some cannabis retailers who promote their products on the platform, they’ve gotten fairly creative about it, using clever euphemisms and symbols and focusing on education rather than sales. Using the word “cannabis” or showing clear cannabis imagery is strictly prohibited by the platform. And if you do decide to chance it, there’s always a risk, however, that the platform will identify your content as a violation of their terms and services and have you banned. Sometimes even if accounts aren’t outright banned, they may be “shadow-banned,” which is when the algorithm makes it so your content is only visible to those who seek it out directly.

If you have any uncertainty about whether your ads – or ideas for ads – will hold up to all relevant laws, industry regulations, and platform policies, run them by a Los Angeles cannabis business lawyer first.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

CBD and Related Products, Meta

Introduction to the Advertising Standards, Meta

More Blog Entries:

Twitter Marijuana Advertising Rules Still Restrictive, April 5, 2023, Los Angeles CBD Advertising Lawyer Blog

As our Los Angeles cannabis business lawyers can explain, when the state rolled out regulations for cannabis license requirements, one of those was the mandate to sign a labor peace agreement with a a bona fide labor union.

For those who may not be familiar with labor peace agreements, they are contractual agreements between employers and labor unions. The union agrees it won’t picket, stop work, boycott, or interfere with employer operations, and in exchange, the employer promises not to try to interfere with the union’s ability to organize the workers. The purpose is to lay the foundation of a relationship of collaboration between workers and their employers, with the ultimate goal of boosting stability, safety, productivity, and company longevity. It can also help lower the potential for employee abuse and/or exploitation – which was a major concern of state regulators when they were drafting cannabis company rules.

So what happened here?

According to the ALRB panel findings, a number of California marijuana businesses signed off with an organization dubbed the Professional Technical Union Local 33, or ProTech for short. Problem was it appears to have been a “labor union” in name only. It had few members, made no intent to organize workers, and failed to respond to basic inquiries from the ALRB about its membership and organizational structure.

This is part of a pattern we’ve seen crop up in other regions of the country as well. But why would these companies take the risk of losing their license by signing off with a sketchy labor union? Regulators suspect the motivation for these companies was to sidestep worker protection laws and lower labor costs by signing off with a “labor union” that wasn’t actually a labor union.

As for what constitutes a “bona fide labor union,” the ALRB broadly defined it as one that shows sincere good faith with regard to organizing workers, representing them in collective bargaining negotiations, and has the capacity and resources to effectively carry out these tasks.

The fact that the union in this case spotlight did not respond to basic questions from the board led to the panel’s conclusion of impropriety. For that reason, the board ruled that any cannabis company labor union deals inked with ProTech were immediately void. Because a labor union deal is required for state-issued cannabis business licenses, all of those companies are at risk of having their license revoked – unless they scramble to sign off on new deals with recognized labor unions.

This whole investigation kicked off after a number of other California cannabis labor unions filed complaints with the ALRB. One of those representatives expressed approval of the board’s ruling, saying that simply signing a deal isn’t enough to ensure employee protections. There has to be leadership guiding employee organization and sufficient representation to advocate for important workplace rights.

Cannabis labor unions across the country have been showing lately that they aren’t afraid to drive a hard bargain – including exercising their power to strike. For instance, employees of a handful of retail dispensary employees in Chicago were led in a two-week strike to compel company owners to guarantee worker raises.

One the flip side, many cannabis businesses are grappling with tightening profit margins, rising product costs, stagnation on federal reform promises, and heightened investor pressure. But workers say these difficulties aren’t an excuse to pay them a less-than-fair (or livable) wage.

Whether you’re a cannabis company with concerns about the labor union with which you are contracted OR an employee who finds your company’s current labor union to be substantially lacking, we can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Agricultural Labor Relations Board Makes First Finding of NonBona Fide Labor Organization for Cannabis Labor Peace, July 13, 2023, Agricultural Labor Relations Board

More Blog Entries:

Los Angeles Cannabis B2B Companies Must Establish Clear Pay Default Policies, June 16, 2023, Los Angeles Cannabis Business Lawyer Blog

As our Los Angeles cannabis business lawyers can explain, a joint venture is a commercial enterprise with a specific goal undertaken by 2+ partners that otherwise get to retain their distinct identities. Joint ventures can take on many different forms, but typically involve some type of shared returns, ownership, risks, or governance. Often, they’re pooling resources such as expertise, labor, data, physical space, etc., and minimizing risk by dividing it up among them. The extent to which each partner benefits/takes a risk is outlined in the joint venture contract – which should only be signed after careful review by an attorney representing each party. In some cases, it can involve the creation of a separate business entity, such as an LLC.

Joint ventures can be an innovative solution, but it’s not ideal for every situation. Furthermore, it’s usually most beneficial for all involved when there is:

• A clearly stated purpose, a tangible goal.
• A time limit, either for termination or re-evaluation.
• A specified hierarchy or authority structure.
• Clear allocations of profit sharing and losses.
• Stipulated resources that will be shared (and which will not).
• A blueprint for dealing with disputes and liabilities.

These agreements tend to make the most sense in situations that involve:

• Pooling resources for branding and intellectual property. Ex: A grower and distributor pool resources to develop a marketing strategy to promote and sell a certain strand.
• Pooling resources for a single service. For instance, several small cannabis retailers might create a joint venture to get better rates on delivery or shipping. Smaller growers might band together to get better rates on regulatory testing of their products by an accredited testing facility.
• Developing certain cannabis products that wouldn’t necessarily be released by a single company solely with its own resources.

It’s worth noting that identifying joint venture opportunities and partners can be challenging in virtually any industry, but it’s fairly new practice in the cannabis industry. This is another reason it’s a smart idea to hire an experienced cannabis business lawyer to help you navigate the process.

Different Types of California Cannabis Joint Venture Agreements

As previously noted, there are several different types of California cannabis joint venture agreements. These can include:

• Marketing partnerships. Complimentary businesses can capitalize on certain opportunities that benefit them both. A good example of this is the “Weed & Wine” tour joint venture between the cannabis industry and prominent wineries in Napa Valley.
• Supply partnerships. Sales and distribution are different beasts than cultivation and harvesting. These distinct processes are specialized, but related enough that a partnership can free up resources to help each partner focus on what it does best.
• Financial partnership. Every business owner knows it takes money to make money. A joint venture with financial advisors, bankers, or investors can give cannabis companies the capital they need to launch and sustain, while also allowing those financiers to enter the cannabis industry fray without actually having to go through the process of obtaining their own license, etc.

If you have questions about how to initiate a joint venture with your cannabis company or need a legal review of an agreement you’re closing in on, we can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

What Is a Joint Venture and How Does It Work? Oct. 22, 2020, By Priyanka Prakash, Nerd Wallet

More Blog Entries:

Los Angeles CBD Companies Can Take Steps to Shield Against Product Liability Lawsuits, May 17, 2023, California Cannabis Business Lawyer Blog

As Los Angeles cannabis company lawyers, we know this has grown to become a significant problem for our clients. Put simply: Customers aren’t paying their bills. In response, more than half the state’s wholesale B2B cannabis market has invested in help from a Los Angeles non-profit credit association tasked with rating retailers and flagging repeat offenders – with the ultimate goal of halting the growth of hundreds of thousands of dollars in unpaid invoices. The operation, Credit Management Association, is reviewing accounts receivable and documentation from dozens of brand and distributors. Ultimately, it will release a “do not sell list” of two dozen+ cannabis retailers and delivery companies flagged for:

• Failure to pay their bills in a timely manner (90+ days late on invoices).
• Owing at least $25,000 for products.

As longtime Los Angeles marijuana lawyers, we recognize that the majority of cannabis retail and delivery companies don’t set out with the intention of becoming bad actors. They are subject to many of the same brutal market forces as suppliers. They fall a bit behind, and then it’s an uphill battle to fight their way out of debt.

Still, it’s a significant issue because pretty much every manufacturer, distributor, and brand has a non-inconsequential amount of unpaid invoices. That’s not a new problem, but it’s one that’s been exacerbated in the last year thanks to plummeting stocks and dwindling capital. Companies are having to take a hard line with some of their biggest clients – because they simply aren’t paying up.

Companies say they’ve been left with increasingly few choices, particularly because they aren’t backed by investors. If they utilize a debt resolution service, they’re going to take a 20 percent hair cut right off the top – even if they are paid. Most of these claims exceed the small claims avenue because the debts are primarily in excess of $5,000.

Some cannabis firms are making it regular practice to run credit reports on the companies with which they intend to do business. That probably seems obvious, as it’s standard practice in mature industries like government, lending, and banking. But it’s new for the marijuana market.

Lawmakers are starting to be wade into the foray as well. Assembly Bill 766, for instance, would require:

• Cannabis business licensees receiving goods or services of at $5,000 or more to pay their invoices no later than 15 days beyond the due date. Failure to pay would trigger a state regulatory warning notice and potential state disciplinary action.
• Licensees with outstanding invoices in excess of $5,000 to refrain from using credit to purchase any new goods or services from other operators until the outstanding invoices are paid off.
• Invoice due dates to be set at no later than 30 days from the time the goods or services are sold.

Our Los Angeles cannabis business lawyers will be carefully monitoring the progression of this bill. But in the meantime, marijuana businesses extending credit to other companies might consider protecting themselves by taking some of the following steps:

• Have a credit manager either on staff or via contract to help oversee the process by which you’re granting credit. This will help ensure consistent application of your credit policy, as well as management of accounts, collections on accounts receivable, and oversight of the dispute resolution process. A person in this role could also help review the credit status of current customers.
• Develop a credit application and approval process. If you extend credit to all your B2B customers, chances are at some point, you’re going to get burned – possibly big time – especially if you don’t properly vet these operations. Even if your customers are on a COD arrangement, they should still have a credit application on file. Such documentation won’t necessarily guarantee you’ll get paid, but it can be a key document if you ever do need to pursue collections.
• Have a collection strategy already in place. The ideal time to develop a collections action plan is before your customers are in default on their payments. In general, if a B2B cannabis retailer is more than 30 days late on their payment, they should be considered delinquent on that payment. That should trigger an escalating action plan – starting with maybe an email, then five days later a phone call, five days later a phone call and an email, 5 days after that another phone call and another email, a week after that, another email. Once the customer crosses the 60- or 90-day mark without paying, they’re seriously delinquent – and you should have a plan in place for how you’re going to initiate collections on the debt they owe. That may include issuing a final demand letter. If there’s still no response, the bill should go to a collections agency.
• Let go of nonpaying customers. Relatively speaking, the cannabis industry has a very low recovery rate once an overdue invoice goes to collections. Many find that by the time their firm is ready to take serious action, the customer in question has already closed up shop (or is uncooperative). In that case, you can sue, but that might not even be worth your time and money. (It depends on the situation.) But it’s better if you can minimize the problem before it becomes serious by letting go of non-paying customers earlier in the process. Don’t continue to sell products and services to companies that aren’t current on their bills. You can avoid this by having a clear plan in place to put a hold on any account that’s more than a month overdue on invoices.

Making sure you have strong processes and good people in place to manage your credit system and invoicing can make a big difference in the success of your cannabis company.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources: California’s cannabis firms band together to address credit woes, May 16, 2023, Reuters More Blog Entries: Los Angeles Cannabis Businesses Must be Audit-Ready, May 20, 2023, Los Angeles Cannabis Lawyer Blog

Even mor recently, the California Department of Industrial Relations issued a reminder to cannabis employers that they are bound to comply with California labor law requirements. Further, it was noted that labor protections apply to ALL workers – regardless of the worker’s immigration status or even the legal status of the business. That means individuals operating unlicensed cannabis businesses can catch heat not only for operating unlawfully, but also for failing to follow state statutes pertaining to worker rights.

As longtime Los Angeles cannabis lawyers who also practice employment law in Southern California, we are closely familiar with the intersection of these issues and the unique legal questions that can arise.

Cannabis businesses are expected to provide workers with:

• Minimum wage. The statewide minimum is $15.50 as of January 2023. Some cities may impose higher minimum wages.
• Overtime paid at 1.5 the regular rate. Generally, overtime rates must be paid if an employee works more than 8 hours in a day or more than 40 hours in a week. If the employee works more than 12 hours in a workday, they must be paid double for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.
• Valid workers’ compensation insurance. If the worker is hurt on the job, they have a right to expect workers’ compensation coverage, which is required by almost all employers in the state. If the company doesn’t have workers’ compensation insurance, they can be fined by the government and the worker can can sue them for damages.

The new unit of the DCC is aimed at taking action against cannabis companies that coerce or threaten workers, compel them to work in dangerous conditions, or deny them pay, benefits, or breaks to which they are entitled.

Last year, the Los Angeles Times published an investigation exposing the unfair treatment of cannabis workers, who are sometimes cheated out of wages, threatened with physical harm, or compelled to work in dangerous conditions that have actually proven fatal for some.

Allegations of employee abuse involving some 200 cannabis contractors and farms (half lacking state licensing) have been filed since marijuana first became legal in California. An estimated 37 cannabis workers have died on the job since 2016. In Lucerne Valley in December, an 18-year-old cannabis worker died in a greenhouse from suspected carbon monoxide poisoning. It was the same cause of death for a 30-year-old Mexican who died while working at a greenhouse in San Bernardino County. Carbon monoxide poisoning is the No. 1 cause of death among cannabis workers in California.

Other deeply troubling cases involve alleged instances of Argentinian immigrant workers toiling 14-hour days for weeks on end behind locked gates on a Trinity County farm – using a single-burner propane stove for cooking outdoors, a portable toilet, and a shipping container in which some slept at night. Others slept in tents or in their cars. Some said they were paid less than $8 hourly – rarely on time – and provided text messages showing their employer threatened to report them to immigration authorities if they complained.

Longtime California cannabis lawyers know that part of the problem is that the cannabis industry was underground for so long. For decades, cheap, vulnerable laborers were sought for work that was paid in cash and commonly exploited. Still, this doesn’t excuse the continuation of such practices now that the industry has been pulled aboveboard.

A number of sheriff’s offices in Northern California have started teaching officers in the narcotics division about how to identify, investigate, and intervene in suspected human trafficking situations.

The DCC has it’s own such unit, based in Fresno. It’s called the Human Trafficking/Exploitation Assessment and Response Team (or HEART). This marks a notable shift in the DCC’s response to labor exploitation. The agency had been primarily focused on licensing and regulating commercial cannabis operations. Any suspected cases were simply forwarded to state labor agencies. Now, the agency has more than a half dozen detectives who can work on human trafficking cannabis cases and refer to them to prosecutors and/or federal authorities. The team also provides training to law enforcement.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Cannabis workers face death and exploitation. California is stepping in after Times investigation, May 5, 2023, By Paige St. John, L.A. Times

More Blog Entries:

Los Angeles Cannabis Businesses Must be Audit-Ready, May 28, 2023, Los Angeles Cannabis Business Lawyer Blog

As our Los Angeles cannabis lawyers know, there are many different types of audits. If you’re proactive, you conduct internal audits – of your policies, your practices, your financial records, your compliance accuracy, etc. There are external audits, which might be requested by the board, investors, etc. for a lot of the same reasons as an internal audit, except with a fresh set of eyes from the outside. And then there’s an IRS audit or compliance audit.

Three years ago, the Department of the Treasury’s Inspector General for Tax Administration indicated that the IRS intended to ramp up its audit of cannabis businesses nationally. That report flatly stated the IRS did not believe most marijuana industry companies were correctly applying IRC 28E, and thus might owe millions in taxes. (This was based on 2016 tax filings.)

Of the subsequent IRS audits that took place in three states (California, Washington, and Colorado), roughly 60 percent of cannabis companies had to adjust their tax returns – which totaled nearly $50 million in unpaid taxes just for 2016.

This year, the IRS has better staffing than in recent years – plus the ability to conduct most audits virtually. Owners of plant touching businesses need to be especially primed and ready for this.

Tax attorneys will tell you that while the IRS has been called upon to provide clear guidance to those in the cannabis industry so that they can ensure they’re following all regulatory guidelines, the available resources aren’t super helpful. It’s critically important if you are operating a cannabis company or CBD businesses that you keep meticulous records and that you already have a marijuana industry lawyer on retainer – for consult, if nothing else. This will help ensure that if you are audited, you can respond promptly and accurately and hopefully put the whole thing behind you without much trouble.

Being audit-ready means not being reactionary, but proactive. Reacting to an audit by ordering your policies, procedures, and processes is not the ideal. You want to already be prepared for that by having an airtight accounting and reporting system. This includes not only tracking transactions and goods sold, but your inventory, revenue, labor costs, etc. The amount of detail with every record will help not only ensure that your accounting is accurate, but also provides a blueprint of how you arrived at those conclusions. That way, if there’s ever a question or a mistake uncovered, it’s made clear that at least it was an honest one. (This can go a long way in curtailing potential penalties.)

You need to make sure that your standard operating procedures are clearly spelled out step-by-step, and that your staff has clear guidance on how to maintain the books. Follow Generally Accepted Accounting Principles wherever possible. Companies with end-to-end business processes (sequential steps that identify key controls and fraud risks) can go a long way in helping to accelerate an audit as well.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Documents reveal how IRS became more adept at evaluating marijuana company taxes, April 12, 2021, By John Schroyer, Marijuana Business Daily

More Blog Entries:

California Cannabis Businesses Should Prepare for DCC Inspections, Sept. 20, 2022, California Marijuana Business Lawyer Blog

Public acceptance of CBD and cannabis products has grown, use has expanded, and even the federal government has been steadily easing restrictions.

However, where companies are too often getting caught up in litigation and regulatory scrutiny is with respect to potency, mislabeling, and misbranding.

Let’s start with the risk of product liability claims. For those who are unfamiliar, product liability is when a consumer alleges that a product was defectively designed, defectively made, or the warning about the risks was inadequate. Claimants don’t need to prove negligence, but they do need to show the product was the cause or a major contributing factor to the plaintiff’s illness or injury.

The long-term adverse impacts of CBD (or lack thereof) aren’t really widely known because research on these products has been so restricted over the last several decades. The U.S. Food and Drug Administration has raised concern about the potential for CBD to interact negatively with certain medications, and that it might cause liver damage. But the extent to which this is true isn’t well-known because it hasn’t been thoroughly studied. These potential harms could end up being the subject of lawsuits in the future. President Joe Biden recently passed a law permitting advanced research on the risks and medical benefits of both cannabis and its derivatives – including hemp-derived CBD.

While CBD companies aren’t expected to have a crystal ball in knowing all the possible side effects, they would be wise to keep a close bead on emerging research, and ensure they’re both properly monitoring their product and any reported issues. They should also be communicating regularly with regulatory agencies.

The bigger issue in terms of product liability, at least in the short term, is labeling. Improper labeling – whether with respect to potency or mixed ingredients – has been the subject of major headaches for the cannabis and CBD industries the last few years. In 2022, the FDA handed out 33 warning letters to CBD companies for label issues like:

• Product potency didn’t match the numbers on the label. Sometimes these claims stem from lower potency than advertised. Other times, CBD companies have been called out for claims of containing “zero THC” when in fact, there was THC in the products.
• Misbranding, where the product labels provided inadequate instructions for consumer use.
• Making claims the product could be used medicinally for certain conditions when it legally couldn’t make such claims. Examples included promises to treat conditions ranging from diabetes to COVID-19. (Companies cannot make medical claims on non-FDA approved drug products.)
• Label mix-ups between THC and CBD products. (This is a major mistake that in several cases has resulted in big fines and a string of civil lawsuits and later settlements after a half a dozen people who were hospitalized for serious health issues when they consumed what they thought was CBD, but was actually THC. In one case, the family of an elderly man says he died as a result of such a mistake. In another, a Kentucky man drove into a bus after using a CBD vape that actually contained high quantities of THC.)

Product contamination is another legal issue to be wary of. A number of CBD product liability lawsuits have involved contamination of their products with pesticides. A Canadian company recently paid out $2.31 million in a class action lawsuit alleging just this.

Lastly, inaccurate spread of information through advertising – on websites, social media platforms, and more – can come with serious penalties. This includes fake celebrity CBD endorsements.

In general, CBD companies would do well to focus on quality control and pay close attention to the developing science. Also, contracting with a CBD lawyer is a smart, proactive way to ensure your operations stay above board and ahead of the curve on CBD litigation trends.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Warning Letters and Test Results for Cannabidiol-Related Products, February 2023, U.S. Food & Drug Administration

More Blog Entries:

Twitter Marijuana Advertising Rules Still Restrictive, April 5, 2023, CBD Product Liability Lawyer Blog

Of course, as our Los Angeles cannabis DUI lawyers can explain, a big part of the reason for that is because it’s none so simple to establish marijuana intoxication simply based on the levels of psychoactive THC in one’s body. Unlike alcohol, which cycles through the body very quickly, THC remains traceable for weeks after consumption. A 0.08 percent blood-alcohol level would likely indicate recent excess alcohol consumption. But the same isn’t true for THC. Person A might have higher levels of THC in their bloodstream than Person B, but still be less intoxicated. The level of THC in one’s system simply doesn’t tell the whole story, particularly if one is a regular cannabis consumer.

Despite this, 18 other states have imposed some sort of limit on the amount of THC drivers can have in their bloodstream before they’re considered “under the influence” of cannabis. (THC, of course, is short for tetrahydrocannabinol, the element contained in marijuana that creates the “high.”)

There are some safe driving advocates trying to change that. One of those is the family of a 25-year-old who died tragically in a California car accident in 2020 – a passenger in a truck driven by her boyfriend. He would later say he saw an animal, jerked the steering wheel, and crashed into another vehicle – totaling his truck and killing his girlfriend instantly. The woman’s father believes the boyfriend was stoned, and he’d even spoken to his daughter about not getting into the car with her boyfriend when he’d been consuming cannabis. Her mother said she’d spoken directly to the boyfriend about what they recognized as a serious safety issue.

The boyfriend, according to a local news outlet, reportedly conceded that he’d consumed marijuana the day of the crash – but he was a habitual user of cannabis and his consumption had been earlier in the day. He insisted he was not impaired.

Authorities didn’t buy his story initially, and charged him with felony DUI. However, with no legal limits on THC, prosecutors had a weaker case. He ultimately pleaded guilty to vehicular manslaughter and served one year in jail. It was reportedly the second time a passenger of his died in a crash; the first time was in 2010.

Investigators say his blood-THC level was 18 nanograms. The THC legal limit for drivers in other states is 5 nanograms. But again, as our Los Angeles DUI cannabis lawyers can explain, that doesn’t necessarily mean the driver was impaired. And there’s bipartisan agreement on this from legislators. Numerous studies have been conducted that conclude if you’re trying to ascertain the level of impairment, a sole reliance on the amount of THC in one’s system would be inconclusive. A person’s impairment might last several hours after consuming cannabis, but the THC in one’s system is going to persist in one’s system for much longer than that.

So while the cases like the one mentioned in this article are undoubtedly tragic and devastating for families, broadening California’s marijuana DUI laws would likely have the consequence of prosecuting people for impaired driving when they weren’t truly impaired – and that is not justice.

It’s worth noting that the State of California has set aside $2 million for research this year on the impacts of THC on drivers to determine whether some sort of a fair standard for intoxication can be identified.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Marijuana and driving: California lacks legal THC limit, March 6, 2023, By David Goldstein, CBS News Los Angeles

The Modernization of Cosmetics Regulation Act of 2022 (better known as MOCRA), it’s the first time cosmetic rules have been updated by Congress through the Federal Food, Drug, & Cosmetics Act since it was passed in 1938. Other aspects of the law have been updated many times over as we’ve seen evolutions of technology, science, product safety, and responsible resourcing advocacy. Still, none of those expressly addressed makeup laws until MOCRA.

Prior to these changes, makeup companies didn’t legally have to test their products or the individual ingredients to ensure safety. Businesses didn’t have to register their production facilities with the FDA, abide by good manufacturing practice rules, or notify the government when there are adverse reactions (even life-threatening ones). Additionally, the FDA didn’t have the power to recall cosmetic products – even those that could be deadly. MOCRA rectifies all this and grants the FDA authority to oversee regulation of makeup products. (Small businesses may be exempt from certain requirements, depending on the specific circumstances.)

Cosmetics are defined not just as makeup, but those products intended for application to human bodies for cleaning, beautifying, altering appearance, or promoting attractiveness. Any product that promises to treat or prevent a condition or disease or alters some bodily function is classified as a “drug” by the FDA. It’s worth noting that CBD products can fall into both categories, but we’re specifically here just talking about CBD-infused cosmetics – though many do promise anti-inflammatory properties. These can include products like:

• Lip balm and lip gloss
• Moisturizers
• Under eye serums
• Hair creams
• Scalp oil
• Skin cleansers
• Face masks
• Deodorant
• Mouthwash
• Concealer/color corrector
• Mascara

What Does This Mean for CBD Cosmetics Companies?

Companies that produce makeup or other cosmetic products with CBD (hemp-derived) or other cannabinoids are now bound by MOCRA requirements with respect to the following practices:

• Product listing.
• Product registration.
• Facility registration.
• Good manufacturing practices.
• Record-keeping.
• Product recalls.
• Safety substantiation.
• Adverse event reporting to the government.

While states might have their own laws pertaining to cosmetics, MOCRA supersedes those.

It’s worth noting that federal prohibition on cannabis could make complying with certain provisions tricky. For example, if CBD cosmetic products are sourced from a larger cannabis producer, those facilities might not be able to be registered with the FDA due to marijuana’s ongoing classification as a Schedule I narcotic. That said, states are free to pass their own requirements for product and facility listing that align with MOCRA. We suggest companies consult with an attorney to ensure they are in compliance with the law.

As our Los Angeles CBD lawyers can explain, manufacturing CBD cosmetic products may ultimately be more expensive because they’ll have to acquire and maintain proof of their safety and ingredients. On the other hand, the ability to bolster consumer confidence in product safety is important for just about every product maker – particularly those in newer markets like CBD cosmetics. Beyond that, a “substantiated cosmetic use” for CBD products could go a long way in reducing the odds the FDA will object to these products – and possibly even reduce the risk of product liability litigation. It establishes a legitimate, legal reason for CBD to be included in makeup and cosmetic products.

Certain provisions of MOCRA don’t go into effect until the end of next year, and we expect there will be some state-level rules developed in the meantime.

If you have questions about how to make sure your production, record-keeping, registration, reporting, and sales of CBD products are aligned with state and federal rules, contact an experienced cannabis business lawyer for insight.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Modernization of Cosmetics Regulation Act of 2022, March 27, 2023, U.S. Food & Drug Administration

Certainly, this is big news. But our Los Angeles cannabis business consulting lawyers would urge caution before rushing to your marketing firm for content.

Previously, the company only permitted ads for hemp-derived CBD topical products. This was still more progressive than other social media firms. TikTok, Instagram, and Facebook have had (and maintain) a strict no cannabis advertising policy – so long as it remains illegal at the federal level. (This despite the fact that 21 states allow recreational use cannabis – and more are on the horizon.) It’s likely only a matter of time before these other social media platforms adopt policies similar to Twitter’s.

However, despite giving the green light to “approved cannabis advertisers to target the U.S.,” cannabis companies on Twitter still aren’t allowed to advertise their actual products for sale. The only exception is for topical, hemp-derived CBD products that contain less than 0.3 percent THC (which is the government’s threshold for being classified as a CBD product rather than a more heavily-restricted THC product). Undoubtedly, there’s a market for these types of products, but it doesn’t represent the full array of cannabis products and services.

Further, cannabis companies seeking to advertise on Twitter must:

• Have a proper license.
• Pass through Twitter’s ad approval process.
• Limit their target audience to jurisdictions wherein they are licensed to operate.
• Do not target youth under age 21.

Advertisers are NOT allowed to:

• Create ads that promote or depict people using cannabis.
• Display advertising that shows people under the influence of cannabis.
• Claim any sort of efficacy or health benefits.
• Use any celebrities, images, icons, characters, or athletes in their ads that might appeal to children or those under 21.

These are somewhat similar to Twitter’s restrictions on alcohol advertising, although alcohol products themselves can be marketed so long as companies don’t appeal to minors or imply that drinking alcohol to excess is good.

Los Angeles cannabis consulting lawyers recognize that vague language pertaining to celebrities might be especially tough, particularly given that a number of high-profile athletes and celebrities who have cannabis companies or have been vocal supporters of marijuana use might have broad appeal to both adults and minors. For example, few would dispute that Martha Stewart, who launched a line of CBD products in 2020, appeals to a more mature audience. But what about Sha’Carri Richardson, Kourtney Kardashian, or Wiz Khalifa? They’re all adults over 21 themselves, but does their celebrity appeal to people under 21? The answer of course is subjective, and therein lies the concern.

This is where seeking guidance from a cannabis law firm may be to your benefit.

The rules only apply to the U.S. and companies therein. (Other countries, like Canada, that have more cannabis freedoms have broader leeway to advertise the products on social media platforms.)

Meanwhile, Google has also revised its advertising policy for marijuana companies, allowing FDA-approved CBD drugs and topical CBD products with less than 0.3 percent THC to advertise their products. However, these ads are strictly confined to markets in California, Colorado, and Puerto Rico. (Twitter’s previous CBD product ad policy also limited markets to 7 states – including California – but that restriction has since been removed.)

If you are a Southern California cannabis company hoping to advertise on Twitter, our Los Angeles cannabis business lawyers provide consulting to help ensure your ads are aligned with the law as well as the policies of advertising platforms.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Drugs and Drug Paraphernalia, Ads Content Policies, Twitter

As longtime Los Angeles cannabis business attorneys, we help break down what legislators are after.

The new bill, introduced by Democrats and Republicans in both the House and Senate, is titled the, “Breakthrough Therapies Act.” It seeks to revise the U.S. Controlled Substances Act by establishing a procedure through which certain Schedule I narcotics can be considered “therapies” by the U.S. food & Drug Administration. Either that, or they could qualify for a waiver via the U.S. food, Drug, and Cosmetic Act (FDCA). This waiver would allow the drugs to be transferred under a lower-schedule classification to research facilities and pharmaceutical laboratories.

The bill says that drugs that meet certain criteria making them eligible for legitimate research could be rescheduled as Schedule II medications – which are heavily restricted, but accepted for certain medical uses.

The bill notes that substances like psilocybin (what’s found in so-called “magic mushrooms”) and MDMA (also known by the street name “ecstasy”) have already been identified as having potentially significant value in the treatment of conditions like addiction, depression, and post-traumatic stress disorder (PTSD). If Congress passes the bill, it would do away with rules and regulations that are unreasonably overbearing and either delay or outright prevent research that could be potentially very valuable for those struggling with serious and potentially fatal mental health conditions. Sen. Corey Booker (D-NJ) identified the patients who could benefit from this research as “urgently needing care.”

Across the aisle, Republican Senator Rand Paul (R-KY) said he was “proud to co-lead this legislation,” which he hopes will compel the government to take a backseat and allow doctors, scientists, and researchers to do the work necessary to determine whether these substances can prove a greater benefit to those grappling with mental health and addiction issues.

An older version of the same bill left out provisions that would have simplified the registration process and paperwork researchers needed to complete to request a reschedule of certain Schedule I narcotics.

As Los Angeles marijuana and CBD lawyers, we know that scientists and doctors have long lamented the burdensome process that accompanies research of drugs restricted by the U.S. Drug Enforcement Administration under the CSA – particularly Schedule I drugs, which marijuana still is. A bill addressing this issue with respect to marijuana – the “Medical Marijuana and Cannabidiol Research Expansion Act” – was signed by President Joe Biden last year.

The new measure contains a provision that indicates any drug that is rescheduled from a Schedule I to a Schedule II for a breakthrough therapy or via a waiver could still be reverted back to a the high-level Schedule I if it’s established that there isn’t any accepted medical use absent the strictest of regulations. The process for doing so would require a recommendation from the leadership of the U.S. Department of Health & Human Services to the U.S. Attorney General’s Office. From there, the AG’s office would have three months to issue a final ruling regarding the drug’s scheduling.

A separate bill introduced last year called the “Right to Try” law would have given very ill patients the opportunity to take Schedule I narcotics (including psychedelics) under the recommendation of a physician. That measure, however, did not gain enough support to pass.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Cory Booker And Rand Paul File Revised Bill To Reschedule Psychedelic Breakthrough Therapies, March 7, 2023, By Kyle Jaeger, Marijuana Moment

More Blog Entries:

Can California Cannabis Patents Survive Illegality Doctrine? Feb. 20, 2023, Los Angeles Marijuana Business Lawyer Blog

As our Los Angeles CBD lawyers recognize, CBD has been on store shelves legally across the U.S. since the passage of the federal 2018 Farm Bill. Recently, advisory notes from the Substance Abuse and Mental Health Services Administration indicate its popularity has ballooned, now being available from some 270,000 retailers across the country. It’s sold in beverages, tinctures, topical ointments, food, and more.

The primary point stressed by federal regulators is that whatever CBD’s benefits, it’s not intended or recognized as safe for children unless expressly approved by the U.S. Food & Drug Administration (FDA) for a specifically stated purpose. As it stands, the only approved purpose for administering CBD to children is to help treat rare cases of epilepsy. Even then, only the purest form of CBD is recommended.

It’s estimated that one-third of Americans used CBD or a CBD-infused product at some point in 2020.

Among the main concerns listed by the federal agency:

• Lack of clear safety standards.
• Inconsistent quality control.
• Lack of uniformity in labeling.

All of these, the agency said, leads to additional concerns for accidental intoxication or overdose – primarily involving children. The primary health risks include potential for adverse drug interactions, adverse impacts to development and reproduction, and liver toxicity. These statements, however, lack the clinic research that might conclusively determine the safety (or lack thereof) with regard to CBD products. They simply haven’t been studied adequately – thanks to the U.S. government’s own rules.

What’s more, the FDA didn’t go out of its way to list the benefits of CBD – which include reduced reliance on powerful prescription medications like opioids for treatment of chronic pain and other conditions.

Despite this (and fervent calls from CBD industry advocates, stakeholders, and California lawmakers), the FDA has already stated it’s not going to issue rules specific to CBD that would allow it to be lawfully used as a food item or dietary supplement. The agency said it intends to rely on Congress to create these new rules.

The agency has also turned down numerous requests from Americans seeking FDA rules for CBD marketing. This has left California CBD retailers and manufacturers in the dark about what rules they need to follow – making it all the more imperative to rely on an experienced cannabis lawyer for guidance on walking the legal tightrope on everything from banking to advertising to sales to warehousing to order fulfilment.

It’s estimated that about 40 percent of CBD purchases are made directly from marijuana retailers. About a third are made from different retailers and another third are shopped online. The rest are gotten from some other sourcing.

It’s fairly well-established that because cannabis retailers are so heavily regulated and taxed, their products are going to be more uniform, more clearly labeled, and more pure. CBD products must contain no more than 0.3 percent of the THC, the psychoactive component in cannabis products. Delta-8 THC-O and Delta-9-THC-O have recently drawn the ire and enforcement arm of federal authorities for violating this rule.

If you have questions about the legality of your CBD products sold in the Los Angeles region or anywhere in Southern California, we can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

SAMHSA Advisory – Cannabidiol (CBD) – Potential harms, Side Effects, and Unknowns, February 2023

More Blog Entries:

California Marijuana Sales & Use May Still Pose Landlord Legal Challenges, Feb. 14, 2023, Los Angeles Cannabis Lawyer Blog