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 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

As our Riverside cannabis lawyers can explain, city council voted 5-2 to green light 14 marijuana shop permits. The city has first passed a moratorium on cannabis companies in 2017 – with the exception of marijuana testing labs. This was despite the fact that Riverside voters supported Proposition 64 (which legalized recreational cannabis) by a 53 percent majority. A year later, the council agreed on an outright prohibition of commercial cannabis operations – except for labs.

Then two years ago, the city caught wind of a citizen-led effort to undercut the municipal ban on marijuana sales. Signatures to move the petition forward were never formally submitted, but the city did start weighing whether it should initiate its own permit program and regulatory framework. (Likely, they wanted to sidestep the reality that it was probably going be done whether they wanted it or not, and best to have some control over the final outcome.)

The city is actively studying how best to support permit seekers who have been disproportionately impacted by anti-cannabis legislation in the past. The initial outlay caps cannabis retailers at 14, but there’s no such limit for the number of labs, manufacturing companies, or distribution firms. Voters will need to consider whether they’re willing to accept taxation for the measure. A vote is expected in November 2024.

One councilmember against the initiative said he doesn’t believe marijuana sales in the city are an inevitability, worried over police and other public services burdening more duties, and lamented the fact that a gateway drug was going to be so easily accessible – particularly for young people. Just recently, the sheriff’s office arrested several older adult teens in Riverside for selling vape pens with concentrated cannabis to minors using a mobile delivery service.

But those who support legal cannabis say that a well-regulated market has proven to offset many of these concerns.

It should be noted that this determination about Riverside City is separate from the rules of Riverside County. (Municipalities may have more stringent requirements than counties, and counties may have more stringent requirements than the state – provided they aren’t infringing on people’s rights.)

In Riverside County, cultivation of cannabis is legal if grown for personal use – indoors and within a single, private residence, obstructed from public view and for non-commercial use by someone over 21 for non-commercial use. Where it’s grown outside of a building, the building must be secured by an opaque fence that’s a minimum 6-feet-high. Commercial cannabis activities are allowed so long as the company has a permit from the county’s planning department (which does incur fees). Storefront retailers may be open to the public, provided they operate within authorized zones. Commercial growing operations can’t have plants that are visible from outside the facility. Cannabis delivery is also legal in Riverside County, so long as it’s done in accordance with California Business and Professions Code – but is not permitted in unincorporated areas of Riverside County.

The legalization of medicinal and recreational cannabis has been an economic boon to Riverside County, resulting in total taxable sales exceeding $100 million in 2019 and $265 million in 2020, according to CaliforniaCannabis.org.

If you are considering seeking a permit to operate a cannabis business in Riverside, our longtime marijuana lawyers 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:

Cannabis businesses in Riverside are on the way, March 1, 2023 by Sarah Hofman, The Press-Enterprise

More Blog Entries:

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

There has been some speculation about whether cannabis might finally be made legal at the federal level in 2023. While that seems unlikely, our legal team will be continuously monitoring any developments, as it could impact how issues pertinent to our cannabis business clients are approached at the state and local level as well.

Here, we’re outlining some of the common questions that arise from individuals, businesses, employers, property owners, etc.

Where is Cannabis Legal in the U.S.?

The maze of state laws on cannabis – recreational, medicinal, CBD/low THC products – there is little consistency. In most Western states (California, Oregon, Washington, Nevada, Arizona, New Mexico, Colorado, and Montana), marijuana is legal both for recreational and medicinal purposes. Limits on precise quantities vary from state-to-state. Utah allows for medicinal marijuana, as well as CBD. Wyoming still criminalizes marijuana, with possession of even small amounts triggering a misdemeanor punishable by up to 6 months in jail and/or a fine of $750. Possession of three ounces can be punished by up to 1 year in jail. CBD is legal there, though. Texas allows for CBD possession, but marijuana is still illegal – and recent efforts to decriminalize possession have stalled.

Just three states in the country have no public-use marijuana program of any kind: Idaho, Kansas, and Nebraska. Idaho criminalizes all possession and distribution of marijuana and its extracts.

This past election, voters in South Dakota, North Dakota, and Arkansas rejected ballot initiatives to legalize marijuana for recreational purposes. Medical marijuana, however, is legal in all three of those locations. It’s possible that by the end of 2023, other states could have expanded marijuana access. Voters in Oklahoma are slated to decide on the issue in a March election. In Ohio, the legislature is weighing a bill that would legalize sale and use of marijuana for recreational purposes.

What Are the Rules for Cannabis in California?

Here in California, medicinal use was approved by voters in 1996. Recreational use marijuana did not become legalized until 2016. That said, possession is only lawful for adults 21 and older. Anyone under 18 caught in possession of marijuana may be referred for drug education, counseling, or community service. Anyone who’s at least 18 but younger than 21 caught with marijuana will be fined $100. Minors can lawfully have marijuana administered for medicinal purposes if they have a medical marijuana ID card. State health and safety codes limit individual marijuana possession to 28.5 grams of flower or 8 grams of concentrated cannabis (basically, about 1 ounce). You’re also legally allowed to grow up to 6 plants at home, though the local government may have additional restrictions, such as requiring permits for indoor growing. If you have more than the allowable limit, you may be subject to a 6-month jail sentence.

Public Use

Possession of marijuana is one thing, but public use is another. Adults over 21 can lawfully possess the drug (in the aforementioned quantities), but it is not lawful to smoke marijuana in public spaces. There’s a minimum $100 penalty for a violation, but it can be as much as $250 if you’re doing so in a place where smoking tobacco is also unlawful. You are not allowed to use cannabis in state parks or national parks either. If you smoke within 1,000 feet of a school, day care, other facility where kids are typically present, you can be facing even higher fines. Smoking or consuming cannabis products – or even having an open container of them – is not allowed if you’re riding or driving a car, boat, or aircraft. (If you’re operating any of these vehicles while under the influence of cannabis, the criminal penalties are severe, particularly if you cause an accident and especially if someone is hurt.)

In Schools

As previously noted, use of cannabis near a school or daycare is unlawful. But even simply possessing the drug is a problem if you’re on school grounds. If you’re caught with cannabis at any K-12 school – even if you’re of-age and you’re under the legal possession limit – expect stiffer penalties. For those under 18 carrying under the statutory maximum, it’s a $250 fine. Subsequent offenses can result in a $500 fine and possible jail time.

Sale of Marijuana

Selling marijuana is not lawful in California unless you have a license to do so from the state and/or local government. You can, however, legally gift marijuana or marijuana products to others (assuming they are not underage) without a license.

When Traveling

As noted before, you can’t have open containers of cannabis in a car, boat, or airplane. But usually where people run into problems is when crossing state borders and/or flying. Outside of certain marijuana business operations (and even those have had legal difficulty), traveling state lines in possession of cannabis is against the law. This is true even if you’re coming from a state where recreational use is legal and going straight into another state where it’s legal. That’s because possession is still illegal under federal law, and the crossing of state borders gives the federal government jurisdiction. The federal government is also responsible for air traffic control, which is why possession

In airports, rules can get a little fuzzy. For example, marijuana is legal to possess in California. Therefore, staff at some airports will allow travelers to possess the legal amount, of up to 28.5 grams. However, once you go through TSA, all bets are off because the Transportation Security Administration is a federal government agency – and marijuana is illegal under U.S. law. If a TSA agent finds marijuana – on your person, tucked into your purse, or in your suit case – they can (if they choose) report it to local, state, or federal authorities. That said, it’s unlikely you’ll be arrested (so long as you are 21 or older and/or have a medical prescription and you aren’t possessing an amount in excess of what’s legal in California). TSA’s primary focus is security, but you may have to toss it before you proceed through the terminal.

At Work

A recently-passed law shields employees from so-called “weed bias” from employers. It prohibits discrimination or discipline against workers based on their use of marijuana off-duty and off-site. That means simply testing positive for marijuana use as an adult over 21 shouldn’t be used against you in the hiring, employment, or termination processes. However, there are exceptions for certain industries (building and construction, primarily), as well as those jobs that require federal background clearances. Further, it doesn’t protect workers who consume marijuana on-the-clock or show up to work high. Worth noting: That law doesn’t go into effect until next year.

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:

Where will marijuana be legal in 2023? Dec. 31, 2022, By Alix Martichoux and Nextstar Media Wire, The Hill

More Blog Entries:

Potential Complications for California Cannabis Company Real Estate Lending & Commercial Leases, Dec. 26, 2022, Los Angeles Marijuana Lawyer Blog

As our Los Angeles marijuana business lawyers can explain, it’s not the first time pot shops have been subject to inspections. It’s just that officials handling it in the past typically gave companies a heads-up – often several days of notice – before showing up. But according to recent reports, there has been a surge of drop-in, no-notice inspections. The 24-to-48-hour heads-up is no longer something your company can count on.

Given that even minor transgressions or oversights might compromise your ability to keep your doors open, it’s imperative that licensed California cannabis businesses be ready for a DCC inspection out of the clear blue sky.

Prime Targets of California DCC Inspections

If a company isn’t following state marijuana law and guidelines to the letter, DCC can issue citations, fines, and even license revocation. As this new aggressive inspection campaign is under way, it’s unclear how nit-picky inspectors are going to be, but we do know the agency has expressly stated there are a few major compliance rules on which they’ll be devoting a heavy focus. Those include:

• Compliance with Track & Trace. Companies need to be fastidious about maintaining their METRC compliance records. That requires plants/batches to be correctly tagged, placed in storage, and submitted into the track-and-trace system. Our L.A. marijuana lawyers know it’s a tedious process about which many clients grumble. However, slip up on this front and it’s likely to cause problems during an inspection. Even seemingly inconsequential requirements like ensuring all tags are clearly visible to anyone within a certain radius of the plant can result in a track and trace violation.
• Property modifications. If you intend to change or update the physical facilities out of which you operate, you must obtain the DCC’s prior approval. This could be anything from knocking out walls to simply moving a certain part of your business operations to a separate side of the building. This is likely going to present the biggest headaches for growers, given that their government fees and size caps are based on their canopy square footage. Manufacturers, meanwhile, will want to make sure they aren’t overstepping the bounds of license by producing products that haven’t been previously disclosed/approved by the state DCC.
• Property access. Your premises needs to be secure. Retail facilities obviously allow patrons to enter off-the-street, but supplies should be adequately secured and there should be numerous protections in place for off-hours. Meanwhile, access to cultivation farms, manufacturing facilities, and lab sites should generally be limited solely to authorized personnel. Businesses should have proper gating, locks, cameras, and alarms.
• Workplace safety. If there are potential on-the-job hazards, they need to be addressed immediately – because of unannounced inspections but also just for the safety and well-being of your staff and customers. No doubt this is a unique industry with special considerations, but state Cal/OSHA workplace safety requirements still apply.
• Records. California cannabis companies can be compelled at really any point to turn over records they are required to keep – from certified lab test results to METRC records to auto insurance records to employee contracts to surveillance videos (which they must keep for a full 90 days). Businesses also need to have their license properly displayed on site.
• Transparent cultivation processes. Cannabis farmers are held to a high standard of accountability when it comes to providing DCC with detailed plans on practices ranging from light and energy consumption to managing pests. If your current operations deviate even in the slightest from the blueprints and plans that DCC has, the inspector is going to catch it. Make sure if you make changes to run it by your cannabis business attorney to see whether you need to submit a review request before pushing full steam ahead.

In a recent DCC informational pamphlet entitled, “What to Expect When You’re Inspected,” the agency conceded that establishing a cannabis company in California is complicated and often very challenging. The agency vowed to work with businesses that may not be compliant to make corrections within a certain time frame. Usually, you’ll have 30 days to respond to any citations. If you don’t already have an attorney on retainer at this point, it’s a smart move to get one before responding to a DCC citation. Ideally, if you work closely with a cannabis lawyer on a regular basis, you can avoid running into most of these issues in the first place.

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 to Expect When You’re Inspected,”Canna Connect, DCC Inspection Checklist

Congress is currently mulling the 2023 Farm Bill, while state lawmakers across the country are slated to hold their yearly sessions. Many are expecting hemp extract sales and shipments – particularly those happening online and across state lines – are likely to get attention from both federal and state lawmakers.

As our Los Angeles marijuana business lawyers can explain, the concern with delta-9 products is that they possess intoxicated properties, yet aren’t being taxed, overseen by safety regulators, and are being shipped across state lines with little oversight.

For those who may be unfamiliar, delta-9 products are different than delta-8. Delta-8 THC products are manufactured in labs. Lawmakers have set limits on delta-8 products. So now, some hemp manufacturers have concentrated the delta-9 THC that already exists in hemp plants, allowing them to make tinctures, edibles, and vapes that are intoxicating – and then sell those online. Delta-9 is the THC compound created when raw hemp is heated, but in smaller amounts than what one might find in a cannabis extract.

Some manufacturers doing this have gone on record to say that doing this allows them to operate in currently-underserved markets. Some marijuana businesses contend that purveyors of this practice are cutting corners unfairly by using hemp – which is legal at the federal level – to make THC – which is not. The intoxicating properties of THC are what led to prohibition of it in the first place, and what continues to be a sticking point for overturning stringent federal laws against marijuana sales.

The sudden popularity of hemp-derived delta-8 over the last few years was largely unanticipated. Hemp farm operators and retailers saw a sudden new potential in a part of the plant few had previously paid attention to.

Still, many hemp operators have been careful to remove any trace of intoxicating THC from their CBD products, for two main reasons:

• To avoid unwanted attention and oversight from federal authorities.
• To attract consumers who don’t want to be intoxicated/who may be drug tested.

Delta-9 has somewhat confused matters. A fair number of marijuana business advocates assailed D-8 products because they were made in a lab through a chemical conversion process that lacked health and safety oversight. It was those criticisms that largely fueled the delta-9 hemp extract market. Technically, a 5-gram gummy can contain more than 15-milligrams of delta-9 THC and still comply with federal regulations because it still comes in under 0.3 percent THC by dry weight. Being able to market it as both natural and legal was a compelling point for some hemp growers, manufacturers, and retailers. However, many California marijuana businesses have viewed this as unwelcome competition. Many had seen a bright-line partition between hemp and cannabis. Of course, hemp is cannabis – and always was (just like marijuana). But delta-8 and delta-9 products blur the lines between marijuana-derived products and hemp-derived products.

Those in the hemp industry may be enjoying something of a free ride for the moment, but that’s because they aren’t operating under the same crushing weight of taxes, regulation, and black market competition those in marijuana growth and sales.

Hemp industry insiders, however, insist they aren’t in competition with marijuana companies. Rather than respond to concerns by quickly imposing the same taxes on hemp-derived products, they urge an easing to the marijuana business taxes.

Those on all sides of the table will closely be following the discussions regarding the Farm Bill, as this will be the first time it’s been revised since it opened the doors to hemp and CBD in 2018.

It should be noted that even if the THC content meets the federal definition of hemp, states still have the authority to oversee the safety of ingestible products sold within their borders. Some have noted that if you change the composition of hemp, it may no longer be considered legal in certain states.

Those that are selling d-9 products should do so with great care, particularly if they’re doing so through online sales/the mail. Consult with an experienced cannabis law attorney to ensure you are in compliance.

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:

As hemp THC sales boom online and by mail, cannabis industry braces for crackdown, Feb. 9, 2022, By Kristen Nichols, Marijuana Business Daily

However, rather than toss their crops into the ocean, shop owners are floating the notion of not paying state taxes. If the idea where to gain traction statewide, that would amount to roughly $1.3 billion.

Whether the call will lead to real action is questionable, but Los Angeles marijuana business lawyers know there is no doubt retailers are treading water. Steep competition from illicit providers who don’t follow state rules – yet aren’t unequivocally shut down by the state – have cut into the survival odds for these firms. Some call it a clear case of “taxation without representation,” echoing the Revolutionary War grievances.

This is not a new problem. It’s a situation that has been ongoing for the last five years, ever since state voters approved recreational use cannabis for adults. The prospect of bolstered taxes was one that spurred many government leaders to climb aboard. The problem, business owners say, is that while those firms are happy to rake in the tax revenue, they aren’t doing enough to protect the industry from unfair competition.

Beginning first thing next year, taxes on cultivation of cannabis is increasing by 4.5 percent. This comes even as the state is staring down a budget surplus next year of $31 billion.

The “Weed Party” proposal is to put all taxes in an escrow account rather than handing to the state, in an effort to force their hand and bring them to the table. However, as marijuana business attorneys, we would tend to strongly advise against this, as it’s going to violate a myriad of regulations and tax laws and risk state license suspension. The hope is that there will be viable solutions proposed in the coming year.

Why California Marijuana Industry Tax Hikes Are Unique

Of course, no industry is a fan of tax increases, but there is also no other industry (save tobacco) that is taxed at the same sky-high rates as cannabis retailers. And unlike the tobacco industry, legal marijuana retailers are banned in most cities in the state. Plus, legal tobacco retailers aren’t threatened by a behemoth black market.

And it’s not just retailers who pay the price for it. Black market cannabis has been clearly linked to:

• Fire dangers.
• Environmental risks.
• Felony crimes.
• Health hazards.

While withholding taxes or launching a new political party might seem dramatic, many who have spent decades in the industry say this is the worst the problem has ever been.

What Exactly Is the Cannabis Tax Rate?

Voters opted to permit – and regulate – cannabis for recreational use in 2016. From the very beginning, the law imposed an excise tax of 15 percent. Additionally, cannabis growers pay a tax on the basis of what they sell in weight. That gets passed on to consumers. But that’s not all. There’s also the regular, old state sales tax, which is somewhere between 8-10 percent. On top of that, local governments that have agreed to permit cannabis sales in their jurisdictions take their own cut, sometimes as high as 15 percent.

At the end of the day, some California cannabis businesses are easily forking over 45 percent in taxes.

Meanwhile, the underground market is believed to be double that of the legal market. Products sold at these locations are half the price.

When surveyed, most Californians who buy and consume cannabis are all for purchasing products that are both legally produced and regulated, safe and grown without potentially hazardous chemicals that pollute the environment. But how much of a cost are they willing to absorb to do so? A difference of about 10 percent, research shows.

With taxes continuously on the rise, some marijuana businesses are in the red – even as they are selling overall more volume. It’s little wonder we haven’t lost more than the 6,000 cannabis retailers we had four years ago. In 2018, there were some 16,000 licensed retailers in the state. There are now roughly 10,000 – and falling.

So where is all that tax money going, if not to address the black market? Per Prop. 64 stipulations, it goes toward:

• Research on the impacts of legalization.
• Programs for at-risk youths.
• Development of protocols for roadside officers to ascertain marijuana impairment of drivers.
• Drug use treatment and prevention.
• Environmental restoration efforts.

Some jurisdictions have allowed cannabis retailers to pursue grant money, which can be funneled toward law enforcement efforts. But that doesn’t necessarily help those retailers who may be a hop-skip-jump away from black market operators the next city over.

It’s estimated the state is going to bring in roughly $145 million during the current fiscal year from cannabis businesses for licensing, regulatory fees and penalties. That goes to the operation of the Department of Cannabis Control, which has its own investigators who partner with police to take down unlawful operators. Raids are announced fairly regularly. However, the penalties are pretty weak. It’s become something of a game of whack-a-mole: One goes down, another pops back up in a place.

Some retailers say a more helpful solution would be lowering the barriers to entry (including reduced taxes), ultimately leading to a fair playing field of competition.

Tax hikes are slated to take place each year “as needed,” for the stated purpose of keeping pace with inflation. But retailers are also having to deal with issues of oversupply, resulting in falling prices.

Companies that are struggling to stay afloat may consider working with an experienced cannabis company attorney to discuss legal strategies for staying in business.

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:

With taxes going up, cannabis operators threaten ‘Weed Party’, Dec. 3, 2021, By Brooke Staggs, The Orange County Register

However, it would be erroneous to assert that marijuana sales are legal everywhere in the state. As our Los Angeles marijuana lawyers can explain, cannabis still remains widely unavailable in some of the largest cities in the Golden State.

Of the state’s 482 cities, only 174 of them allow some type of licensed, cannabis business to operate within their district. In a number of those jurisdictions, the only allowable businesses are those that are not classified as retail locations. That means that a key piece of the supply chain puzzle is missing. Ultimately, this leaves millions of people without immediate access to retail recreational cannabis.

The one exception is delivery. Having a state license from the California Department of Cannabis Control authorizing delivery allows that company to deliver in any jurisdiction in the state – something that has been affirmed in subsequent court rulings challenging this right. However, those companies might still be subject to local jurisdictional requirements. All cannabis company owners and operators should be working with an experienced marijuana business attorney to help ensure their operation rights are protected.

But the benefit of accessible cannabis for all communities goes beyond the shop owners. It benefits the industry as a whole, as well as citizens. Accessible legal cannabis constricts opportunities for those in the black market to gain a foothold.

So what’s the holdup?

Primarily, it comes down to a provision of Proposition 64 (the bill that legalized marijuana for adult recreational use) grants a significant degree of local control. Some industry proponents have been lobbying the governor to back efforts to do away with that provision entirely. However, there are a fair number who argue that the local control provision was central to the promise made in Proposition 64 – that cities and counties could retain explicit control marijuana-related businesses within their jurisdictions, including banning them entirely if they so chose. Most cities that approved the introduction of recreational cannabis dispensaries were ones that already had medicinal marijuana and/or needed an economic boost (which cannabis businesses have indeed provided).

But allowing the black market to thrive isn’t serving the communities or their constituents. Increasingly, the people support permitting legal cannabis retail shops in their areas. But the “Nay” votes mostly come down to politics. Voting in favor of retail cannabis could mean lost support from certain PACs (Political Action Committees or groups like local police chiefs, etc.

California’s biggest cities that bar cannabis dispensaries are:

• Fresno, a community of 525,000 people. However, this is on the verge of changing. The city has created an Office of Cannabis Oversight, and is slated to approve nearly two dozen retail businesses within the next few months.
• Bakersfield, a community of more than 400,000 people. Neither this city nor the unincorporated parts of Kern County allow for cannabis sales.
• Anaheim – home of Disneyland, but not to any marijuana dispensaries. The city council in the community of about 350,000 voted against cannabis retail operations last year.

Other larger communities in the state that don’t allow cannabis retail include Irvine, Fremont, Santa Clarita, Fontana, Oxnard, Huntington Beach, and Glendale.

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:

Weedmaps.com

The bill reportedly has unanimous, bipartisan support in the Assembly Business and Professions Committee, and is supported not only by organizations like NORML but also the California Veterinary Medical Association.

As our Los Angeles cannabis business attorneys understand that animal owners are essentially being left in the dark about how much or what type of cannabis they should be giving their animals for various ailments. Veterinarians cannot discuss the possible impact of a certain product on a specific animal or offer a suggestion for how much would be a safe yet effective dose. Absent this guidance, pet owners are essentially left to their own devices and research to guess or rely on a cannabis dispensary clerk’s take, even though these individuals know noting about the effects on animals.

U.S. law bars veterinarians from possessing, administering, prescribing or dispensing cannabis or any related products. State law in California recognizes that cannabis can be used legally by adults over the age of 21 and medical doctors can prescribe cannabis for humans who are patients, state law still doesn’t permit veterinarians to prescribe it for animals. A veterinarian who prescribes cannabis to an animal would be in violation of the state law.

AB 384 would change that, but would that be safe? Unfortunately, due to the drug’s status as a Schedule I narcotic, there isn’t a great deal of research on the safety or effectiveness of cannabis for pets. There also aren’t any quality control measures that are specific to animals or specific breeds. That’s not to say cannabis does not have benefits for animals, only that more research may be required to establish regulatory guidelines. As veterinarians likely know, animals like dogs and cats can be more sensitive to the impact of certain drugs, cannabis included. There can also be side effects if an animal is already taking another medication or supplement. That’s why it’s important for vets to be able to discuss matters like dosage with owners.

This bill would require the California Veterinary Medical Board to set forth guidelines for vets who recommend the use of cannabis on animal patients. It would also amend Prop. 64 on adult-use recreational marijuana to encompass products intended for animals too.

The measure does have its opponents. For instance, the Veterinary Cannabis Society is concerned that the bill, as it is worded, might open the doors for unscrupulous manufacturers, operators and advertisers to target a sensitive market, without paying adequate heed to the potential consequences.

Animals who are suffering from cannabis toxicosis may experience:

• Disorientation.
• Lack of coordination and balance.
• Reduced heart rate.
• Dilated pupils.
• Dribbling urine.
• Sensitivity to light and sound.
• Vomiting.
• Lethargy.
• Excessive drooling.
• Seizures.

Although cannabis itself is unlikely to kill a dog or cat, what can happen is the animal becomes so sedated they choke on their own vomit.

Pet owners and veterinarians in Los Angeles can report cases of cannabis toxicity to the Veterinary Public Health program, which is designed to allow the pet owner and reporter to be anonymous so the agency can collect information on which products are causing potential harm to pets – and also to gain information about which potential dosages might be dangerous.

Vets or makers of cannabis animal products should consult with a cannabis lawyer if they have any questions or concerns.

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 and Pets, County of Los Angeles

You don’t need to take our Los Angeles marijuana business lawyers‘ word for it. This is according to a new study commissioned by the Insurance Institute for Highway Safety. Despite a few isolated incidents of state law violations (i.e., workers giving out free samples of edibles), the analysis revealed workers at cannabis retail locations are committed to following the rules, protecting minors and staying in business.

Study authors say the largest loophole through which minors obtain cannabis in California is through unlicensed vendors. Consider that black market bud sales are three times bigger than the legal market. They don’t have the regulations and taxes to contend with. They sell products that aren’t verified for safety or quality, but they can sell them cheaper – and they don’t always ensure the people to whom they’re selling are of legal age to do so.

The proliferation of the black market in this state has served as a lesson to other states preparing to oversee the unveiling of similar recreational cannabis industries.

Selling Cannabis to Minors is Illegal in California

Cannabis companies caught selling the drug to minors without a doctor’s recommendation for medicinal use face substantial penalties: Up to six months in jail and a $500 fine for a first-time offense. But what really deters legal cannabis companies is that they risk the lose of their state licenses, which are incredibly competitive, take months to obtain and cost hundreds of thousands of dollars. In L.A. , a licensed cannabis shop that even lets a person under 21 set foot in the shop can face not only a fine, but a suspended or revoked license. That’s why many require identification before you even walk in. Operators who have taken the time and spent the money to qualify for a lawful license aren’t going to want to imperil it to sell to a teenager here and there.

On top of that, there is the potential for liability. A business that sells to a minor who is then hurt or hurts someone else could be held legally liable in civil court for that injury. It’s not a chance most shops are eager to take. Many are vigilant about spotting fake IDs and other work-arounds.

Study on Minors’ Access to Marijuana in California

To examine how cannabis shops in California are restricting sales to minors, the study authors recruited a 22-year-old man and 23-year-old woman who were “young-looking” to randomly visit nearly 50 recreational retailers last January. They made stops in stores located in San Bernardino, Los Angeles and Santa Ana. Each of the decoys attempted to enter the shop without ID.

What they found was that about 50 percent of stores required ID to be shown outside the store. The other half required identification once they entered. None of the shops allowed the decoys to shop without showing proper identification.

About a dozen stores had signage posted outside indicating shoppers had to be 21 and older to enter. Others had signs posted inside the shop. The majority had a security guard, while others had salespeople checking identifications. Some stores had electronic ID scanners, while others relied on retail workers to visibly verify the cardholder’s identity and birthdate.

Given that most cannabis crimes have been downgraded to misdemeanors, law enforcement in Southern California doesn’t devote as much energy to enforcement. They will, however, do random age-compliance checks at licensed retailers. In Los Angeles, the city’s cannabis department does this as well.

Meanwhile, compliance with the minimum age for alcohol sales, set nationally to 21 in 1984, was a lot slower to catch on. Even now, depending on the region of the country, violations are common. One recent analysis of underage alcohol sales in New York City found that 60 percent of shops sold booze to underage decoys without ID. However, it’s still largely accepted that the minimum drinking age was a positive thing, and has likely saved thousands of lives on the roads.

But cannabis and alcohol markets can’t necessarily be compared apples-to-apples. Since alcohol prohibition was repealed in 1933, there really isn’t any such thing still as unlicensed alcohol vendors. The same can’t be said of the cannabis industry. In fact, it’s thriving in California. A survey of state law enforcement agencies across the state said that 8 in 10 underage marijuana users obtaining marijuana were getting it from an unauthorized seller. Now that recreational use is legal, unlicensed sellers may feel they have more freedom to operate and flout the rules.

The only way licensed shops will be outpace illegal operations in this state is if we see more cities welcome the industry (resolving the cannabis deserts we have now) and by reducing taxes so that legal operations can start being truly competitive.

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:

Study: California’s licensed cannabis shops aren’t selling to minors, April 7, 2021, By Brooke Staggs, The Orange County Register

More Blog Entries:

California Cannabis Companies Prep for USPS Vape Product Shipping Ban, April 25, 2021, Los Angeles Marijuana Attorney Blog

As our Los Angeles marijuana business lawyers can explain, the measure was tucked quietly into an appropriations bill late last year that was passed to keep the government running.

Not a single mention of “marijuana” or “hemp” is contained in the Preventing Online Sales of E-Cigarettes to Children Act, but investors and entrepreneurs in both sectors are concerned – and rightly so. They will be expected to comply with it.

To the extent any industry is involved in selling vape products, it will apply to them. That includes manufacturers and retailers.

The legislation formally took effect late last month, but the Postal Service has 120 days to create rules to implement and enforce the law. Note that both UPS and FedEx have also agreed to abide by the U.S. Postal Service’s rules. They won’t be shipping vape products either. UPS’s adherence to the rule went into effect April 5th, and applies to shipments to, from or within the U.S.

How Cannabis Companies Can Become Compliant

It’s not clear how frequently vape products are being shipped in the mail. What we do know is that consumers in the U.S. ordered some $44 million worth of CBD vape cartridges online last year. That gives us some idea of how often mail carriers are being utilized to fulfill these orders.

Sellers of these products under the new regulations will be expected to ship through private companies. This mandates someone sign for the package upon delivery. They’ll also need to register with the U.S. attorney general. Additionally, they will need to onboard some type of system for age verification.

The good news is that many CBD vape sellers do age verification already – both for in-person and online sales. However, there are those for whom this is going to be a bigger beast to take on.

That said, it doesn’t seem as if the government is taking aim at the cannabis industry, at least with this measure. The intention is to throw a wrench in vaping of nicotine (specifically to minors), not cannabis or CBD products.

Los Angeles Cannabis Lawyers Can Offer Guidance

The other bit of good news is there is still some time to prepare. The USPS still needs to organize its resources and the new rules won’t be issued for a few months yet. It’s possible the cannabis industry will be lobbying the USPS for exceptions in the interim, but if you’re in the cannabis or CBD vaping market, now is the time to consult with an experienced Los Angeles marijuana lawyer to ensure you’re fully compliant, or well on your way to it.

The new provision also updates the Jenkins Act, a prior law pertaining to taxation of smokeless tobacco and cigarettes. However, the way it’s worded (“electronic nicotine delivery system” … “or any other substance to the user inhaling from the device”) is what ropes cannabis and CBD companies in. Part of the challenge initially may be just figuring out which companies are subject to the new law. What we don’t want to see is a small business all the sudden required to obtain approval from dozens of different tax authorities, local governments and native tribes. Depending on your company’s business model, you may need to be prepared to considerably increase shipping prices.

Some of it is going to depend on how strictly the measure is enforced. There are criminal penalties that include prison time, though it’s more likely violations will be met with steep fines and possible shut down. Of course, none of these are problems with which you want to contend.

Any cannabis or CBD company with questions can contact our Los Angeles marijuana lawyers for guidance.

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:

How will new law banning vaporizer shipments impact cannabis businesses? March 21, 2021, By Ivan Moreno, Marijuana Business Daily

Our Los Angeles marijuana business lawyers know that many cannabis company entrepreneurs who had been banking on this help have felt overlooked by the L.A. government in particular. Our goal is to assist these companies in building a solid framework by establishing workable business plans that are not only profitable but legally protected.

As detailed in a recent L.A. Times article, politicians in Los Angeles vowed help for those hit hardest by pot prohibition through the social equity program, which targets those with low incomes, prior marijuana arrests and who live in areas disproportionately impacted by enforcement of marijuana prohibition laws. But some lament they’ve been left stranded with little local aid. The city granted licenses to some of the long-standing marijuana operations that met city requirements, but newer social equity program retailers have not seen expedited license approvals.

Ultimately, in many cases this has harmed the very people the program was designed to help, as they’ve been left shelling out cash for empty storefronts. The latest round of city licensing required applicants to the social equity program to already be holding a storefront lease or deed.

Hundreds of applicants rushed in their applications before the fall 2019 deadline, but this sparked lingering debate over whether the competition was fair. Following an audit and later a legal settlement, the city now says it’s ready to grant licensing approval to 200 new storefronts, all eligible under the social equity program.

As for when that might actually happen though, it’s uncertain. The L.A. Department of Cannabis Regulation conceded they were slowed by the pandemic, which has led to reduced hiring, contracting and services. Disputes over previously-submitted applications have also stymied them to an extent, as has bureaucratic red tape, the Times reported, but officials insist they’re doing what they can to expedite licensing and assistance. As it stands, there are nine city employees responsible for reviewing hundreds of applications.

What officials shouldn’t fail to acknowledge, though, is that marijuana business tax revenue is expected to spike nearly 80 percent in this fiscal year. Surely, that could offset the administrative costs.

But yet another potential challenge has arisen for many social equity entrepreneurs are aggressive investors. Complaints are surfacing that these so-called “sharks” are attempting to sideline social equity applicants. It’s imperative that anyone in the cannabis industry weighing business offers or contracts talk with an experienced Los Angeles marijuana business lawyer. Investors have their place (sometimes a necessary one), but also their own interests – not yours – in mind. A legal advocate who will work on your behalf in these negotiations is essential.

Your legal agreements must be properly vetted to ensure your business interests are protected.

In 2020, the local cannabis regulation department was given $5 million by the city, which was earmarked for assistance with business, licensing and compliance assistance. However, training for those programs is still ongoing. The department has also received $7.8 million from the state, most of that for applicants of the equity program. It’s expected those benefits will be dispersed this month.

Now with the latest round of grants, the department is expected to receive another $2 million in social equity program assistance.

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:

L.A.’s promise of social equity for marijuana businesses has been painfully slow for entrepreneurs, March 20, 2021, By Emily Alpert Reyes, Los Angeles Times

The three-year milestone is noteworthy because that’s the cutoff for California Department of Tax and Fee Administration auditors for examination of corporate tax returns.

Prior to 2018, marijuana companies were already required to pay sales taxes. As our Los Angeles cannabis lawyers know first hand, many were were routinely subject to state audits. In 2018, when the state first allowed legal cannabis sales for recreational use, they were required to pay two new taxes – a cultivation tax and a 15 percent excise tax.

As some CPAs note, audits like these can be very advantageous for the state of California, so it should come as no shock that these are starting. In fact, the state is pumping up all its general business audits too, so it’s not necessarily that marijuana companies are being singled out. Still, the high tax rates and significant penalties associated with marijuana sales could spell trouble for some marijuana businesses if anything is amiss.

One CPA quoted by Marijuana Business Daily surmised it won’t be difficult for state auditors to uncover tax violations. Some estimate the state is going to be owed tens to hundreds of millions of dollars in unpaid taxes from the marijuana industry, which will include sales taxes, excise taxes and cultivation taxes. Further, this is the first fiscal year that both cultivation and excise tax audits are being funded by the state, and the agency has even been hiring more auditors. And estimated 60 inspectors are currently dedicated solely to ensuring tax compliance among tobacco and cannabis companies. In the words of the CPA: “It’s going to be a turkey shoot.”

A spokesman for CDTFA said that there have been ongoing compliance issues where sales taxes are concerned, which is why many have seen an uptick in sales tax inquiries. These in turn result in investigations into cannabis and excise taxes.

But while there’s unquestionably an uptick in audits, it’s also very likely the state will be more aggressively enforcing existing liabilities that don’t require an audit (something that’s a lot cheaper/faster for the state).

It’s not clear exactly how many marijuana businesses have received an audit notice, but even those that haven’t at this point may want to consider consulting with a tax specialist and cannabis business attorney to be on the safe side. This is especially true because some companies are getting hit with COVID-related tax headaches. For example, last year the CDTFA issued an announcement that there would be a delay in collections of sales taxes – a way to cut businesses some slack while they were in the throes of coronavirus response. Some companies took the agency up on that – only to hit a brick wall with the agency’s processing unit and then incurring stiff penalties for late payments.

Our law firm has heard complaints about the agency threatening to revoke operational permits of cannabis companies unless outstanding payments are made. The CDTFA insists its only goal is to compel taxpayers to pay only what they owe – no more or less.

Complaints of possible rights violations can be made to the Taxpayers’ Rights Advocate Office. An attorney can file this complaint on your behalf and help you decide your next step.

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 marijuana firms face more state tax audits, millions of dollars in unpaid taxes, Feb. 25, 2021, Marijuana Business Daily

In that case, a marijuana testing lab forced to close earlier this year after the California Bureau of Cannabis Control revoked its provisional license said the move was unconstitutional because they were denied due process by not being allowed to appeal the decision. But in a recent filing before the Superior Court in Alameda County, the state’s attorney general argued that no cannabis business in California operating on a provisional license is entitled to due process under state law.

The superior court ordered the testing lab is allowed to reopen its doors after being forced to close them in January, when the BCC pulled its provisional license for numerous alleged offenses, including:

• The inability to take solid representative testing samples.
• Violation of rules in use of a third-party courier to ship marijuana samples.
• The failure to produce shipping manifests prior to moving marijuana goods.
• Shipping marijuana goods and samples absent the state-required Metrc labels (those required for track-and-trace within the state).
• Modifications of lab property absent agency approval.
• Failure to install a video surveillance system.

Soon after, the company filed a lawsuit against the BCC, arguing the absence of an appeals process was a violation of the company’s due process rights. The superior court’s most recent ruling bars the state from enforcing the license revocation, allowing the cannabis lab to continue operating under its provisional license until further order from the court.

A hearing is set for later this month to determine if the state has the right to impose a preliminary injunction on the lab. However as our Los Angeles cannabis business attorneys know, the bigger question is really whether marijuana companies with provisional licenses have a right to due process – including the appeals process.

The state’s attorney general had argued that there should be no due process for provisional licensees because such permits are designed to be temporary and thus provisional license holders don’t have the benefit of the same legal rights and standing as full-fledged annual license holders.

It’s the position of the lab, however, that provisional licensees comprise 8 in 10 cannabis companies in California – the majority of industry players in this state – and that their property interests should be constitutionally protected. Thus, they argue, the BCC shouldn’t be allowed to shutter their operations without giving them the legal benefit of due process.

If the lab prevails at the hearing later this month, even the judge noted it would be an “interesting case.” The potential consequences are certainly wide-reaching, given that there are an estimated 8,300 provisional licenses held by marijuana companies in the state. Meanwhile, the state has only issued about 1,700 annual permits.

The whole purpose of provisional licensing, you may recall, was because cannabis companies and regulators needed more time to streamline the licensing process while still keeping the industry upright and functional. It started in 2018. 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 judge rules shuttered marijuana testing lab can reopen, March 5, 2021, Marijuana Business Daily

As longtime Los Angeles marijuana lawyers also well-versed in California employment law, we recognize this could be a substantial benefit not only for workers, but cannabis companies as well.

Assembly Bill 1256 would put a stop to the common practice of common employers who require workers to be tested for marijuana use. It would also prohibit employers from using certain kinds of evidence of prior marijuana use (urine tests, hair follicle tests, etc.) from being used to discriminate against the worker or denying them employment opportunities. The measure is sponsored by California NORML.

Urine and hair follicle test are of particular concern for employee advocates because they don’t show any indication of on-the-job impairment due to the psychoactive ingredients of marijuana. Similar issues exist with traffic cases involving drivers suspected of marijuana impairment; there is no “marijuana breathalyzer” that can indicate current impairment, only previous use – which could be anywhere from an hour ago to two weeks ago or even months prior. Blood tests can be more accurate in telling recent consumption, but even the U.S. Supreme Court has reasoned (albeit in a different context) that these are more invasive and should only be a last-resort.

To be clear: Employers still have the right to insist their employees not work under the influence. As noted by the California Chamber of Commerce, state law allows employers to mandate suspicionless drug tests as an employment condition (though they can’t randomly drug test workers except under very narrow circumstances). However, depending on the industry and worker’s role, it could be a clear liability issue if they don’t drug test. But because existing drug screens don’t tell us whether someone is currently under the influence, their application seems overbroad. Some have compared the use of urine tests by employers trying to determine intoxication like finding a beer bottle in a person’s trash and deciding they must be drunk.

The bill contains a provision that allows for a legal cause of action if an employee or prospective employee is discriminated against for their legal cannabis use off-the-clock. As noted by a spokesman for NORML, employees have the right to engage in many other legal activities off-the-clock, from smoking to drinking to firing off guns.

“Use of cannabis should be treated the same way,” the spokesman said.

The chances of AB 1256 being passed this year are uncertain, though sponsors say they are still seeking input from stakeholders, meaning it might not be taken up in earnest until 2022.

If it passes with its existing language, it does contain numerous exemptions, including employers under federal mandate to test for THC and those that would lose licensing-related or monetary benefits for failing to test. Those in the construction or building trades would also be exempted.

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:

No more urine tests: Proposed California law would end most workplace marijuana tests, March 1, 2021, By Andrew Sheeler, The Sacramento Bee

Labeling lawsuits against CBD and THC product makers are increasing. As our Los Angeles cannabis attorneys can explain, it is imperative that companies ensure the level of THC and CBD in their products aligns with what is advertised. In this case, the lawsuit alleged the potency of these compounds in the products were “drastically” different from what was publicly claimed.

FDA Studies CBD, THC Product Contents

Recently, the U.S. Food and Drug Administration submitted a letter to Congress indicating numerous CBD products that the company tested that contained far more – and sometimes less – than the amount of cannabidiol that was advertised. Some of the testing revealed certain products contained THC (the psychoactive compound in cannabis) that wasn’t supposed to be in them.

Of the more than 100 products (tinctures, oils, capsules, edibles, drinks, and pet products) the FDA tested prior to the report, 18 had less than 80 percent of the CBD they were advertised to have. Slightly less than half were within 20 percent of the amount of CBD advertised. A significant number – 38 – had more than 120 percent of the CBD advertised. Many also contained trace amounts of THC, though they weren’t supposed to contain any.

The FDA chose a random sample of products to test from a pool of internet and trade journal advertisements, companies that had previously been cited by the FDA for making health-related claims about their CBD products and participants in various industry events. The testing size was limited, a fact the FDA noted as well and pointed to as cause for a more intensive, longitudinal study.

Hemp and CBD industry insiders are concerned by the findings, but know that as a whole, providers and manufacturers hold themselves to high standards. Part of the problem is the lack of FDA regulation for CBD and hemp products, which has resulted in a patchwork of state-level rules and enforcement. That may soon happen, as members of the House Appropriations Committee has allocated $5 million for the federal food and drug regulator to continue its review of CBD products, expressing concern for misleading health claims.

Last year, with assistance from researchers at the University of Mississippi, the FDA completed analysis on cosmetic products containing hemp, finding that a dozen of more than 100 tested contained THC – even though that element wasn’t specified in the label. A couple of those products contained 120 percent more CBD than advertised.

While there is little question the industry requires more work to ensure products with CBD and THC meet product labeling guidelines, one bright spot worth noting is that in the FDA’s testing for heavy metals such as cadmium, mercury, lead and arsenic, none were found in any quantity that posed a significant health concern to consumers.

Potency Rules for California Cannabis Products

California law has established testing regulations to ensure the package labeling matches the potency of each product. The law requires products to be tested for THC, THCA, CBD, CBDA, CBT and CBN. The potency level is considered “passing” if it is within +/- 15 percent of the amount indicated on the label.

This is in addition to testing for solvents, pesticides, microbiological impurities and heavy metals.

California law limits the amount of THC in edible cannabis products for recreational use to 100 milligrams. These limits are not in place for medical marijuana products, which require a medical marijuana ID card to purchase.

Consult with an experienced cannabis business attorney in L.A. to ensure your company is doing everything possible to meet the potency, packaging and label 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:

Sampling Study of the Current Cannabidiol Marketplace to Determine the Extent That Products are Mislabeled or Adulterated, 2020, FDA

Of course, lack of harmony between the state and federal positions on marijuana is nothing new. But it’s important for marijuana businesses in cities close to international borders to use extra caution, and consult with a California cannabis lawyer for insight on how best to protect their investment, operation and employees from legal headaches. As The Los Angeles Times reported recently, those in Imperial and San Diego counties especially need to beware due to the closeness of the U.S.-Mexico border. The U.S. Boarder Patrol has the authority to establish checkpoints that stretch as far north as 100 miles past the international line.

In one reason case, a small van transporting about $15,000 of marijuana wholesale – locally grown, certified and state-legal – from Imperial County to a state-licensed dispensary about three hours north. However, it was stopped at a Border Patrol checkpoint on the highway – 20 miles from the actual U.S.-Mexico boarder. The distributor reports federal agents seized the entire load.

It’s incidents like this that have prompted some marijuana dispensaries, delivery operators and others to avoid these areas – especially Imperial County. That’s been problematic for several operators in that region.

For example, one of the few state-certified testing labs in Southern California revealed it no longer makes testing trips to cannabis farms and dispensaries in Imperial County. The risk is just too great. In turn, that makes it tough for legal operators to do business there, but some say they’ve been left with little choice. As the lab’s CEO put it: “They’ve trapped a corner of the state.”

At any given time, there could be up to nine checkpoints within 65 miles north of the U.S.-California border. Primarily, these exist along I-5 North, I-8 West and I-15 North, with some on more rural stretches.

As far as federal agents are concerned, setting up these checkpoints allows for an additional measure to halt illegal immigration of people coming in through Mexico who may have slipped passed the border without detection.

It is true that the region is a hot spot for drug trafficking across the border. The checkpoints are viewed as the final defense before those substances reach larger distribution hubs in other areas. Big drug busts involving cocaine, heroine, methamphetamine and fentanyl are reported with some regularity. But there is still a question of how much authority federal agents have when it comes to accosting citizens of the U.S., particularly those who routinely cross the border for school, work or errands. Nonetheless, courts have ruled time and again in the government’s favor. The lines have gotten blurrier though since California legalized marijuana for recreational use four years ago (though sales didn’t ramp up until two years ago). The U.S. government’s position is that marijuana (containing more than 0.3 percent THC concentration) is still illegal, classified as a Schedule I narcotic.

Therefore, it remains subject to federal forfeiture if a load happens to cross a U.S. border checkpoint – even one dozens of miles from the U.S. border. But that doesn’t mean it’s always seized. There are reports of substantial volumes of state-legal cannabis products being quietly ushered through these checkpoints. But there is no clear distinction between what’s legal and what isn’t. The state itself has a host of stringent rules for any company legally transporting marijuana. The product needs to be locked and secured, not visible from outside, protected by a security system and clearly packaged and labeled.

Distributors need to ensure their transport operators are licensed, permitted and have all their documentation and shipping manifests easily accessible when they approach one of these checkpoints. But then, it’s up to the discretion of federal agents. Some cannabis companies say their drivers aren’t hassled much when they pass through the checkpoints, which sometimes aren’t even open. But because much is left up to the agents, it’s still possible that a load with every T crossed and I dotted can be seized.

That means state-legal marijuana businesses are ultimately taking a gamble at every checkpoint they approach. Consult with an experienced Los Angeles marijuana business lawyer for information about the best ways to protect your company and your people and to be prepared in the event you are ensnared in a legal issue. 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: Border Patrol checkpoints are a risky reality for California cannabis companies, July 4, 2020, The Los Angeles Times

The state’s recreational cannabis law does expressly prohibits marijuana drive-thru operations – unless a dispensary applied for a permit prior to June 2018, when Prop. 64 rules were finalized. Harborside cannabis dispensary filed its application for a drive-thru shop earlier that year, so it’s allowed to proceed with its marijuana business plan.

Approaching customers will have the benefit of a large, electronic menu, where they can place orders for edibles, vape cards and pre-rolled joints – the same way one might order a Happy Meal (except you will have to show ID to prove you are of age). Passengers, however, will not need to produce identification.

Desert Hot Springs, located in the Coachella Valley geographic region of Riverside County, is a great place to start, considering it was one of the first to welcome legal recreational marijuana with open after Prop. 64 passed in 2016. (Eighty percent of California jurisdictions have decided not to allow cannabis to be sold in their jurisdictions.)

Drive-Thru Dispensaries in Other States Thriving

The first legal drive-thru marijuana dispensary in the country opened in Parachute, Colorado in 2017. The owner told The Washington Post the idea was sparked after he noticed how many after-hours customers came knocking at his dispensary. Drive-thru service, he said, would be a better option for late-night customers. The drive-thru appears to still be open and doing well.

Around the same time, a drive-thru pot dispensary opened in Las Vegas as made from a converted bank teller window, bullet-proof glass and all.

In Florida, there are several medical marijuana drive-thru locations, though none yet for recreational marijuana, as it has not yet been approved there. The owner of one location noted numerous customers were afflicted with debilitating conditions that impacted mobility, making drive-thru and free delivery services essential.

In Vermont, a medical marijuana drive-thru window dispensary handles roughly one-third of the business at one facility. That service too is only for medical marijuana patients, who must first place their orders online. They are then free to come to the drive-thru to pick them up. Turnaround time can be as little as 30 minutes.

In Massachusetts, one purveyor has proposed opening up a drive-thru service in Boston.

Legal Concerns of Drive-Thru Pot Shops

Entrepreneurs wading into this kind of business model will need to take some extra precautions to ensure they’re on the right side of the law. This is especially true in California, where so few facilities are actually going to be getting licenses to engage customers this way.

But some like one in Adelanto, are weighing the possibility of pickup service, similar to the Vermont setup. People wouldn’t actually order at the window; they’d order online and then come to the drive-thru window to pickup, just like at pharmacy.

Cannabis companies that want to try out this type of business model should consult with an experienced Los Angeles marijuana business lawyer to ensure they aren’t running afoul of the state’s provisions against drive-thru services.

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:

Harborside got around a regulatory ban to open SoCal’s first drive-thru cannabis shop in Desert Hot Springs, Dec. 4, 2019, By Melissa Daniels, Palm Springs Desert Sun

Housing authority officials cite the conflict between state and federal law, saying they jeopardize their access to much-needed federal dollars if they allow a Schedule I narcotic to be used in taxpayer-funded housing or by those receiving assistance. However, what our Los Angeles marijuana lawyers see is yet another example of double standards when it comes to marijuana law and regulation enforcement – with people of color in low-income communities facing particular adverse consequences. Coincidentally, this is the same population disproportionately impacted by the failed, decades-long War on Drugs.

Officials with the Department of U.S. Housing and Urban Development (HUD) have said they do want “sensible” regulation that might legally permit medical marijuana use by public housing tenants, but so far there is no concrete proposal on the table.

This issue has arisen in numerous states. Illinois, for instance, after the end of this year will join the growing list of states to allow recreational marijuana use, possession and sales – but public housing tenants will face homelessness if they partake. This was made clear, the Associated Press reported, when managers of Section 8 housing sent notice to tenants underscoring that federal law bars the use and possession of marijuana in housing subsidized by federal dollars.

In effect, the drug is being legalized, but we’re only allowing certain groups to benefit from it – even though many states (California included) have built in special provisions within regulation to to reverse the effect of years of racial disparity on this front.

As our Los Angeles marijuana eviction attorneys can explain, it’s not just the U.S. Controlled Substances Act, either. State housing authority officials point to the 1998 Quality Housing and Work Responsibility Act. This measure expressly prohibits any facility that takes in federal dollars from allowing marijuana use. There are is also a provision of federal housing law that specifically gives both public housing authorities and landlords the right to evict any tenants who use marijuana, regardless of the reason. Anyone convicted of a marijuana-related offense is prohibited from obtaining federally-funded housing too. And while the U.S. Department of Justice had suggested in 2013 memo that there would be some enforcement latitude, former U.S. Attorney General Jeff Sessions rescinded that memo last year.

So no matter what the state-level laws, the legal rights of public housing tenants to use marijuana for any reason are sketchy at best.

As it stands, there hasn’t been a flood of cases challenging these laws, but that most likely has to do with the fact that tenants don’t have the means to pursue legal action, don’t have access to information on how to pursue such action if they wanted to and the risk of losing a roof over their heads is enough to muzzle any loud discontent. That doesn’t mean these measures aren’t having an impact on a substantial number of people.

Among the recent cases reported by local media outlets:

• An elderly man in New York, convicted of using a marijuana vaporizer for pain, was evicted from his public housing residence. (The 78-year-old was allowed by his landlord to move back in after public pressure.)
• A California woman and her daughter from Arcata were evicted for medical marijuana use last year.
• A 55-year-old in Montana was denied public housing when she admitted to having a medical marijuana card, which she was given as an alternative to opioid prescription painkillers after a breast cancer diagnosis.
• A Massachusetts couple were evicted for smoking medical marijuana on their patio last year. The husband is disabled while the wife suffers a painful, progressive brain disease.
• In Oakland, California, four elderly public housing residents were all evicted for marijuana use, despite having lived in public housing for years – three of them being elderly women who were caring for children and grandchildren.

A U.S. Representative from Washington, D.C. has introduced a bill that would allow medical marijuana usage in states where the drug is legal for that purpose, but it has yet to gain significant traction.

The existing HUD policy on marijuana use is one-strike – meaning one-strike, and you’re out. This has put hundreds of seniors and those with disabilities at risk for homelessness – and even criminal charges.

If you are facing eviction for marijuana use in Southern California, our experienced marijuana lawyers 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:

Marijuana banned from Chicago public housing despite legalization taking effect January, 2019, Associated Press

However, our Los Angeles cannabis lawyers prefer to look at these layoffs on a case-by-case basis. There are undoubtedly some lessons to be gleaned about business planning and management, but ultimately the same kind that are relevant to entrepreneurs in any market.

Marijuana agriculture, manufacturing, processing, retail, tech and quality control sectors all comprise a new and evolving industry. Companies that don’t properly plan from the beginning phases may soon find themselves overwhelmed, overstaffed and prime for failure.

The truth of the matter is cannabis isn’t a veritable gold mine. Companies must implement careful strategy, smart investment and measured growth. Even with the increasingly high demand for the plant and derivative products, there are a fair number of marijuana businesses that simply aren’t making the money they need to survive, let alone thrive.

But the fact that there is demand – and it’s unlikely to subside – means there is hope for cannabis business owners committed to smart growth.

List of Weed Worker Layoffs

The list of companies that have had to cut back on staffing in recent months include:

• A California vape pen maker that laid off 65 workers this month.
• A California marijuana delivery tech firm that laid off three dozen employees this month.
• A California marijuana farm that laid off 180 workers in September.
• A Canadian marijuana farm that laid off 200 workers this month.
• Weedmaps (a California marijuana tech company) laid off 100 employees this month.
• An Oregon marijuana farm that cut 33 workers (roughly 20 percent of its staff) in April.

In total, we’re talking some 600 marijuana workers who are no longer employed. Although this is disappointing and perhaps disconcerting, it just underscores the fact that this is not a turnkey industry. Cannabis company CEOs, investors and supervisors all need to be willing to commit to careful market research to formulate business plans that have the best chance of succeeding – and contingency plans if something doesn’t go as anticipated.

Our Los Angeles cannabis business lawyers can help companies generate smart business plans and avoid some of the legal pitfalls – from commercial real estate contracts to regulation compliance and licensing – that can result in costly surprises.

Contracting Cannabis Industry Not Exactly a New Trend

California is only a couple years into the legal recreational marijuana market, so there is still a lot of new territory with which folks are unfamiliar.

The downward trend first started in 2018, though news outlets hadn’t yet picked up on it as a trend because at the time it only involved a few much smaller and lesser known cannabis businesses. By some estimates, the actual number of marijuana industry workers laid off in the last year is more likely in the thousands rather than the hundreds.

Among the top reasons some companies are struggling:

• Market maturation. Marijuana as an industry started off in something like a bubble, similar to what we saw with the housing market a few years back (though admittedly, not quite as dramatic). However, the bubble seems to have burst and what we’re seeing is a leveling out.
• Miscalculation of growth. Many marijuana entrepreneurs are hiring new workers based on their market projections, which is smart. However, the market has followed a somewhat unpredictable pattern, thanks to ongoing black market competition, stringent regulatory requirements for legal operations and the fact that the product itself remains illegal at the federal level.

Companies that are considering laying off workers should discuss the legal ramifications for this with an experienced attorney (and our cannabis lawyers also practice California employment law).

The bottom line is that companies may need to dial back some of their expectations, take a hard look at how their respective markets are performing and consider that responsible growth is smarter than growth at all costs.

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 advertising firm Weedmaps cuts 100-plus jobs in response to slow adult-use market rollouts, Oct. 16, 2019, Marijuana Business Daily