As you might recall from previous blog posts, more and more states are requiring cannabis companies to enter into labor peace agreements with unions in order to obtain their licenses, but could that soon go up in smoke?

The National Right to Work Legal Defense Foundation (“NRTWF”) asked the National Labor Relations Board (“NLRB”) for help when New Jersey took one toke over the line by requiring cannabis companies to not only enter into a labor peace agreement but also enter into a collective bargaining agreement within 200 days of commencing operations. If companies fail to adhere to New Jersey’s requirement, then their permit will either be suspended or forfeited.

The NRTWF argues that under section 7 of the National Labor Relations Act (“NLRA”), employees have the right to choose to be represented by a union or to refrain from union representation. However, by forcing companies to enter into collective bargaining agreements, the State is taking that right away from employees. At the end of the day, having a labor peace agreement with a union does not mean employees will choose to unionize. A labor peace agreement is simply an agreement between a company and a union whereby the company agrees to give the union access to its employees and, in exchange, the union agrees not to disrupt business operations–that’s it.

But by imposing such requirements in the first place, certain unions are in effect indirectly forcing employees to choose them over others (or none at all), which could violate section 9(a) of the NLRA. Section 9(a) provides that employees have the right to elect a union of their choosing, not the other way around.

So can the NLRB take action? It seems like it. First, NRTWF argues that federal law preempts state interference in the labor field. In particular, courts, when faced with state interference, have often ruled that such state action is preempted by the NLRA.

Second, as noted above, labor peace requirements and collective bargaining agreements take away an employee’s right to choose to be represented by a union and, takes away their right to choose which union. And the requirements contradict the NLRA because they “destroy[] the right to free negotiation.”

Among other things, the NRTWF argued that the Board has implied power to challenge state regulation when “federal law preempts the field.” This includes the power to sue for declaratory relief. And importantly, the Board has sued in the past for similar issues. Previously, a state agency tried to force employers to sign collective bargaining agreements. The Board in that matter sued to restrain the state agency’s order. The injunction was granted. On appeal, the court found that the order was preempted by the NLRA, thereby solidifying that the Board can bring claims such as the one at issue here.

The Board has yet to respond to the inquiry, so it’s unclear if the labor peace agreement and collective bargaining agreement requirements will go up in smoke. Stay tuned for further updates.

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 DEA.  On Monday, they released a proposed rule to expand marijuana research.  For the first time, more than one institution would be permitted to register with the agency and grow cannabis.  The comment period runs until May 22, 2020, and then final rules will appear – no timeline for those.  So this isn’t happening in the near future.

And we might also be waiting a while for state voting on cannabis use.  In Ohio, a ballot initiative was rejected because it had too few valid signatures.  A Nebraska campaign to put medical marijuana on the ballot has suspended operations due to the coronavirus.  In Florida, the issue won’t come before the voters in 2020, but may go before the state’s Supreme Court.  New Approach South Dakota, a group supporting legalization in that sate, is urging state residents to use absentee ballots, fearing that coronavirus may keep voters from the polls.

In international news, Mexico is expected to delay its vote on marijuana and hemp legalization.  Although the delay is not expected to be lengthy, even once cannabis is legalized, regulations will need to be put into place, so don’t hold your breath.

And now on to the coronavirus news.  As we detailed last week, cannabis companies are not eligible for the relief provided other industries.  Industry leaders wrote a joint letter (no pun intended) to Congress, asking to be included in the stimulus measures, but to no avail.  Politico (subscription required) is reporting that aid may make its way into future legislation; guess that’s another thing we need to wait and see.

One piece of good news for marijuana dispensaries and retailers is that some states are classifying them as essential businesses.  This means they are permitted to remain open for business, even in areas where most shops are closed.  Marijuana Business Daily has a map that shows which states grant recreational and medical cannabis suppliers this status.  Massachusetts has decided that medical dispensaries can remain open, but recreational shops must close.

Even if shops can remain open, they don’t necessarily want to do business the old-fashioned way.  Drive-thru and curbside pick-up are the new ways to shop.  Home delivery is another attractive option.

And finally, you know you’ve truly entered the mainstream when you get skewered on “The Simpsons.”  In last Sunday’s episode, Highway to Well, both Marge and Homer enter the world of cannabis sales, and hijinks ensue.

See you next week!

In response to the drastic economic impact COVID-19 has had on small businesses in recent weeks, President Trump announced that the Small Business Administration (SBA) was authorized to provide $50 billion in low-interest loans – more than double the amount of loans provided by the SBA in 2019 – to keep them operating during the pandemic. After the announcement, the SBA established a disaster assistance loan program for small businesses, which could potentially provide up to $2 million dollars in assistance for an applicant. The cannabis industry, however, has been excluded from this relief, along with agricultural enterprises, casinos, racetracks, and religious and charitable organizations. With respect to cannabis specifically, SBA public affairs specialist Carol Chastang told Cannabis Business Times that “the SBA does not provide financial assistance to businesses that are illegal under federal law… even if the business is legal under local or state law.”

Although cannabis use is legal in Canada, Canadian businesses in the cannabis industry are finding themselves excluded from country-wide aid packages as well. The Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) announced a plan to increase loans issued on commercial terms by $10 billion. Dan Sutton, CEO of Canadian-based Tantalus Labs, stated that a BDC account manager said they aren’t doing business with cannabis firm at this time. CEO of the Cannabis Council of Canada, George Smitherman, confirmed that this response “fits with what the industry has been told to date.” Participants in Canada’s cannabis industry have shared potential challenges with a disruption in cashflow, such as crop loss and dispensary shut downs. Canada’s largest cannabis company, Canopy Growth, shut down 23 of its retail stores on March 17th, and other cannabis companies announced temporary closures of their flagship stores.

It appears that businesses in the cannabis industry that survive the financial burdens related to the COVID-19 outbreak will have to do so without government intervention and assistance.

With the COVID-19 landscape continuing to change rapidly, companies can stay up-to-date on COVID-19 developments by clicking here to sign up for Seyfarth’s daily digest.

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

Before we get to COVID-19, let’s examine some non-virus news, shall we?

What would have been our big story of the week is that the Alabama state Senate has approved medical marijuana in the state.  The measure now moves to the state House, where it may meet with a frostier reception.

Staying in the south, Mississippi has not one, but two, medical cannabis measures on the November ballot.  Those in favor of legalization are fearful that multiple choices may confuse voters and divide the vote, leading to no legalization at all.

If you were betting on hemp legalization in Idaho, you are about to be disappointed.  Although the state Senate passed a measure to legalize the crop, a House committee voted it down.

Moving on to the federal government, hemp farmers may have reason to rejoice, as USDA secretary Sonny Perdue recently described the interim final rule on hemp as a “draft.”  This designation allows farmers another growing season to use older rules.

And just because sports are shut down doesn’t mean there isn’t sports-related cannabis news.  The recently approved NFL collective bargaining agreement eliminates suspensions for positive marijuana tests.

So, what’s happening in the world of cannabis in the age of COVID-19? No surprise, demand is up, and home delivery is now a thing.  It’s a measure of how much times have changed that dispensaries, once unthinkable in a country that viewed marijuana as “Reefer Madness,” are now considered essential businesses.  For info on which states view them as such, see our blog post here.

See you next week!

With the spread of COVID-19 fears, states and cities nationwide are in the process of issuing a variety of executive orders and other ordinances shutting down businesses that are considered “non-essential.”  However, what is considered “essential” differs by state and locality.  Across the board, these laws have included healthcare services as “essential.” The question many have is whether marijuana dispensaries will fall into this “essential” category.

New York:

At the time of publication, Governor Cuomo’s most recent executive order remained pending.  However, on March 18, 2020, he announced that non-essential services will be forced to reduce the number of employees reporting to work in person by 50 percent.  As part of his announcement, he stated that essential services included grocery stores, pharmacies, healthcare, and shipping.  At the same time, he voiced opposition to the shelter-in-place plan floated by Mayor de Blasio.

In advance of the passage of any such Orders, New York state health regulators issued guidance declaring licensed medical cannabis businesses to be “essential” services as medical providers.  This would allow such dispensaries to remain open if nonessential businesses are ordered to close because of COVID-19.  The guidance also strengthened safety and health protocols for Registered Organizations in the Medical Marijuana Program.  These include:

  • Allowing Registered Organizations to dispense goods from the doors of the facility provided that they maintain compliance with all current laws, rules and regulations including but not limited to dispensing on camera, checking the PMP as required and validating registry ID cards.
  • Permitting Registered Organizations (who have been approved to deliver medical marijuana products to the homes of registered patients and designated caregivers) to expand delivery services statewide without seeking the Department of Health’s prior written approval.  This directive is in place until April 16, 2020.
  • Issuing recommendations for delivery drivers, which include wearing masks and gloves, sanitizing or washing hands after each delivery, encouraging patients to use their own pens for signatures / sanitizing pens.  It also recommending instituting confirmation of receipt of delivery of medications through a phone call, text or email in lieu of getting a signature, although this confirmation should be documented and retrievable upon audit.
  • Encouraging businesses to have patients set up appointments in order to avoid overcrowding in dispensaries.
  • Encouraging businesses to institute a variety of COVID-19 planning practices for issues with ill staff, supply chain problems, and increased sanitation of facilities.

California:

As of 12:01am on Wednesday, March 18, 2020, thirteen California counties are now subject to shelter in place orders requiring all non-essential businesses to either operate remotely or close up shop for 2-3 weeks to help curb the spread of coronavirus.  The orders provided lists of essential services that could remain open, including grocery stores, pharmacies, gas stations, and medical facilities.  It left room, however, for interpretation for many other businesses, including the cannabis industry—which walks the line between medical and recreational markets, and generates hundreds of millions of dollars each year in state tax revenue.

Offering a slice of clarity, the City of San Francisco ruled on March 17th that its numerous dispensaries would be allowed to remain open under an “essential business” exception.  In doing so, the San Francisco Department of Public Health stated that cannabis is an essential medicine and that “[d]ispensaries can continue to operate as essential businesses during this time, while practicing social distancing and other public health recommendations.”

In addition to San Francisco, dispensaries in San Jose were also deemed by the city to be essential providers of healthcare needs and therefore exempt from the shelter in place orders, so long as the dispensaries comply with social distancing requirements.  Santa Cruz County is allowing cannabis dispensaries to continue operating via delivery or pickup only, with customers prohibited from gathering in shops.  Santa Clara County is allowing dispensaries to operate as essential businesses for medical purposes, but not recreational.  Alameda County dispensaries are reportedly still open for business despite the orders as well.

Other States Deeming Cannabis “Essential” During Business Closures

In addition to New York and California, several city and state health departments have stated that medical marijuana dispensaries are “essential” businesses, like pharmacies or grocery stores, and are allowed to remain open.  Specifically, Michigan, Illinois, Massachusetts, and Washington State all issued bulletins lessening the regulations on delivery and/or in-store transactions in efforts to limit contact between patients and vendors.

Michigan’s Marijuana Regulatory Agency will ultimately need to approve all delivery methods used by retailers, but in the interim, will temporarily permit delivery to customers and patients whose current addresses do not match their state-issued identifications.  They will also allow dispensaries to make curbside sales to their clientele.

The Illinois Department of Financial and Professional Regulation is still prohibiting delivery to patients, but will allow medical dispensaries to transact business “on the dispensary’s property or on a public walkway or curb adjacent to the dispensary.” Any recreational sales must still be made indoors, but the dispensaries must do so in “limited access areas” and comply with social distancing requirements.

Massachusetts’s Cannabis Control Commission recommended that medical dispensaries offering delivery services consider expanding service areas and to urge their patients to place larger orders to limit the amount of human contact.

Washington state’s Liquor and Cannabis Board announced that marijuana retailers are not required to close, so long as they designate an employee or officer to establish best practices in light of the virus.  The Board is also working to identify ways to help licensed businesses during this closure, specifically by tweaking regulations to allow for curbside delivery.

Takeaways:

With the COVID-19 landscape continuing to change rapidly, companies can stay up-to-date on COVID-19 developments by clicking here to sign up for Seyfarth’s daily digest.

 

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

FEDERAL NEWS

The big news this week was the FDA’s report to Congress on CBD.  The report did not set out a timeline for usage guidelines, citing the need for more data.  Commissioner Stephen Hahn did indicate he thought it would be a “fool’s errand” to ban over-the-counter sales.

In other federal action, the House Veterans Affairs Committee passed two bills related to medical marijuana.  One allows doctors at VA hospitals to prescribe medical cannabis in states where it is legal.  The other increases research into the efficacy of marijuana in treating chronic pain and PTSD.

As for banking, banking associations around the country sent a letter to Sen. Mike Crapo (R-ID) and Sen. Sherrod Brown (D-OH), asking that the Senate Banking Committee vote on a cannabis banking bill.  Regular readers will doubtless recall that TBT has expressed doubt on this legislation before.

STATE NEWS

In tribal news, the Oglala Sioux voted to legalize medical and recreational marijuana on their reservation in South Dakota.  Contrast this to the South Dakota state government, which has just worked out a hemp legalization deal.  If it seems as if South Dakota is proceeding at a glacial pace, they’re moving faster than Idaho.  It’s unlikely that the state will legalize hemp this year.

Virginia passed legislation decriminalizing cannabis, and the governor is expected to sign the bill.  Some supporters would like to push for full legalization.  The legislature has directed the Joint Legislative Audit and Review Commission to recommend ways in which the state could establish a marketplace.

In Ohio, the drive to legalize marijuana suffered a setback this week.  The state’s Attorney General rejected summary language proposed by the group supporting the plan.  This means that the group will have to redraft the proposal, collect signatures and resubmit.  Nevertheless, advocates are confident they will be able to get the initiative on the November 2020 ballot.

ON THE LIGHTER SIDE

And finally, hemp has launched into outer space.  Front Range Biosciences sent some hemp off to the International Space Station this week in order to study the effect of microgravity on cell cultures.  If there’s a plan to make those cultures available for sale, perhaps they’ll market them as “out of this world.”

See you next week!

CBD continues to flourish in the markets despite lack of federal regulations, and we’ve identified some significant events that indicate there’s no sign it’s stopping.

Topical CBD Pain-Relief Receives FDA Product Listing Certification

Elixicure, an over-the-counter (OTC) CBD-infused topical pain-relief cream marketed for treating inflammation, aches, and pains, has received product listing certification from the Food & Drug Administration (FDA).  This certification is the first of its kind for a topical OTC drug containing CBD.  As Elixicure’s Chief of Business Development, Yaniv Kotler, explained,  “[t]his certification requires us to vet our processes, our equipment and systems, our vendors and suppliers, and conduct batch-by-batch testing to ensure quality.”

While the FDA is under immense pressure from the public and Congress to produce a regulatory regime for CBD, it has not stood still with respect to new CBD products.  Elixicure’s product listing certification should not, however, be confused with formal FDA approval.  The latter requires extensive vetting, including analyses of the underlying target condition and other related available treatments, conducting a cost benefit analysis from clinical data, as well as strategizing on how drug risks may be identified and mitigated.  Here, the product listing certification conferred to Honest Globe, the maker of Elixicure, instead allows for the product to be listed in the FDA’s National Drug Code Directory, a database that lists “all drugs manufactured, prepared, propagated, compounded, or processed by it for commercial distribution.”  Product listing certification requires manufacturers to ensure, on an annual basis, that its directory listing is updated and accurate.  Manufacturers are responsible for certifying records, including all product data, which includes, for example, information on formulation, labeling, and DEA Schedule.  Yet despite this momentous event, it must be noted that the only FDA-approved CBD drug product available is Epidiolex.

CBD Class Action Litigation

At the beginning of the new year, a Florida federal judge stayed a proposed class action that alleged Green Roads of Florida LLC misled consumers on the amount of key ingredients in its CBD line.  At the core of the suit are CBD products marketed to provide relief from a host of health conditions, including anxiety and pain.  Plaintiffs are seeking the return of profits made from sales.  While Judge Ursula Ungaro denied Green Road’s motion to dismiss, she granted its motion to stay and explained that because “the rulemaking processes [sic] at the federal level is active,” she would stay the case during the pendency of FDA rulemaking.

Judge Ungaro rejected the plaintiff’s argument that there was an adequate, preexisting regulatory framework for CBD, sufficient to resolve the labeling issue at the core of the case.  Instead, she noted that any regulations propounded by the FDA would be highly beneficial in aiding her review of the case.  She further added, under these circumstances (i.e., with forthcoming FDA regulation), plaintiffs would not be significantly prejudiced by the stay.

Class actions against CBD companies could potentially threaten the growing CBD industry at its fragile beginning.  With Judge Ungaro’s ruling, however, CBD companies faced with similar claims may have some temporary relief while the FDA works to put forth a regulatory framework.  Other CBD companies, like CV Sciences Inc., involved in suits with similar claims, have set forth a similar argument: that private class actions alleging non-compliance to the Food, Drug, and Cosmetic Act (FDCA) are necessarily preempted by federal law.  In other words, according to CV Sciences, any FDCA enforcement must be brought by the Government, and not private litigants.  Still, given the FDA’s inability to produce guidance by the fall of 2019, any potential stay in litigation may last for some time. Still other class lawsuits not involving misleading product claims, like for example those involving violations of Title III of the Americans with Disabilities Act, are being lodged (and going forward) against CBD companies.  Both young and more-established CBD purveyors would be wise to invest in good legal counsel.

Collin Peterson Introduces New Legislation Permitting CBD Marketing in Dietary Supplements

On January 13, 2020, the Chairman of the House Committee on Agriculture, Rep. Collin Peterson (MN 7th District), introduced H. R. 5587, legislation that would permit CBD to be marketed in dietary supplements.  Rep. Peterson’s bill is another example of Congressional interest in CBD.  This bill would amend the Food, Drug, and Cosmetic Act (FDCA) to include CBD within the definition of a dietary supplement.  It also requires the US Department of Agriculture to complete a study and report on the regulatory and market barriers for hemp farmers.  Rep. Peterson has said the bill would “provid[e] a pathway forward for hemp-derived products.  It would also identify barriers to success for hemp farmers, informing growers and policy makers of the challenges facing this new industry.”

Seyfarth will continue to monitor and report on this piece of legislation, along with other CBD developments.

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

STATE NEWS

To cap or not to cap, that was the question facing the state of Florida this week.  Lawmakers wrestled with the issue of capping THC content in medical marijuana for those patients under the age of 21.  The Senate Rules Committee questioned the rationale for such a cap, causing the measure to stall in that chamber.  Undaunted, the House is now considering an identical proposal attached to a state Department of Health bill.

Turning our attention to New England, Connecticut‘s General Assembly Judiciary Committee held a hearing this week on a marijuana legalization bill.  In Vermont, legislation to establish a marijuana marketplace passed on a second reading in the House.  Both states might want to look at their northern neighbor, Maine, as a cautionary tale.  Although recreational sales were expected to begin this month, they’ve been postponed until June.

Medical marijuana made the headlines in two states this week.  In Utah, sales began at the state’s first dispensary, located in Salt Lake City.   Meanwhile, in Nebraska, we see proof of that old adage that politics makes strange bedfellows.  ADOPT (Adopt a Decrease in Oppressive Property Taxes) joined Nebraskans for Medical Marijuana to push for a ballot initiative allowing medical cannabis.

In Minnesota, regulators have suggested that one office should oversee all aspects of both hemp and medical marijuana.  If the state legalizes adult-use cannabis, the office would handle that as well.

In Ohio, ’tis the season for ballot petitions.  A group called Regulate Marijuana Like Alcohol filed a petition to legalize recreational marijuana.  They see legalization as a solution to problems with the medical cannabis program.

For those of you wondering whatever happened to the man transporting hemp through South Dakota, prosecutors dropped the most serious charges against him.  He pleaded guilty to ingesting marijuana and cocaine.

FEDERAL NEWS

So what’s happening on the federal level?  The Department of Agriculture delayed a requirement that the DEA conduct all THC testing on hemp crops.  The requirement will take effect on October 21, 2021 or upon publication of a final rule, whichever comes first.  Over at the Food and Drug Administration, new director Dr. Stephen Hahn called it a “fool’s errand” to prohibit CBD use; the industry is still awaiting federal regulations.

Treasury Secretary Steven Mnuchin painted a vivid picture of the IRS’ problems with the lack of banking services to the marijuana industry.  “We have to build cash rooms to take in large amounts of cash where people owe us taxes, because we want to collect the taxes, and those entities are not banked,” Mnuchin said.  The Secretary indicated that his department has limited ability to handle this problem, and he urged Congress to “deal with this one way or another.”

ON THE LIGHTER SIDE

Finally, has Canadian marijuana legalization gone too far?  An eight-year-old raffle winner at a youth hockey tournament thought he was bidding on chocolates; instead, he took home a prize of cannabis products.

See you next week!

Maine is on track to launch its first recreational marijuana businesses in June, four years after its residents voted in favor of legalization. A year ago, Maine created an Office of Marijuana Policy (OMP) within its Department of Administrative and Financial Services. The OMP handles all licensing, compliance, and oversight of medical and recreational use of marijuana. In an effort to protect the confidential information flowing through its office, the OMP drafted a bill that would protect trade secrets, along with security and operating procedures, from being accessed by the public.

Maine’s Freedom of Access Act is intended to guarantee access to all public records, and some FOAA requests for public records related to marijuana licenses have already been submitted to the OMP, but the new bill would provide an exemption for certain information included in business license applications. The OMP is especially interested in protecting recipes, cultivation methods, and other proprietary information that competitors might try to use against each other. Some advocates of the bill say it should be even broader, protecting the identities of those who fund the cannabis startups. On the other hand, some worry that a government-sanctioned lack of transparency risks an erosion of the public trust in this emerging industry.

One attorney who represents cannabis businesses noted that much of the information the bill seeks to protect — recipes, soil mixtures, and other trade secrets — should not be included in filings with state agencies in the first place, and made it clear that her clients are in favor of transparency. The OMP understands that its bill is merely a catalyst for discussion and may not be adopted verbatim, and indeed it seems the debate will be a lively one.

Maine decriminalized possession of cannabis as early as 1976, and legalized medical marijuana in 1999, so other states will likely look to Maine’s legislation as a model for balancing transparency concerns with concerns over the protection of confidential information and intellectual property.

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

Let’s start in Kentucky where medical marijuana legalization passed the state House unanimously.  It now moves to the state Senate, and if it passes there, it will move to the governor’s desk.

In Vermont, possession of marijuana is legal, but buying and selling are not.  The state House passed a bill this week to set up a market for adult-use sales.  There are several steps still to go before stores will open, including convincing a reluctant governor to sign the law.

Moving next door to New Hampshire, the state House passed a recreational cannabis legalization bill.  Note: it would not allow for a marketplace; if Vermont sets one up, one can only assume they’ll have some out-of-state customers.

In federal news, the USDA okayed five state and tribal hemp programs.  Washington and Wyoming had their programs approved.  The Otoe-Missouria Tribe, the Prairie Band Potawatomi Nation and the Santee Sioux Nation were also given a green light.  Heading in a different direction, Georgia is looking at a bill to re-criminalize hemp.

And finally, in the melee that was the latest Democratic Presidential debate, marijuana legalization got a mention.  Sanders promised to legalize cannabis on day one of his presidency.  Warren released a new plan for legalization.  Bloomberg called for decriminalization and expungement.

See you next week!