Stiffed Drinks: CBD-Infused Alcoholic Beverages Banned in California

Cannabis Litigation 101: Arbitration

This is the second post in a series on various aspects of cannabis litigation. The title is admittedly a bit misleading, as arbitration isn’t really the same thing as litigation. That said, the two can intersect, and so understanding what arbitration is and is not, is important for cannabis businesses. After all, many contracts in the cannabis industry can include arbitration clauses.

Arbitration is, essentially, a trial before a private entity (this post only describes private arbitration and not judicial arbitration, which is different). Typically, arbitration cannot occur unless the parties have agreed to it in a contract; for example, an LLC operating agreement, sales contract, distributor agreement, intellectual property license, or any other kind of contract. The parties can use this contract to dictate the terms of the arbitration and how it will proceed. That said, below are a few of the features that are common to almost any arbitration:

Who Presides: In private arbitration, there are no juries. Instead, the parties pay a private arbitrator or arbitration company. Arbitrations are presided over by at least one arbitrator, who is generally a former judge or attorney. In some cases, there can be a panel of arbitrators who decide a dispute. Arbitrators are almost always neutral, meaning that the parties cannot communicate with them outside the presence of the other parties (there are some cases in which some of the arbitrators can be “party” arbitrators).

Anyone who has spent significant time in a court room knows that judges have intense caseloads—sometimes hundreds of active cases at any given time. On the other hand, arbitrators typically have less-intensive caseloads. This means both that arbitration can proceed more quickly and that the arbitrator(s) can devote more time to and gain more understanding of each case.

Arbitration Setting: In private arbitration, there is no court room. Instead, arbitration hearings take place in private facilities provided by the arbitrator or arbitration company. It’s not uncommon for an arbitration to occur in something that looks more like a classroom or board room than a court room. While an arbitration can feel a bit less formal, it is key to remember that arbitration is still an adjudicative and adversarial proceeding.

Private Nature: Arbitration is, again, private. This is very different from litigation, where almost every facet of a case is published or can be made public unless there is an order of the court to “seal” certain records. Parties to arbitrations don’t necessarily need to keep things confidential—it’s just that way by design. That said, they certainly can agree to strict confidentiality provisions above and beyond the non-public nature of arbitration.

Procedural and Evidentiary Rules: In court litigation, there are rules of procedure and evidence set forth in a number of different places. For example, in federal litigation, the process is governed by the Federal Rules of Civil Procedure, a district court’s local rules, and rules set forth by the individual judge. Evidence is received according to the Federal Rules of Evidence. In state court, there are typically a number of different evidentiary and procedural rules that will govern any proceeding.

Unlike in court proceedings, the procedural rules and rules of evidence are slimmer. Arbitration forums often have their own rules, which will generally apply by default unless the parties elect to follow the federal or state rules in their arbitration contract. Arbitration rules are generally much more compact than federal or state rules, and based on the private nature of arbitration, there are usually no cases discussing how those rules are to be applied. The result of this process is that arbitration proceedings can seem less formal.

Arbitration is not Mediation: One common misconception is that arbitration is or is similar to mediation, when the two are in fact very different. Mediation is a typically non-binding process in which parties come together in front of a third-party neutral (the mediator) to discuss their case with the intention of settling it. Arbitration is similar to a trial, and if it proceeds to the end, will result in an award to one party (which can be filed in court), rather than a settlement. The only important similarities are the presence of a neutral, and the fact that many arbitration companies employ arbitrators and mediators (often, the same people do both kinds of work).

This all sounds great, right? You may be asking why would someone would ever want to litigate, when they could just arbitrate faster, with less-intense rules, in front of a focused neutral who could devote more time to the dispute? It may come as a surprise that parties in a dispute often seek to avoid arbitration. One of the chief concerns is cost—because arbitration is private, parties need to pay the arbitrators, on top of their attorneys. This additional cost can be overly burdensome for some private litigants and is likely a major concern for smaller businesses. Another concern may be the private nature of arbitration. There may be a host of reasons why one party to an arbitration wants the dispute to not be kept private. And finally, there are generally no options for appealing an unfavorable arbitration decision. These are just a few of the reasons that parties may want to avoid arbitration.

As mentioned in the beginning of this post, arbitration and litigation can overlap. Parties to disputes sometimes file cases in court in spite of arbitration provisions. In such circumstances, the other party may file what’s called a “motion to compel arbitration”, and the other party could resist arbitration by arguing that the arbitration agreement is void, or that the dispute at issue is outside the scope of the arbitration clause. In California, for example, we have an additional law that permits a court to delay or even avoid arbitration if there are parties to a court case and a separate arbitration, if there would be a risk of an inconsistent outcome or factual finding. This is a very powerful tool for a party who wants to resist arbitration in multi-party disputes and, in many cases, it is available unless disclaimed in the arbitration clause.

In sum, what an arbitration clause says is powerful and will dictate how any dispute is resolved. When negotiating any contract, the dispute resolution procedures may be an afterthought for some, which can end up costing the parties later down the road. That’s why its critical to put serious thought into arbitration clauses and engage counsel who is experienced in drafting and reviewing such clauses.

For more on cannabis litigation, see our series here.

source https://www.cannalawblog.com/cannabis-litigation-101-arbitration/

Get Ready Now for the California Cannabis Licensing Logjam

Paying Cannabis Workers Equally Under the Oregon Equal Pay Act: Part 3

This series of posts has been exploring Oregon Bureau of Labor and Industries (BOLI) proposed rules implementing Oregon Equal Pay Act and how it will affect cannabis businesses. Last week, I discussed what “work of a comparable character” means. The week before that, I explored what compensation is. This week, I’ll dive into the systems employers can implement to pay employees doing work of a comparable character different compensation.

The Oregon Equal Pay Act prohibits employers from paying employees performing work of a comparable character different compensation unless the entire compensation differential is based on a bona fide factor related to the position in question. The statute and rules only allow employers to consider certain “bona fide factors.” Employers may pay employees differential wages for work of a comparable character if it’s based on: 1) a seniority system; a merit system; a system that measures earnings by quantity or quality of production; 3) workplace location; 4) travel requirements; 5) education; 6) training; and 7) experience. Let’s unpack these a little bit.

A seniority system is defined as a system that recognizes and compensates employees based on length of service with the employer. A seniority system should be applied consistently. Meaning, If Budtender A is hired at $14 per hour and is raised to $16 per hour after two years of employment, Budtender B should receive the same raise after two years of employment.

A merit system provides for variations in pay based upon employee performance as measured through job-related criteria. BOLI has provided an example of “a written performance evaluation plan or policy that measures employee performance using a set numerical or other established rating scale.” An employer should use such performance evaluation to determine employee pay rates.

A system that measures earnings by quantity or quality of production include piece rate work. So for example, you could pay joint-rollers a certain amount for each joint rolled. An employee who rolls more joint would be paid more.

Work place location can be a consideration for differential wages. When determining if workplace location should factor into employee’s wages, the employer should consider: cost of living; desirability of worksite location; access to worksite location; minimum wage zone; or wage and hour zones.

Employers can also consider necessary and regular travel. This does not include consideration of normal travel between home and work.

When considering education, training, and experience, employers should consider substantive knowledge acquired through coursework, experience in the job field or trainings attended.

The rules require employers show a “devised coherent, consistent, verifiable and reasonable method.” This means more than an ad hoc decision to pay one budtender more than another. Instead, employers should have written policies describing how it pays its employees. This will require work—but in the long run could save you from BOLI penalties or a civil lawsuit from an employee (which is happening more and more in the industry as of late).

If you need assistance drafting compensation plans consult an attorney or a certified human resources specialist.

source https://www.cannalawblog.com/paying-cannabis-workers-equally-under-the-oregon-equal-pay-act-part-3/

Commercial Cannabis Case Law Update: Federal Courts Continue to Find a Balance

The Perplexing State of Industrial Hemp and Hemp-Derived CBD Sales in California

Oregon Congressman Releases “Blueprint to Legalize Marijuana”

California Cannabis Cultivation: DFA’s Proposed Permanent Rules

On Friday, the three California agencies charged with issuing and enforcing rules for cannabis business licensees issued a stack of proposed changes to the final rules it had previously proposed in July. Many of the most dramatic changes came from the BCC and will likely motivate more than a few comments during the rulemaking process (deadline for comments on these proposed changes is Nov. 5, FYI).

The Department of Food and Agriculture, which administers the cannabis cultivation licensing program, issued its own set of proposed rule changes that, while not as jaw-dropping as some of the BCC’s proposed changes, are still noteworthy.

Most importantly, the rules for cultivation plans just got a lot more onerous for licensees that plan to “stack” small licenses for use on one premises. Recall California’s controversial decision last year not to cap the total cultivation acreage per licensee to one acre, and the resulting benefit to mega farms that were then free to “stack” multiple smaller licenses to get a larger total cultivation area that they would otherwise be prohibited from getting due to the one-per-licensee limit of 1-acre outdoor licenses and the prohibition on Type-5 “large” cultivation licenses until 2023. A key element to that loophole’s benefit to large growers was AB 133, which clarified that a licensee could maintain one big “premises” upon which to operate all of its licenses, and was not required to make each license have its own “separate and distinct” premises. This would allow for economies of scale, as it would be arbitrary and inefficient to require every single chunk of canopy on a parcel to have its own fencing, security, etc.

Cue the DFA, which through its new proposed rule modifications, now says there are certain categories of a licensed premises that categorically cannot be shared among licenses owned by a single licensee.  Permissible shared areas must be contiguous, and they are limited to areas designated for pesticide storage, composting, cannabis waste storage, and harvested cannabis storage, in addition to traditional common areas such as hallways, bathroom, and break rooms. However, areas that cannot be shared among multiple licenses held by one licensee include: (i) areas outside of the canopy where only immature plants are grown (i.e. nursery-type areas); (ii) processing or packaging areas (i.e. “drying, curing, grading, trimming, rolling, storing, packaging, and labeling”); and (iii) areas designated for physically segregating cannabis during an administrative hold pending resolution of a notice of violation from the state. While it is not clear exactly how the DFA would interpret this proposed new rule language in practice, a likely result could be that cultivation licensees holding multiple licenses (either of the same type or a variety) for use on a single premises would no longer be able to take advantage of the same economies of scale for processing and packaging or for cultivation of immature plants, and that each separate license would require its own dedicated room for each such activity. We also know that the BCC requires separate walls and sealed doors when it calls for premises to be separate. Time will tell how this rule will look in a few months, but as it stands now it could harm companies with limited access to space and resources for building additional rooms, and would certainly add to costs of compliance.

Other notable small changes that could add to licensing costs include requirements that each license applicant must now agree to put one supervisor and one employee through a standard 30-hour Cal-OSHA course for workplace safety; and beginning in 2020, all cannabis and nonmanufactured cannabis products packaged or labeled by a licensed cultivator must come in child-resistant packaging, which conforms to the requirements of BCC and DPH for packing of other cannabis products.

Finally, one proposed change in the BCC rules that may end up having more of an effect on cultivators is that all structures included as part of the licensed premises must now be permanently affixed to the land for an indefinite period of time. Off-the-grid type operations are notorious for using RVs, mobile homes, lightweight moveable greenhouses, etc., so this rule change might also serve to prevent what would otherwise be a quick fix to the first issue identified above.

source https://www.cannalawblog.com/california-cannabis-cultivation-dfas-proposed-permanent-rules/

Procedural Hurdles for Washington Marijuana Businesses

What You Need to Know Now: BCC Drops Revised, Proposed, Permanent Cannabis Rules

California’s Proposed Modified Cannabis Regulations Could Prohibit Intellectual Property Licensing (!)

Paying Cannabis Workers Equally Under the Oregon Equal Pay Act: Part 2

In 2017 Oregon passed sweeping Equal Pay Legislation. Towards the end of August, Oregon Bureau of Labor and Industries (BOLI) issued draft rules implementing the Oregon Equal Pay Act. This series of post is exploring those new rules and how they will affect cannabis businesses. In my last post, I unpacked the definition of “compensation” under the Equal Pay Act and the proposed rules. This week I’ll discuss “work of a comparable character.”

The Oregon Equal Pay Act prohibits employers from paying wages or other compensation to “any employee at a rate greater than that at which the employer pays wages or other compensation to employees of a protected class for work of a comparable character.” To put it simply, cannabis businesses need to pay employees doing the same work the same pay. But what is “work of a comparable character?”

Work of a comparable character is not determined simply by job title alone. Two cannabis workers who have the same job title but perform different tasks are not necessarily performing “work of a comparable character.” Similarly, two cannabis workers that perform essentially the same tasks but have different job titles may be performing work of a comparable character.

According to the BOLI draft rules, to determine if different jobs constitute “work of a comparable character” the employer must consider whether the jobs require “substantially similar knowledge, skill, effort, responsibility, and working conditions.” No one factor is determinative. Meaning, an employer should balance the factors against each other to determine if employees are performing the same work and therefore should be receive equal pay. The proposed BOLI rules further define each factor.

• Knowledge. When considering whether two jobs require similar “knowledge,” the employer should consider whether the jobs require similar education, experience, or training.
• Skill. Things to consider to determine if two jobs require the same “skill” include the ability, agility, coordination, efficiency or experience required to perform the job.
• Effort. Considerations to determine the “effort” of a job include the “amount of physical or mental exertion needed; amount of sustained activity; or complexity of job tasks performed.”
• Responsibility. To determine if responsibility of two positions are “similar,” an employer should consider the “accountability, decision-making discretion, or impact of an employee’s exercise of their job functions on the employer’s business; amount, level, or degree of significance of job tasks; autonomy or extent to which the employee works without supervision; extent to which the employee exercises supervisory functions; or extent to which an employee’s work or actions expose an employer to risk or liability.
• Working conditions. Finally, to determine if employees are working in similar “working conditions” an employer should consider the “work environment; hours; time of day worked; physical surroundings; and potential hazards.”

Determining how to pay your employees is not an easy task. The Equal Pay Act, while it has good intentions, may make that task even more difficult. Regardless, now is the time to analyze how you are paying your cannabis employees. Now is the time to look at the jobs that are being performed, identify work of a comparable character, and adjust wages accordingly. If you’re unsure whether two workers should be receiving equal pay, you should contact an employment attorney.

The Equal Pay Act pay provisions are effective on January 1, 2019. Again, now is the time to ensure compliance before BOLI starts handing out penalties next year.

source https://www.cannalawblog.com/paying-cannabis-workers-equally-under-the-oregon-equal-pay-act-part-2/

Breaking News: California Cannabis Agencies Modify Proposed Regulations

Watching Your Backside in California Cannabis: Indemnification Issues

The Trump Administration Wants Your Opinion on Cannabis

Last Wednesday, the Food and Drug Administration (FDA) announced it was seeking public comments regarding “abuse potential, actual abuse, medical usefulness, trafficking, and impact of scheduling changes on availability for medical use ….” of cannabis and other substances currently under international review. If you want to take FDA up on its offer, go here.

The FDA’s announcement was released as the World Health Organization (“WHO”)’s Expert Committee on Drug Dependence (“ECDD”) prepares to discuss the medical and legal status of cannabis in a November meeting in Geneva, Switzerland. Specifically, the ECDD is evaluating whether to recommend that certain international restrictions be placed or removed on the plant.

As we have previously discussed (here and here), marijuana is currently classified as a Schedule I substance under U.S. federal law and international drug treaties. Schedule I drugs, substances, and chemicals are defined as drugs with no currently accepted medical use and with a high potential for abuse. Consequently, nations that are signatories to these international drug treaties are expected to treat cannabis as an illegal substance. However, depending on the outcome of the survey conducted by the ECDD, the November meeting may bring us one step closer to the rescheduling of cannabis, giving signatories the freedom to decriminalize, and possibly legalize, the plant within their own borders.

Legalization advocates are hopeful that a careful review of the medical values of the plant will result in the rescheduling of marijuana. Groups like the Marijuana Policy Project intend to submit scientific and anecdotal evidence detailing the benefits of cannabis. Their optimism is undoubtedly fueled by previous ECDD recommendations to deschedule “preparations considered to be pure CBD,” the non-psychoactive constituent of the cannabis plant, which the ECDD concluded did not appear to have abuse potential nor present a significant risk to the public health.

However, even if the ECDD report were to favor the legalization of cannabis, it would take some time to implement this global reform. In its announcement, the FDA explained that it will not make any recommendations to the ECDD regarding whether cannabis should be subject to international controls at the moment. Instead, it will defer such consideration until the ECDD has made official considerations to the Commission on Narcotic Drugs, which are expected to be made in mid-2019. Moreover, the FDA declared that any position it takes on this issue will be preceded by another Federal Register notice, soliciting public comments.

Of course, the United States could deschedule marijuana before the international community takes that step—after all Canada, Uruguay and Portugal have managed to go around the international ban. According to a recent Fox News interview of Representative Dana Rohrabacher (R-CA), the Trump administration intends to relax federal marijuana laws and regulations after the midterm election.

Rep. Rohrabacher declared he has been “talking to people inside the White House” about ending cannabis prohibition and that he has been “reassured” that the president will stick to his promise to protect state cannabis laws from federal interference.

While it is premature to determine whether the Trump Administration will soon loosen, and possibly legalize, federal cannabis laws, it is clear that the international effort to study the medical and legal status of cannabis are promising steps.

source https://www.cannalawblog.com/the-trump-administration-wants-your-opinion-on-cannabis/

Canada Cannabis Legalization Today: U.S. Customs and Border Protection Update

Canada Legalizes Cannabis!

 

Congratulations to all of our Canadian readers! Today is the big day!

Whether you are a cannabis business owner, consumer, lawyer, doctor, advocate, or even an opponent, you can surely appreciate this historic day. Canada has bucked international trends and become the first North American country to legalize recreational, adult-use marijuana.

Canada has instantly become an international leader in marijuana policy. If states like Washington, Oregon, and California are any indication, there will surely be bumps along the way, but Canadians should be excited about what comes next.

For those celebrating today, be safe and enjoy responsibly!

For more on Canadian cannabis, check out these posts:

• Bumps Ahead: The U.S. Border After Canada Cannabis Legalization
• Cannabis Trademarks in Canada are Attainable, Even for U.S. Companies
• The Potential for Cannabis Trademarks in Canada is Huge
• Vancouver, B.C. to Allow Off-Work Marijuana Use for Police
• How Canadian Companies Invest in U.S. Cannabis
• Investing in Marijuana Businesses Abroad
• ICYMI: Canada Drops Marijuana Legalization Bills

source https://www.cannalawblog.com/canada-legalizes-cannabis/

Bumps Ahead: The U.S. Border After Canada Cannabis Legalization

Canada’s cannabis legalization creates yet another wrinkle in the relations between the U.S. and its northern neighbor.

U.S. Attorney General Jeffrey Sessions harbors a well known hatred towards anything cannabis and he clearly has no love for Canada’s Cannabis Act either. What will this mean though for Canadians who are 100% legally involved in Canada’s cannabis industry when coming to the United States?

The answer came last week, when U.S. Customs and Border Protection (“CBP”) issued its Statement on Canada’s Legalization of Marijuana and Crossing the Border:

[a] Canadian citizen working in or facilitating the proliferation of the legal marijuana industry in Canada, coming to the U.S. for reasons unrelated to the marijuana industry will generally be admissible to the U.S. [H]owever, if a traveler is found to be coming to the U.S. for reason related to the marijuana industry, they may be deemed inadmissible. (Emphasis supplied).

Though this statement is a welcome surprise, it still provokes skepticism from U.S. immigration lawyers who have seen countless foreign nationals banned for life from entering the U.S. because they once used marijuana or were once associated with the cannabis industry.

Under the U.S. Controlled Substances Act (“CSA”), passed by U.S. Congress in May 1971, cannabis is classified as a Schedule I drug, which is reserved for substances that: (i) have a high potential for abuse; (ii) have no currently accepted medical use in treatment in the U.S.; and (iii) lack accepted safety for use under medical supervision.

U.S. federal law – more specifically the Immigration and Nationality Act (“INA”) — governs entry into the United States and under the INA, a “conviction” for controlled substances renders a foreign national inadmissible into the US. INA’s definition of “conviction” expands beyond a formal finding of guilt by a court of law to include instances where a foreign national admits to the essential elements of the crime under oath to a U.S. consular or CBP officer. For example, by answering “yes” to the question, “Have you ever smoked pot?”

Even a foreign national who has never consumed marijuana could be declared inadmissible under the INA based on his or her involvement in a legal cannabis business, either as “a knowing aider, abettor, assister, conspirator, or colluder with others” or “an illicit trafficker” of a controlled substance. Earlier in the year, we saw two examples of this when Canadian businesspersons Sam Znaimer and Jay Evans were banned for life from entering the U.S. because of their intended affiliations with U.S. cannabis industry.

Of course, lying about the use of or affiliation with marijuana would also render a foreign national inadmissible and you should avoid this at all costs. CBP has the legal authority to search electronic devices, and if it finds conflicting and/or incriminatory evidence about a foreign national’s actual or intended activities, that foreign national may be refused entry into the U.S. or even given a lifetime ban.

Once declared inadmissible, a foreign national needs a waiver of inadmissibility from the CBP to enter the U.S. These waivers are discretionary, costly, time-consuming, and limited in validity to between one and five years. Even with a waiver, a foreign national will typically face secondary questioning and delays each time he or she attempts to enter the U.S.

Foreign nationals have also been historically denied entry for profiting from the drug trade. Because of this cannabis lawyers were concerned that virtually all foreign nationals lawfully engaged in Canada’s cannabis industry would be deemed inadmissible even if coming to the U.S. for purely personal reasons.

The recent statement from the CBP appears to exempt individuals who seek to enter the U.S. for reasons unrelated to cannabis. However, the process of admitting foreign nationals into the U.S. remains discretionary and subjective and only time will tell just how exactly the new policy will be applied at U.S. ports of entry.

source https://www.cannalawblog.com/bumps-ahead-u-s-border-policy-after-legalization-of-cannabis-in-canada/

Cannabis Tax Crimes: Don’t Even Think About It

Today let’s talk about Matthew Price, the Oregon marijuana businessman headed to jail for tax crimes. This story got a lot of coverage when it broke last month, partly because it was the first known tax-related prosecution for a licensed pot business owner, and partly because Price was fairly well known in Oregon. He once sat on an Oregon Liquor Control Commission (OLCC) rules advisory committee for cannabis retail, and he owned three dispensaries. Seems like he was off to a pretty good start.

Well, not any longer. In addition to the seven-month lockup, Price was ordered to pay the I.R.S. $262,776 in restitution on the nearly $1 million in taxable income he raked in from 2011 to 2014. He will probably never be allowed to participate in the OLCC program again, given the agency’s recent tightening of the screws, and its authority to bar anyone with a federal conviction “substantially related to the fitness and ability of the applicant” to obtain a license.

Generally speaking, marijuana businesses are liable for lots of tax under IRC 280E. As cannabis business lawyers, we work with CPAs and others to attempt to mitigate our clients’ tax liability, but at the end of the day, that liability is always there. Tax obligations do not end at the federal level, of course: Most states have income tax programs, and all states with legal cannabis programs seem to collect additional taxes on the sale of marijuana. In Oregon, for example, that sales tax must be escrowed by OLCC retailers and paid to the state Department of Revenue. As to Matthew Price, the news reporting was silent on whether he was also shirking those payments.

Having advised state-legal cannabis businesses since 2010, we have seen a lot of monkey business when it comes to tax. We have seen bad lawyers advise clients not to pay taxes, on the theory that tax programs violate business owners’ rights against self-incrimination. We have seen businesses attempt to claim “non-profit” status and avoid taxes in that manner, despite the impossibility of receiving an I.R.S. exemption. And we’ve seen lots of “management company” schemes, most of which are nonsense. At the end of the day, to paraphrase Benjamin Franklin, death and taxes are certain.

Interestingly and appropriately, the judge in this case didn’t seem to treat Price differently because his income derived from cannabis sales. It was reported that federal prosecutors petitioned the judge to go hard on Price, in order to send a message to the marijuana industry. The judge wasn’t having that:

The fact that the product involved here is marijuana is utterly meaningless to me in passing a sentence,” the judge said. “It’s a tax case to me.”

That didn’t stop the Justice Department from bragging a bit, but it’s encouraging to see cannabis entrepreneurs being treated like everyone else — in theory, anyway — and for better or worse. On that point, we have often said on this blog that just because someone is violating one federal law by trading in cannabis, that doesn’t make it a good idea to violate all the others. And we always advise entrepreneurs to run their cannabis business like real businesses. That includes paying taxes.

source https://www.cannalawblog.com/28141-2/

Paying Cannabis Employees Equally Under the Oregon Equal Pay Act: Part 1

Back in 2017, the Oregon legislature passed equal pay legislation prohibiting employers from asking applicants about compensation history. The law is known as the Equal Pay Act. This law, like other employment laws, applies to cannabis businesses. The equal pay provision of the law goes into effect on January 1, 2019. Oregon Bureau of Labor and Industries (BOLI) was tasked with drafting rules implementing the Equal Pay Act and recently released draft rules. This series of posts will unpack the new rules and explain the impacts on your cannabis business.

The Equal Pay Act prohibits employers from paying disparate compensation for work of a comparable character. The Equal Pay Act defines compensation as “wages, salary, bonuses, benefits, fringe benefits and equity-based compensation.” What this means is each of these taken in total is an employee’s compensation. The proposed BOLI rules provide clarification to each of the words that make up “compensation.”

BOLI defines benefits as:

“the rate of contribution that an employee makes irrevocably to a trustee or to a third person under a plan, fund or program; or the rate of costs to the employer in providing benefits to an employee beyond what is required by federal, state or local law pursuant to an enforceable commitment to carry out a financially responsible plan or program which is committed to the employee affected including but not limited to the following: medical or hospital care; pensions on retirement or death; compensation for injuries or illness resulting from occupational activity; insurance to provide any of [the above]; unemployment benefits; life insurance; disability insurance; sick leave pay; accident insurance; vacation or holiday pay; or defraying costs of other bona fide fringe benefits.”

But what does this long-winded definition actually mean? As an example, if you have two extraction technicians that perform substantially the same work, you need to provide them the same benefits, otherwise you will be in violation of the equal pay laws. If you provide one health insurance, you need to provide the other the same level of health insurance. Etc.

Bonus, similarly has been given a long definition. Bonus is defined as:

“an amount that is paid or something of monetary or quantifiable value that is given to an employee by an employer in addition to the employee’s regular rate of pay, typically as a means of encouragement or in recognition of superior performance. Bonuses include but are not limited to the following: signing or job acceptance bonuses; attendance bonuses; loyalty bonuses; performance bonuses; and productivity bonuses.”

Again, if you provide a performance bonus to one extraction technician, you must provide a bonus on the same terms to any other extraction technician. A future post will discuss in detail exactly what the “same terms” means.

Finally, “salary” is defined as a predetermined amount constituting all or part of the employee’s compensation paid for each pay period of one week or longer. And “wages” means all compensation for performance of service by an employee for an employer. Your extraction technicians need to be receiving the same salary or wages otherwise, you’ll be in violation of the rules.

All of the above definitions need to be considered in total when setting compensation for your employees. Remember–work of a comparable character must be paid the same. And yes, a future post will explore what “comparable character” means.

The Equal Pay portion of the Equal Pay Act officially goes into effect on January 1, 2019. Now is the time to get familiar with the law and its implementing rules, and to ensure you are paying your cannabis employees in accordance with the requirements. If you are unsure, consult an attorney to review your pay practices. Non-compliance will come with hefty fines.

source https://www.cannalawblog.com/paying-cannabis-employees-equally-under-the-oregon-equal-pay-act-part-1/

California Cannabis: Does Your Business Have a Website? If So, You Probably Need a Privacy Policy.

Washington’s Unwritten Cannabis Rules

The FDA and DEA Disagree Over CBD Scheduling

California Cannabis Bill Round-Up: What Matters Most

It’s not a normal day in California if there aren’t around 50 cannabis bills floating around Assembly halls. And this legislative session did not disappoint in getting certain much-needed cannabis legislation passed (though some important legislation also bit the dust). All in all, there is a lot of legislation and it can be difficult to keep track of. It can also be difficult to identify what’s going to have the greatest impact on California’s cannabis industry. We are still in an emergency rule period under MAUCRSA (with permanent regulations probably taking full shape and adoption in early 2019), so it’s comforting to see the legislature fill some of the gaps left over from the emergency rules.

Here’s my list of the most important/recent cannabis bills of 2018 for California:

Provisional licenses. Without a doubt, the industry would have gone into a tailspin and then come to a screeching halt after December 31 of this year without the advent of provisional licenses. We wrote about the provisional license bill, SB 1459, before its passage, and the bill is now law. The basic gist is that if your business holds or has held a temporary license and you’ve file for your annual license, you’re going to get a provisional license (which is good for only one year) in order to keep operating while you pursue your annual license. Temporary licenses will not be issued after December 31 of this year, so this is the new vehicle for continued operation in California while you wait on your annal license. Here’s a fact sheet from CDFA that details what you need exactly for a provisional cultivation license (the other agencies haven’t released anything yet as of the writing of this post).

Events. Finally, the legislature got on board with expanding the venues at which cannabis events can be held. AB 2020 now allows cannabis events to take place at “a county fair event, district agricultural association event, or at another venue expressly approved by a local jurisdiction for the purpose of holding temporary events of this nature. . .” Of course, local jurisdictions still have to approve of these events and only licensees can throw them, but this is a big move for the increased normalization of cannabis in California where we’ve beyond allowing licensees to have temporary events at only county fairs and district agricultural association events as was previously the case.

Cannabis convictions. AB 1793 represents the continued implementation of Prop 64. Namely, when it comes to cannabis-related convictions, Prop. 64 “authorizes a person to petition for the recall or dismissal of a sentence, dismissal and sealing of a conviction, or redesignation of a conviction of an offense for which a lesser offense or no offense would be imposed under [Prop. 64].” In turn, AB 1793 mandates that the State Department of Justice/Office of the Attorney General, before July 1, 2019, review all existing criminal records in the state’s database to identify past convictions that are eligible for recall, dismissal and sealing, resentencing and/or redesignation. The State DOJ then must notify all local prosecutors about the foregoing eligibility. The prosecutors must then, on or before July 1, 2020, review all of their eligible criminal cases to decide whether to challenge the recall, resentencing, dismissal and sealing, or redesignation. If no such challenge is made by that date, the subject court must automatically reduce or dismiss the conviction. Without a doubt, many people in California will have their lives and futures changed for the better due to the passage of this bill.

Social equity. I have long maintained that any meaningful social equity programs on the local level (like those in Los Angeles, San Francisco, and Oakland) likely wouldn’t survive unless supported by the state. Thankfully, California is on board with the success of local social equity regimes via SB 1294, also now known as the California Cannabis Equity Act of 2018 (the “CCEA“). The CCEA basically sets up the state to provide “technical assistance” not to social equity applicants directly, but to the local programs that govern them. The Bureau of Cannabis Control (“BCC”) “may, upon request by a local jurisdiction, provide technical assistance to a local equity program that helps local equity applicants or local equity licensees.” “Technical assistance” includes “providing training and educational sessions regarding state cannabis licensing processes and requirements to equity applicants or equity licensees that are coordinated with the local equity program.” Cities and counties will have to petition the BCC for a grant of assistance to get things going under the CCEA, and whether the BCC assists or not depends on various merit-based criteria set forth in the CCEA regarding the nature of the local social equity program.

Pets and pot. AB 2215 addresses veterinarians and their relationship to licensees under MAUCRSA. Under this new law, the Veterinary Medical Board can revoke or suspend a veterinarian license, or can assess a fine, for “accepting, soliciting, or offering any form of remuneration from or to a [MAUCRSA] licensee if the veterinarian or his or her immediate family has a financial interest [in the licensee].” Further, if a vet physician even discusses cannabis with a client (i.e., the pet’s owner) while the vet physician has any kind of an agreement with or is employed by a MAUCRSA licensee, or if the vet physician makes any kind of advertisement for cannabis, the Veterinary Medical Board can revoke or suspend a veterinarian license, or can assess a fine against the vet physician. This is the biggest kicker of all though–AB 2215 “prohibits a licensed veterinarian from dispensing or administering cannabis or cannabis products to an animal patient.” Still, the vet will not get into trouble for just discussing, on their own with the pet owner, the benefits or effects of cannabis on the pet.

Privacy. What companies can and cannot share about their customers seems to be ever changing and certainly constitutes an emerging area of law. And cannabis companies are no exception, and definitely not now in California. As we wrote in a previous post, “AB 2402 is significant in that it prevents licensed cannabis businesses from sharing expansive categories of customers’ personal information with third parties—except in limited circumstances in connection with payments, or where a customer has consented to sharing his or her data with a third party. Notably, AB-2402 prohibits licensed cannabis businesses from discriminating against or refusing service to consumers who do not consent to disclosure of their personal information to third parties.”

No CBD in your booze. For anyone who had dreams of making a cannabis-infused wine, cocktail, or beer, AB 2914. “prohibit[s] a licensee from selling, offering, or providing a cannabis product that is an alcoholic beverage, including, but not limited to, an infusion of cannabis or cannabinoids derived from industrial hemp into an alcoholic beverage.”  Yes, the nail is now officially in the coffin for hemp-derived CBD alcoholic beverages. And this doesn’t just apply to cannabis licensees–it also now applies to alcoholic beverage licensees licensed under the Alcoholic Beverage Control Act. Given that CDPH-FDB recently prohibited hemp-derived CBD in all food and regular drinks (via an FAQ), it was really only a matter of time until state government extended that prohibition to alcohol, too.

OSHA. AB 2799 is going to force licensees to get serious about employment laws in California; specifically, it will make cannabis businesses become Cal-OSHA compliant, which really isn’t a bad thing where it’s good public policy to promote and implement safe workplaces for employees. Now, when you apply for your annual license or you to go to renew that annual license, you’ll have to “[p]rovide a statement . . . that [you] will employ within one year of receiving or renewing a license, one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider that is authorized by an OSHA Training Institute Education Center to provide the course.”

source https://www.cannalawblog.com/california-cannabis-bill-round-up-what-matters-most/

Cities Should Not License Cannabis Businesses (They Should Have Them, Though)

California Passes Industrial Hemp Legislation

Vancouver, B.C. to Allow Off-Work Marijuana Use for Police

CanEx Jamaica 2018: Lessons from Marijuana Legalization Across North America

I recently traveled to Montego Bay for the annual CanEx Jamaica conference. I spoke on a panel with attorneys from Jamaica and Canada about the legal challenges across international cannabis markets. Grace Lindo of Jamaican firm Nunes, Scholefield, DeLeon & Co. and Sandra Gogal of Canadian firm Miller Thomson LLP, each spoke about the markets in their respective countries while I cover legal challenges in the US. The panel was moderated by Imani Duncan-Price, Chief of Staff for the Office of the Leader of the Opposition.

Jamaica breaks commercial cannabis licenses into six categories: cultivator, processor, transporter, retailer and a research and development license. A licensed business must be “substantially owned” (at least 51%) by Jamaican residents.

Because Jamaica has decriminalized cannabis under its licensing regime, intellectual property protection is available for trademarks. According to Lindo, Jamaica’s Patent Act is somewhat outdated, meaning that it is not possible, per se, to get protection for plant varieties. Trade secrets and know-how are not statutorily protected, so in Jamaica, confidentiality agreements are key.

Canada’s legal cannabis market is poised to take off this month, so it was very interesting to hear about the legal framework for our northern neighbors. This is when Canada’s “Cannabis Act” goes into effect, legalizing cannabis at the federal level. Like the US, Canada has a federal system of government. When it comes to cannabis, the federal government has jurisdiction over cultivation, quality control, and taxation. Provinces and territories, in turn, have jurisdiction over distribution and retail. There will be six license types: cultivation, processing, analytical testing, sale, research, and a cannabis drug license.

The Canadian market will arrive in a somewhat subdued form. Edible products, other than oils, will not be available initially. Also, the Canadian government is imposing strict limitations on the advertising and marketing. There is a general prohibition on promoting cannabis other than exceptions for “informational” and “brand-preference” promotion. That promotion will only be permitted for adults.

Because cannabis is going to be legal at the federal level in both Jamaica and Canada, my fellow panelists agreed that the international cannabis trade is going to be picking up in the near term. I discussed why America won’t be participating in this market until our federal laws change. As I recently wrote, the Controlled Substance Act makes it nearly impossible to import or export cannabis. I also spoke about the difference between marijuana and industrial hemp, and how the states have taken different approaches to regulating both hemp and marijuana.

It appears to me that both Jamaica’s and Canada’s laws have been influenced by various U.S. state markets. For example, like Jamaica, several states impose residency requirements. Canada has followed states like Washington in creating restrictive marketing rules designed to prevent promoting cannabis to children. On a larger scale, both Jamaica and Canada have also been influenced by the type of licenses issued. The model of issuing cultivation, processing, retail, and research licenses is certainly influenced by states like Washington, Oregon, and California.

When it comes to cannabis, American states have been pioneers and are now influencing regulatory regimes across the globe. However, America as a nation continues to fall behind due to the inability to participate in the international markets. There are signs that this could change, as the Associated Press recently reported that the University of California San Diego’s Center for Medical Cannabis Research obtained a permit from the Drug Enforcement Agency to import capsules from Tilray Inc., a Canadian cannabis company, that contain CBD and THC derived from marijuana. UCSD researchers will look into the cannabinoids effectiveness in treating tremors.  Though this is limited, it is a step in the right direction to keep the US involved in the growing international market.

source https://www.cannalawblog.com/canex-jamaica-2018-lessons-from-marijuana-legalization-across-north-america/

Washington Regulators Ban Cannabis-Infused Candies

By April 3, 2019, Washington retail marijuana stores will no longer carry infused hard candies, tarts, fruit chews, jellies, and gummies due to a newly enacted ban on the production said products. The announcement came from the Washington State Liquor and Cannabis Board (“LCB”) during a recent meeting. A PowerPoint presentation from the meeting is available here.

The LCB reevaluated its stance on marijuana candies finding that infused candies are “especially appealing to children.” The LCB’s regulations (WAC 314-55-077(7)) prohibit processors from creating products that appeal to children. The LCB claims that its new policy is intended to comply with this provision.

Going forward, the following products are prohibited:

• Candy – hard candy (of any style, shape or size) and tarts.
• Fruit chews, jellies and all gummy type products.

The new LCB policy will also impact other products. The following infused products are allowed “with limitation on appearance”:

• Chocolate
• Cookies
• Caramels
• Mints

What does “limitation on appearance” mean? The LCB provides some examples:

• Chocolate in its original color and not coated, dipped, sprayed or painted with any type of color.
• Chocolate in the shape of a bar or ball. No shape or design that is especially appealing to children.
• Caramel and fruit caramels. No color, shape or design that is especially appealing to children.
• Cookies that do not contain sprinkles or frosting.
• Mints that have no color (white or white with small color fleck to represent the flavor only).

Finally, the LCB lists the following “allowable infused products”:

• Beverages
• Baked Goods
• Capsules
• Chips and Crackers
• Sauces and Spices
• Tinctured

Though the LCB has categorized the above products, it still will consider whether any product is especially appealing to children. In making that determination, the LCB examines the appearance, the similarity to products that are marketed towards children, and color. Our Seattle office knows all too well how difficult it can be to determine exactly what the LCB will approve, given these highly subjective criteria.

If you are a Washington marijuana processor, you may have seen this coming. The LCB has been pushing back on many products based on the “especially appealing to children” limitation, signaling that more stringent policies were on the horizon. The LCB now recommends that processors cease all production of hard candy, tarts, fruit chews, colorful chocolates, jellies, and gummies, because they will not be approved. Licensees are allowed to sell their products until inventory is depleted or April 3, 2019, whichever comes first.

This change will have a significant impact on processors that have built brand loyalty by creating suddenly outlawed infused candies. Consumers will also have fewer options. We anticipate that the industry will push back on this ruling, especially because the LCB has claimed that this is to address the public health risk of children accessing infused marijuana candies, but has not provided evidence that kids are, in fact, getting their hands on these products.

The LCB will host a webinar to answer questions on marijuana infused edibles on October 16, 2018. The link will be available on the agency’s website.

source https://www.cannalawblog.com/washington-regulators-ban-cannabis-infused-candies/