Welcome back to The Week in Weed, your Friday look at what’s happening in the world of legalized marijuana.

You might think news about Rudy Giuliani and Ukraine wouldn’t appear on a blog devoted to cannabis, but you’d be wrong.  Two of the former mayor’s associates were indicted for moving foreign money into U.S. elections.  One of their targets was a Nevada gubernatorial candidate; they hoped he would provide them with a cannabis license.

In more traditional marijuana news, two Pennsylvania state senators introduced a bill to legalize cannabis in the state.  The legislation includes provisions concerning home grow, delivery, expungement and a low bar to entry.

In New Mexico, an expert panel appointed by the state’s governor recommended using proceeds from recreational marijuana to provide low-interest loans to small cannabis businesses and eliminating taxes on medical marijuana.  We’ll be keeping our eye on the Land of Enchantment in 2020.

California made a lot of news this week.  The governor signed bills on: social equity, vape packaging, labor peace agreements, “specialty cottage” growers, allowing medical patients to receive free cannabis, and allowing students to use medical marijuana at school.  He also approved an overhaul of the cannabis tax system, but vetoed legislation that would have allowed the use of marijuana in hospitals.

The news wasn’t just on the state level this week.  A former IRS trial attorney predicted a “tsunami” of 280E audits, as a change in agency policy means that associated companies could come under increased scrutiny.

Meanwhile, Senator Majority Leader Mitch McConnell met with cannabis industry representatives to discuss banking and other issues.  The passage of the SAFE Banking Act has increased banking interest (no pun intended) in serving the marijuana industry.

Finally, times have changed in higher education.  When I was in college (many years ago), marijuana was certainly on campus.  Now, however, it’s on the syllabus.

See you next week!

It is widely known that California’s Governor Gavin Newsom has signed into law (and also rejected) a flurry of bills in recent weeks.  But what has been done in the cannabis space?  So glad you asked, because, indeed, Newsom has signed several bills impacting the cannabis industry, reflecting a focus on encouraging minority participation, encouraging union membership, and clarifying select existing regulations.

How is this accomplished?

For starters, Senate Bill (SB) 595, which provides some relief from licensing fees for needs-based applicants, is meant to facilitate minority owned businesses.

Assembly Bill (AB) 1529, an urgency statute co-sponsored by the California Cannabis Industry Association, modifies the labeling requirements on vaporizer cartridges.  It facilitates compliance with the requirements by making some practical modifications to the labeling specifications.

AB 1291, which requires a labor peace agreement for all businesses with 20 or more employees, is designed to facilitate union protections for cannabis industry workers, as well as protections from strikes and other disruption for businesses.  The new law provides “teeth,” imposing strict timelines under threat of loss of marijuana business license.  “Unions were a big part of the legalization push in California and several other states, giving them leverage to push for peace agreement requirements,”  Seyfarth Shaw attorney Jinouth Vasquez Santos is quoted as saying in Law 360.  It will be interesting to see how, in light of AB 5’s near prohibition of independent contractors in California, businesses might try to avoid hiring “employees.”

AB 858 clarifies requirements for “specialty cottage” growers.

Finally, SB 34 allows retailers to provide free products to qualifying medical patients, a practice that was common until the 2018 regulations went into effect.

The Western District of New York, in Horn v. Medical Marijuana, Inc., et al., issued an initial procedural order last week in a case where the plaintiff’s purchase and use of the defendant products resulted in a failed drug test that resulted in his employer terminating his employment.  Horn v. Medical Marijuana, Inc., et al. No. 15-cv-701-FPG (W.D.N.Y.)

We have noted previously that the federal Drug Enforcement Agency (DEA) recently announced that drugs that include CBD (cannabidiol) with less than 0.1% of THC (tetrahydrocannabinols) are now considered Schedule V drugs provided they are approved by the federal Food and Drug Administration (FDA).  The move marked the first time the DEA removed any form of cannabis from Schedule I and was due to the FDA’s approval of Epidiolex, a non-synthetic cannabis-derived medicine used to treat severe epilepsy.  Setting aside this very limited exception, marijuana and CBD remain illegal under federal law.  And while CBD is projected to be a $22 billion industry by 2022, many employers remain hazy about this extremely popular product and the implications it has for their employees and businesses.

We had previously blogged on The Stoned Age: What the CBD Craze Means for Employers and Their Substance Abuse Policies, CBD is Everywhere – But Where Does the FDA Stand?, CBD: Uncertainty for Restaurants and Retailers, and FDA: .1% CBD OK.  As the legalization and normalization of these products becomes more prevalent, their encroachment into the workplace becomes more and more likely, and more of an ongoing issue for employers. Now, we are seeing CBD companies being sued for allegedly promoting “pure CBD” products that might actually contain THC and, thus, creating work-related issues for applicants and employees using these products.

In Horn v. Medical Marijuana, Inc., et al., the plaintiff was a professional over-the-road hazmat commercial truck driver who worked for the same company for 10 years and drove professionally for 29 years.  Plaintiff’s employment as a professional commercial driver required that he be and remain free of all illegal and impairing substances, including marijuana.  The plaintiff allegedly used a CBD product called Dixie X.   Subsequently, the plaintiff submitted to a random urinalysis screening as required by his employer, and as required by the U.S. Department of Transportation (DOT)’s drug and alcohol testing regulations set out in Part 40.  Plaintiff ultimately was terminated for testing positive for a “high level of THC.”

Before his termination, plaintiff asked an independent laboratory to test Dixie X CBD to determine if it did indeed contain THC.  That laboratory informed plaintiff that it could not run the tests on the Dixie X as the substance was illegal and contained THC levels well over the federal limit as per DEA regulations.

In his complaint, the plaintiff alleges that, among other claims, he had used products marked “THC free” and “non-THC,” and the defendants were “misleading the public at large through their misrepresentation of the true chemical compound make-up of products like DIXIE X.”  We will monitor this case as it progresses through the courts.

We continue to recommend that employers exercise caution when dealing with applicants and employees using medical marijuana or CBD.  As noted in our previous blogs, CBD is a recent and largely unregulated industry.  Thus, before taking any action against medical marijuana or CBD users, employers should review the laws of the states in which they operate and work with employment counsel to help navigate this complex and rapidly evolving area of the law.

Employers also may need to consider:

  • Revising their policies to define marijuana and address CBD use;
  • Training managers and supervisors on how to address situations where an employee defends a positive drug test by claiming use of CBD; and
  • Educating employees about CBD and zero tolerance policies.

Seyfarth Shaw will continue to monitor legal developments at the federal and state level.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Cannabis Law Practice or Workplace Policies and Handbooks Team.

 

 

Welcome back to The Week in Weed, your Friday look at what’s happening in the world of legalized marijuana.

We’ll start this week with some financial news.  CBD sellers looking for a payment processing method got some good news.  Square has just announced that they will start servicing the industry.  The state of California has issued guidance for financial institutions on how to deal with cannabis businesses.  And data compiled by the Financial Crimes Enforcement Network (FinCEN) show that more and more financial institutions are serving the industry, even without federal legislation on the practice.

There was some action in the world of hemp this week.  In South Dakota, where Governor Noem vetoed an industrial hemp legalization bill earlier this year, legislators are working on new legislation to be introduced in 2020.

One of the governor’s concerns was the inability of law enforcement to tell the difference between hemp and cannabis.  The Douglas County Sheriff’s Office in Nebraska may have a solution to this problem.

Meanwhile, the USDA is funding research  on hemp pollen migration.  And researchers at the University of Georgia will be studying medical cannabis as a treatment for chronic pain.

Members of the cannabis industry, optimistic after the House passage of the SAFE Banking Act, have a plan for the future.  Not surprisingly, it involves descheduling marijuana.

In state news, Maine may soon see legal sales of recreational marijuana.  And in Florida, there’s yet another cannabis legalization ballot initiative (this makes three).

MedMen and PharmaCann will not be tying the knot.  The deal was terminated by mutual consent, according to press releases from both companies.

And finally, some demonstrations on Capitol Hill gather a bit more attention than others.  A giant, inflatable joint is something you don’t see every day.

Image result for 51 foot inflatable joint capitol hill

See you next week!

The American Civil Liberties Union (ACLU) filed suit last week in the D.C. Superior Court on behalf of Doretha Barber, a sanitation worker with the D.C. Department of Public Works, who claims that she was denied reasonable accommodation and placed on an indefinite leave of absence after disclosing that she is a medical marijuana card-holder under the District’s medical marijuana program.  Specifically, Ms. Barber alleges that she suffers from degenerative disc disease which causes her debilitating back pain and for which she was recently prescribed medical marijuana for off-duty use only.  When Ms. Barber requested a temporary transfer to a clerical position during the fall leaf raking season as an accommodation of her disability, she was purportedly denied the transfer, and after she disclosed that she possessed a medical marijuana card, she was allegedly placed on an unpaid leave of absence and told that she could not resume her duties as a sanitation worker until she successfully passed a drug test (which she would inevitably fail due to her medical marijuana use) because she was working in a “safety sensitive position.” Continue Reading D.C. Sees Latest Test Case for Employees Seeking “Reasonable Accommodation” for Off-Duty Medical Marijuana Use

Welcome back to The Week in Weed, your Friday look at what’s happening in the world of legalized marijuana.

We start off today with Pennsylvania.  Could it be the next state to legalize?  First, the state’s attorney general  announced that he is in favor.  Meanwhile, the governor asked the Pardons Board to speed up applications for those with low-level marijuana offenses.  Plus, a new bill would legalize cannabis with state-run stores.

What about other states?  In Arizona, supporters of legalization have changed their ballot initiative language.  The new wording limits potency, increases the number of people eligible for expungement of past convictions, and adds a social equity component.

In Minnesota, lawmakers are conducting “Be Heard on Cannabis” discussions, so that citizens can share their views on legal marijuana.  In Florida, there are two ballot initiatives; one of which is facing criticism for being too “corporate.”

It’s not just Arizona that is working on social equity.  Illinois has released a map showing disproportionately impacted areas for social equity applicants.  And Michigan is expanding the number of communities eligible for its social equity program.

And in our latest installment of “Where Do the Candidates Stand on Marijuana?” we have Senator Kamala Harris.  She has sponsored the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, but she also faces criticism for her work as a California prosecutor.

There was lots of action on the medical marijuana front this week. A judge in Montgomery County prevented the Maryland Medical Cannabis Commission from issuing more licenses, saying the application process was flawed.  In other judicial news, a judge in New Mexico ruled that the state must accept non-residents into its medical marijuana program.

Also in New Mexico, growers of medical cannabis are suing the state over limits on plant-count.  They maintain that the limits will put constraints on the amount of marijuana available to patients.

In the never-ending saga that is Utah‘s medical cannabis program, the latest twist is that dispensaries could be looking at large operating fees under one state proposal.  In Connecticut, meanwhile, the state may add chronic pain to the list of conditions eligible for treatment with medical marijuana.  And in Missouri, those who receive welfare will no longer lose their benefits if they also have a medical cannabis card.

GW Pharmaceuticals and Montefiore Medical Center in New York are teaming up to study the use of a cannabis compound on autism.

In the world of hemp, Senator Mitch McConnell has directed the DEA to figure out how to distinguish hemp from marijuana.  Note that McConnell still refers to marijuana as hemp’s “illicit cousin.”  Since the CBD industry is projected to surpass $20 billion by 2024, those tests might come in handy.

And finally, if you’re looking for an alternative to picking your own apples or berries, you might want to try picking your own hemp.

See you next week!

Welcome back to The Week in Weed, your Friday look at what’s happening in the world of legalized marijuana.

Let’s start off with the big news: the SAFE Act passed in the House.  For news coverage, see here, here and here.  For our take on this legislation (spoiler alert: we’re not so sanguine about its chances in the Senate), see here.

So, did anything else happen this week?  Glad you asked!  In addition to banking, research loomed large on the federal scene.  Both the FDA and NIH are looking into cannabis products.

In other federal news, the 10th Circuit Court of Appeals ruled that marijuana businesses must comply with the Fair Labor Standards Act (FLSA).  Just because your business is illegal on the federal level, doesn’t mean you don’t have to follow other federal laws.  We blogged about this decision here.

Meanwhile, federal rules for hemp may be coming.  As we reported last week, the USDA sent its proposed rules to OMB for approval.  Now Senator Mitch McConnell (R-KY) is pushing the FDA to issue its own rules.

On the state level, legalization is a hot topic.  North Dakota has not one but two citizen initiatives that would allow recreational cannabis.  In South Dakota (it’s important not to mix up your Dakotas), they also have two ballot initiatives: one that would legalize medical marijuana and one that would legalize recreational marijuana.

Moving east to Wisconsin, legislators introduced a bipartisan measure to legalize medical cannabis last week.  A lawmaker in Virginia plans to re-introduce a recreational marijuana bill next year; the measure got nowhere this year.

The governor of Pennsylvania has come out in support of adult-use cannabis in the state.  In New York, Governor Cuomo backs a regional approach; he hopes to standardize laws in his state, Connecticut and New Jersey.

Finally, cannabis is on the menu at the Lowell Cafe in Los Angeles.  No word on whether the sandwiches come with “the devil’s lettuce.”

See you next week!

Yesterday, the House of Representatives passed H.R. 1595, the Secure and Fair Enforcement Banking Act (SAFE Act), by a vote of 321-103, with 90 Republicans voting in favor of the bill.  Some have hailed the bill as a panacea for banking cannabis related businesses (CRBs).  While this post is not intended to be a comprehensive analysis of the SAFE Act, it is important to note what the Act does and does not do.

Among other things, the SAFE Act:

  • Provides a safe harbor to enable depository institutions (banks and savings associations) to provide financial services (as defined in the Dodd-Frank Act) to CRBs;
  • Prohibits Federal bank regulators from terminating or limiting the deposit insurance of a depository institution;
  • Prohibits Federal bank regulators from recommending or encouraging depository institutions not to provide financial services to CRBs;
  • Protects depository institutions from forfeiture of collateral for loans provided to CRBs; and
  • Provides protections to ancillary businesses serving CRBs in that, for purposes of the Money Laundering Control Act, proceeds from a transaction conducted by a CRB are not considered proceeds of an unlawful activity solely because the transaction was conducted by a CRB.

BUT,

The SAFE Act does not:

  • Legalize marijuana;
  • Eliminate the requirement for depository institutions to file Suspicious Activity Reports; and
  • Extend the safe harbor protections of the Act to prohibit prosecution of a depository institution by the Department of Justice.

The SAFE Act now moves to the Senate where it faces a very uncertain future.  Despite some support in the Senate, there are a number of other cannabis-related bills that are competing for attention.  Among them are the STATES Act, which would amend the Controlled Substances Act, and the MORE Act, introduced by Representative Nadler and Senator Harris, which would provide for comprehensive reform of federal marijuana laws.  The SAFE Act  faces potential opposition from Senator McConnell who is a proponent of hemp and opponent of cannabis.  In fact, in comparing cannabis and hemp, he has been quoted as stating: “It [hemp] is a different plant.  It has an illicit cousin which I choose not to embrace.”

What if the SAFE Act were to be enacted into law?  Would it be the panacea for banking CRBs?

Probably not.  Financial institutions, particularly national and large regional financial institutions, may not want the reputational risk of serving what would still be an illegal industry under Federal law. Further, the SAFE Act does not clarify the status of hemp.  Although legalized at the Federal level, many states have not yet updated their own laws or issued regulations governing hemp.  Finally, banks would still have to comply with Bank Secrecy Act requirements, as well as FinCEN guidelines, and regulations would have to be written under the SAFE Act.

On the positive side, enactment of the SAFE Act would definitely be a step toward reforming cannabis laws.  It might encourage more community banks and even larger banks to join the over 600 depository institutions already providing financial services to CRBs.  In addition, passage of the SAFE Act could aid in removal of the taint of money laundering from proceeds of transactions with CRBs, thereby encouraging more service providers and vendors to engage with the cannabis industry.

Our Cannabis Law Practice will continue to monitor legislative developments and provide updates to our clients and readers of The Blunt Truth.  If you have any questions please contact Stanley S. Jutkowitz at sjutkowitz@seyfarth.com, or another member of the Cannabis Law Practice.

 

 

TBT readers are invited to join Seyfarth Shaw LLP’s upcoming webinar, “Risky Business: US Immigration Law and the Marijuana Industry,” on October 22 at 12 pm CT.

Register here
There is no cost to attend, but registration is required.

About the Program:

Despite the growing trend by states and foreign countries to legalize cannabis for recreational or medicinal use, and the growth of the legalized cannabis business in the U.S. and abroad, federal law and policy regulating marijuana as a Schedule I controlled substance remain unchanged.

Recently, U.S. Citizenship and Immigration Services (USCIS) introduced a new section of its Policy Manual on cannabis involvement, asserting that — despite state and foreign legalization or decriminalization — possession, production or distribution of marijuana remained a presumptive barrier to naturalization. In addition, U.S. Customs and Border Protection (CBP), has announced new bars to entry for Canadians “working in or facilitating the proliferation of the legal marijuana industry.”

Read more about the program and speakers here.

Looks like arguments seeking to dismiss FLSA wage claims under the guise that “cannabis is illegal under federal law” have gone up in smoke. The 10th circuit created a buzz in Robert Kenney v. Helix TCS, Inc., Case No. 18-1105, by holding that cannabis industry workers can claim overtime under the Federal Labor Standards Act (“FLSA”).

The FLSA requires employers to pay employees overtime if employees work more than 40 hours in a workweek.

In Helix, Kenney—a security worker in the cannabis industry—brought an action against his employer claiming that he was misclassified as exempt and sought inter alia overtime wages under the FLSA. Kenney argued that he and other co-workers routinely worked over 40 hours per week but were not compensated for any overtime in violation of the FLSA.

Helix moved to dismiss the action and argued that the FLSA did not apply because the marijuana industry is considered illicit under the Controlled Substances Act (“CSA”). Helix argues that allowing cannabis employees to receive protections under the FLSA would “create a clear repugnancy” between the FLSA and the CSA and “impermissibly render the two laws mutually inconsistent.” The district court denied the Motion to Dismiss, and the Appellate Court affirmed.

The Appellate Court retorted that “‘case law is clear that employers are not excused from complying with federal laws’ because of their other federal violations.” The court noted that a finding that pot workers are covered by the FLSA is in line with “both the plain reading and the overall purpose of the statute, and doing so does not require disavowal of the CSA” because congress has amended the CSA many times since the enactment of the CSA “without excluding employees working in the marijuana industry.” The court also held that both statutes seek to discourage companies from seeking an unfair advantage over legitimate employers and, thus, cannabis workers “are not categorically excluded from FLSA protections.”

Why is this important? Well, cannabis employers governed by the FLSA, will either need to schedule workers so that they do not work more than 40 hours in a workweek or pay workers overtime unless employers want to be subjected to a lawsuit. Moreover, cannabis employers in California, must take other precautions because California’s labor laws require employers to compensate employees who work: (1) more than 8 hours in a work day, and (2) more than 40 hours in a workweek. For more information regarding whether your company’s practices comply with both State and Federal law, please contact the author.