We have been critical of cities licensing cannabis businesses in the past. Cannabis businesses are taxed and regulated heavily enough at the state level–why involve cities as well? We have always thought that if a city is going to be involved in the licensing process, it might as well do some good along the way. Portland, Oregon has provided one example of what a city can do with those tax funds.

As many cities in Oregon have done, Portland imposes a 3% local tax on retail cannabis sales. The City allocated $500,000 of the taxes to support neighborhood small businesses, especially women-owned and minority owned businesses and to provide economic opportunity and education to communities disproportionately-impacted by cannabis prohibition. Of that $500,000, $150,000 was allocated to specifically reinvest in minority- owned cannabis businesses.

portland minority cannabis marijuanaTo receive a City Grant, a Cannabis Business must complete a Cannabis Tax Allocation Grant Application. The Grant Application requires the cannabis business to identify a project/program that meets the “Record Clearing” or “Workforce Development” goals of the grant. The Record Clearing goals focuses on awarding money to those that have been disproportionately impacted by cannabis prohibition by removing barriers to housing, employment and education through legal support including, expungement, fine reduction, and charge reduction. The Workforce Development goals focus on creating pathways for people disproportionately impacted by previous cannabis laws to obtain family-wage jobs, including training, mentorship, and other workforce reentry support.

The application is detailed and requires the applicant to explain the background and mission of their organization, specific examples of activities to be completed, major milestones, along with questions regarding budget. The Portland City Council then reviews the applications and allocates the grants.

The first recipients of grants intended to help communities historically harmed by cannabis prohibition were awarded on January 21, 2019. Green box, an African American owned cannabis delivery company, was awarded $30,000. Adrian Wayman has reported he intends to use the money to hire his first employee.

The second recipient of $30,000 is Green Hop. Green Hop is an African American owned dispensary in North Portland. Green Hop also runs the “Green Hop Academy”, an apprentice program that provides training to individuals who hope to one day own their own cannabis business.

The City plans to keep moving forward with the grants and has increased its allocations for the grants to $700,000 for the fiscal year 2018-2019. It is comforting to see money from cannabis taxes being reinvested into the community. While the grant application can seem daunting, it can certainly make a huge difference in the Portland community to assist those that historically have been disproportionately impacted by cannabis prohibition. Here’s to hoping other cities follow in Portland’s footsteps and reallocate taxes and other fees to good causes.

oregon marijuana OLCC violation
Make it happen!

I’ve been suspicious the last few months that the Oregon Liquor Control Commission (OLCC) is starting to set a zero tolerance policy for marijuana rule violations. Unfortunately, the extrinsic evidence seems to be proving my suspicions.

As I’ve previously written, the OLCC settlement policies seemed to shift last September. In a first for the commission, they rejected a settlement proposal that would have allowed a licensee to keep its license and pay a fine. That particular licensee, Black Market Distribution, LLC, either needs to fight for its license at a hearing or surrender its license. The OLCC has not issued a final order related to Black Market Distribution yet and the company still have its license according to the approved license list. Only time will tell if Black Market Distribution is able to keep their license in light of the alleged violations.

As I wrote in November, if the OLCCs continued actions are any indication, Black Market Distribution may have little chance of keeping their license. In December, the OLCC seemed to continue down a path of refusing to settle cases unless the Licensee agrees to sell the business or surrender the license.

  • The OLCC alleged licensee Positive Vibrations committed four Category IV violations relating to advertising rules. The OLCC proposed a 34-day suspension or a civil penalty of $5,610. However, the OLCC and Positive Vibrations were able to reach a settlement agreement requiring Positive Vibrations to accept responsibility for the Category IV violations and either serve a 26 day suspension or pay a civil penalty of $4,290.00.
  • In the only other settlement agreement from December, the OLCC alleged licensee Greenway Ventures committed 10 violations, including two Category I violations. Even a single Category I violation is sufficient to revoke a license. Based on the violations, the OLCC proposed license cancellation. Greenway and the OLCC entered a settlement agreement that required Greenway to sell the business or surrender its license by March 30, 2019. Greenway must also accept a Letter of Reprimand for the violations that will become a permanent part of its file and may be considered in future applications. Further, the Greenway  had to forfeit 21 totes of marijuana to the OLCC for destruction.

Not only have we seen the OLCC entering into stricter and more stringent settlement agreements, but our office has seen a significant influx of charging documents issued by the OLCC. These usually come about after anonymous complaints are made to the OLCC regarding potential rule violations of the licensee. After an anonymous complaint is received by the OLCC, the OLCC assigns the complaint an investigator. The investigator then conducts inquiries and visits the licensed premises. The investigator will not only investigate the allegations of the complaint, but will also look into other practices of the licensee. This can often result in multiple rule violations.

So, what’s the takeaway? As we’ve said in the past (and will continue to say), the only way to avoid OLCC charging document exposure is to ensure compliance with the rules. How do you do that? The best way is to create a compliance position for your license, and designate or hire a compliance person. This might not be cheap but it will probably save you in the long run. That person’s job will be to keep up to date on OLCC rules (which are still being updated frequently), and to ensure that every aspect of the license is in compliance with those rules. Alternatively, split up the job among several experts. If you have someone running your Instagram account, for example, make it their job to ensure that every Instagram post and every marketing item that stems from the license complies with the rules. Have someone become an expert in CTS, tagging, and manifest. Etc. The bottom line is, make sure you have someone or a team of someones that know the rules inside and out, and isn’t shy about speaking up when practices are lax. If you and the compliance expert cannot figure something out, hire an attorney to review your practices. At the end of the day, it’s better to pay up front to ensure rule compliance rather than to pay the OLCC in penalty fees or lose your license altogether.

Pay those employees, non-exempt and otherwise.

I recently wrote about a case in the Tenth Circuit, Kenney v. Helix TCS, Inc., where the Court of Appeals is asked to decide if the Federal Labor Standards act (FLSA) provides wage and hour protection to employees of cannabis businesses. That case hasn’t seen much movement since I wrote about it, but its decision could have a significant impact on a case recently filed in Federal District Court in Oregon.

Michael Garity has filed a state and FLSA wage and hour claim against his former employer, WRD Investments LLC (“WRD Investments”). According to the complaint, Mr. Garity was hired by WRD Investments to provide expertise and labor in support of WRD Investments’ marijuana grow near Junction City, Oregon.

Mr. Garity alleges he was a “non-exempt” employee for WRD Investments. His status as a non-exempt employee would have required WRD Investments to pay Mr. Garity at least minimum wage for all hours worked and overtime rates for all hours worked over 40 hours per week. In the complaint, Mr. Garity alleges that between March 2016 through May 2017 he may have worked approximately 2500 hours without any compensation. He further alleges that he frequently worked over 40 hours per week without overtime pay.

Mr. Garity’s complaints do not stop there. Mr. Garity also alleges that WRD Investments failed to provide him with itemized statement of pay and failed to establishe regular pay days in violation of Oregon laws. The Complaint also states Mr. Garity incurred expenses on behalf of WRD Investments such as using his personal vehicle to conduct WRD Investment business without reimbursement from WRD Investments.

Mr. Garity’s complaint requests actual damages for unpaid minimum wage and overtime compensation plus an equal amount as liquidated damages and reimbursement for business related expenses, penalty wages under Oregon wage and hour laws, and attorney fees and costs. Mr. Garity’s complaint does not lay out a number, but based on my calculations WRD Investments could be on the hook for around $40,000 related to the FLSA claims alone. Should this matter proceed far into litigation, WRD Investments could also be on the hook for attorney fees which could eventually surpass the $40,000 number.

The Kenney case mentioned at the beginning of this post may have significant impact on Mr. Garity’s claims. Mr. Garity’s case is filed in a Ninth Circuit district court and nothing binds a Ninth Circuit court to follow a decision from the Tenth Circuit. However, the Ninth Circuit district court could be persuaded by the Tenth Circuit Court of Appeals decision and decide to follow its precedent. Alternatively, it could choose to ignore the precedent and decide to create its own path. Either way, it will be very interesting to see the legal arguments that are made in Mr. Garity’s case regarding whether the FLSA protects marijuana employees.

Regardless, a good lesson can be gleaned from Mr. Garity’s complaint. First, be sure you are properly classifying your employees as exempt or non-exempt. Second, and perhaps even more importantly, ensure that you are properly paying your employees. If you are ever concerned you are in violation of wage and hour laws, its always a good idea to have a cannabis employment law attorney review your payment procedures. It may cost some money up front but will likely save you much, much more in the long run.

california cannabis seminar san franciscoOn Thursday and Friday of next week, January 17 & 18, our own Daniel Dersham and Julie Hamill will present at a two-day continuing legal education (CLE) event in San Francisco called The Business of Marijuana in Northern California, to discuss cannabis real estate and land use issues in California. The roster of speakers lined up for this CLE includes an array of lawyers, consultants, and business professionals working with the cannabis industry, and everyone, including non-lawyers, would be well served to attend. For a full event description, including topics, speakers and registration links, click here.

Looking back over the past two years since the passage of Prop 64 legalizing adult-use cannabis in California, it is amazing to see how much things have changed in California cannabis. At this point, the state’s adult-use and medicinal cannabis regulatory regime is fully built out, with thousands of license applications now on file with the state. We are proud to call many of these California producers, processors, wholesalers and retailers our clients, alongside the many investors and ancillary service providers we represent.

Now that the California regulatory groundwork has stabilized, local jurisdictions have continued to open up their markets to the cannabis industry, and the legalization and decriminalization movement has continued to forge ahead, cannabis business activity in California is at an all-time high. Many of these new industry entrants bring skills, capital, and experience from other regulated markets, while others are new to the space. California attorneys and business owners alike need to be familiar with the unique regulatory concepts and industry dynamics that will be discussed on January 17 & 18 in order to best serve the California cannabis industry.

Specific topics at this CLE include: state laws and administrative rules, developments in the highly dynamic federal sphere, and practical approaches to working with and in the cannabis industry. Attendees will hear from consultants, lobbyists, business professionals, and, of course, lawyers aplenty, with specialized experience in fields such as insurance, tax, real estate, litigation, intellectual property, investment, and regulatory compliance.

If you are in or around San Francisco next week, we hope you will join us on January 17 & 18 for a two-day exploration of California cannabis law and business that is both broad and deep. And if you are a Harris Bricken client or a friend of the firm, please click here to request a promotional discount code, which can be applied to either the webcast, or to in-person attendance.

See you soon.

oregon employee medical marijuanaIt’s 2019 and Oregon employees can still be terminated for off-work marijuana use. That includes not just recreational use, but off-work medical use by registered cardholders in the Oregon Health Authority system– even patients with debilitating medical conditions like cancer or epilepsy. This means that Oregon, which has been on the forefront of decriminalization and legalization of marijuana, is no better than the most conservative jurisdictions when it comes to off-work use. What gives?

Back in 2017, the Oregon Senator Floyd Prozanski introduced Senate Bill 301. The bill would have protected employee off-work marijuana use—meaning employers could not terminate an employee for using marijuana outside of working hours, so long as it did not lead to on-the-job impairment. The bill faced opposition from industry groups related to worksite safety and federal law. Accordingly, the bill was amended to protect only off-work use by medical marijuana card holders, but this was still not enough to secure passage.

Never one to be stopped by a little failure, Senator Prozanski is back at it and has proposed a new bill, Legislative Concept 2152. The proposed bill is short and sweet. The relevant portion simply states:

It is an unlawful employment practice for any employer to require, as a condition of employment, that an employee or prospective employee refrain from using a substance that is lawful to use under the laws of this state during nonworking hours except when the restriction relates to a bona fide occupational qualification or the performance of work while impaired.”

However, it seems Senator Prozanski may not have learned any lessons from the 2017 session. The proposed bill does little to address industry concerns related to federal government contractors. Businesses that contract with or receive grants from the federal government are required to comply with the federal Drug-Free Workplace Act. As long as “marijuana” remains a federally controlled substance, these businesses must ensure their employees are drug-free to continue to contract with or receive grants from the federal government. If the Oregon employer does not comply with the federal Drug-Free Workplace Act, they cannot receive the contract or grant. However, if they terminate an employee for off-work marijuana use they would violate the proposed legislation.

Proponents of the proposed bill have stated the bill would not allow employees to use marijuana if a collective bargaining agreement prohibited it. However, a quick glance at the bill demonstrates that it does not clearly address that issue, and seems to continue to ignore the Drug-Free Workplace Act requirements altogether.

Many other states have managed to pass laws that protect employees’ off-work use of marijuana. A careful review of other state laws demonstrates that they specifically address the federal concerns. For example, Arizona’s statute protecting off-work medical marijuana use provides:

Unless a failure to do so would cause an employer to lose a monetary or licensing related benefit under federal law or regulations, an employer may not discriminate against a person in hiring, termination, or imposing any term or condition of employment…based upon…the person’s status as a card holder.”

Legislative concepts are a “draft of an idea for legislation.”  Perhaps there is still time for Senator Prozanski to draft a robust bill that addresses the concerns of businesses that rely on federal contracts and grants, and perhaps 2019 truly will become the year employee off-work use of marijuana is protected in Oregon. Stay tuned.

Here’s wishing all of our readers a bright and festive holiday.

We appreciate all of you, and we will be back here tomorrow with the goods.

Merry Christmas!

fourth circuit marijuana illegal search
Nice work by the court!

The Fourth Circuit Court of Appeals ruled last week that finding marijuana stems in a trash bag does not permit the police to search the house for evidence of a crime. From a legal standpoint this case has interesting implications on when, where, and what police can search. From a more practical perspective, it shows the courts, along with the majority of America, are accepting that marijuana is not a dangerous substance.

The case, United State v. Tyrone Lyles, saw Mr. Lyles accused of possessing firearms as a convicted felon. The police of Prince George County (in Maryland, right outside of Washington, D.C.) were investigating Mr. Lyles in an unrelated case. They searched four trash bags on a curb near his house and found three marijuana stems. Based on the marijuana stems, the police obtained a search warrant for Mr. Lyle’s house. In the application for the search warrant the police stated they had found the marijuana stems, rolling papers and based on this believed that there were “controlled dangerous substances, Marijuana, and handguns being stored, used and/or sold” at Mr. Lyles home.

Based on this information, the police were granted a broad warrant and allowed to search Mr. Lyles home in total. The police, during the search, found four handguns, ammunition, marijuana, and drug paraphernalia, in Mr. Lyle’s house. Mr. Lyle asked that the evidence found in his home be suppressed because there was not sufficient evidence to search his home based on the discovery of three marijuana stems in his trash.

The Fourth Circuit agreed. The court, in its decision, first reiterated the fact that police have the right to search trash that that has been left at the curb and that evidence found in trash can be used to support a warrant to search other premises. The Fourth Circuit recognized, that while the police can search trash, that there is limitations to what can be presumed from the discovery of the evidence in the trash. Focusing on the facts from Mr. Lyles’s case, the Fourth Circuit determined there was simply too little marijuana found in the trash to presume that Mr. Lyle had more marijuana in his home. The Fourth Circuit agreed with Mr. Lyles that the tiny quantity of discarded residue gave no indication of how long ago marijuana may have been consumed in Mr. Lyle’s home.

So what does this mean? The police used marijuana as an excuse to search Mr. Lyle’s house for evidence of crimes related to marijuana, money laundering, and hand guns. The Fourth Circuit essentially said the police cannot presume that someone has committed crimes related to controlled substances or to other crimes when a small amount of the substance has been found in the trash. This is important because in other cases, the Fourth Circuit has determined that evidence of a controlled substance in someone’s trash is sufficient for a warrant to search that person’s house. Perhaps the distinction here is that such a small amount was found, or perhaps it is evidence that the federal courts are no longer considering marijuana a dangerous drug that is evidence of other crimes (what if they had found a small amount of heroin?).

It will be interesting to see if any of the other federal circuits follow the Fourth Circuit’s helpful precedent, or if prosecutors decide to appeal this decision to the Supreme Court.

class action marijuana cannabisMedMen, a popular California cannabis retail company, has been hit with a class action lawsuit from former employees. Class action lawsuits are no joke. These lawsuits involve a few plaintiffs suing on behalf of multiple similarly situated plaintiffs. The claims, money, and other associated costs add up very fast.

In MedMen’s case, two former employees, Chelsea Medlock and Anthony Torres, allege that MedMen failed to pay them for all hours worked, failed to pay overtime wages, failed to provide mandatory meal and rest breaks, and failed to keep accurate records of employees hours worked. Medlock and Torres worsened the blow by bringing the lawsuit as a class action on behalf of all MedMen employees (current and former) from the last four years. If the class is “certified” by the Superior Court of the State of California, where it was filed, the class of plaintiffs could include thousands of employees.

Specifically, Medlock and Torres allege MedMen required them to perform work “off-the-clock” for which they received no pay. Medlock and Torres are seeking minimum wage, liquidated damages, interest and attorney fees for the unpaid time. Although Medlock and Torres have not made specific allegations in the complaint, Starbucks was recently ordered to pay an employee $102.67 for the time the employee spent locking up the store and setting alarms, without compensation. While this amount may seem small, if Medlock and Torres get their class certified, MedMen could be paying out a similar amount or something much greater, to thousands of employees.

Medlock and Torres also allege in their lawsuit that MedMen failed to pay employees required overtime wages. In California, employers must pay overtime rates to non-exempt employees who work in excess of eight hours per day. Medlock and Torres also allege they either were not provided the required meal and rest periods, or were not paid for the meal periods they had to work during. Medlock and Torres have not identified specific dates these alleged violations occurred, but if done over a significant period of time, the back wages and penalities owed will add up quickly.

In addition to their claims relating to their wages, the plaintiffs allege they were not provided accurate wage and hour statements as required by the California Labor Code and failed to provide accurate payroll records. Failure to provide accurate wage and hour statements can result in a penalty of up to $4,000 per employee.

Finally, Medlock and Torres allege that MedMen failed to timely issue final paychecks. Failure to issue final paychecks can result in penalty wages of up to thirty days of pay at the employee regular rate of pay.

In short, Medlock and Torres’s claims are numerous and serious. If they have merit, MedMen will have to pay pack wages and may be hit with treble damages, attorney fees, and interest. Of more important, if the class is certified, MedMen will have to pay those types of damages to potentially every employee they employed in California over the last four years.

Cannabis companies are growing. With growing businesses come more employees. More employees means a higher chance of litigation. For these reasons, if you are ever unsure whether your employment practices are compliant with state and federal law, it is best to have a cannabis employment attorney evaluate and provide advice. You may be able to stave off litigation, or, if you are hit with a lawsuit, you’ll have procedures in place to adequately fight it before it gets too far.

marijuana montana employmentMedical marijuana is legal in Montana. Unfortunately, that does not prevent local employers from terminating workers for legal, off-work use of marijuana in the state.

In 2010, while already employed by Charter Communications, LLC, Lance Carlson was issued a medical marijuana card under Montana Medical Marijuana Act to treat chronic low back and stomach pain. The medical marijuana card allowed Mr. Carlson to legally use marijuana to treat the conditions. In 2016, Mr. Carlson was involved in a work-related motor-vehicle accident. A urinalysis that followed the accident tested positive for THC. Mr. Carlson was promptly terminated as a result of the drug test.

Mr. Carlson initially brought suit against his former employer in Montana state court, alleging the former employer had wrongfully terminated him in violation of the Discrimination Under the Montana Human Rights Act— specifically, that his employer had discriminated against him because of a disability. The case was removed to Federal District Court. Charter Communications quickly moved for a motion to dismiss arguing that the Montana Marijuana Act allowed them to terminate Mr. Carlson for his medical marijuana use. Mr. Carlson appealed the decision to the Ninth Circuit.

The Ninth Circuit, in an unpublished opinion, upheld the district court’s dismissal. The Ninth Circuit specifically relied on the carve-out of Montana’s medical marijuana act that states employers are allowed to prohibit employees from using marijuana. Mr. Carlson challenged that exact regulation as unconstitutional. However, the Ninth Circuit determined it was constitutional because it was “rationally related to Montana’s legitimate state interest in providing careful regulation of access to an otherwise illegal substance for the limited use by persons for whom there is little or no other effective alternative…”

Given the general trend for acceptance of marijuana, the Ninth Circuit decision is disappointing, even though it is unpublished and therefore sets no legal precedent. However, the problem does not generally lie with the Ninth Circuit, but instead with Montana’s state law. Now is the time to lobby Montana officials to have the Montana Medical Marijuana Act revised to protect employee’s off-work medical marijuana use.

Montana is not alone in allowing employers to terminate employee for their legal off-work use of marijuana. Oregon, similarly, has a statute that does not require employers to accommodate employees’ off-work use of medical marijuana. Way back in 2010, the Oregon Supreme Court ruled that the statute prohibiting disability discrimination in employment does not protect medical marijuana users. Washington’s laws do not require employers to accommodate employee’s medical marijuana use either. Colorado, another state on the forefront of adult use legalization, still allows employers to terminate employees for medical marijuana use, too.

While Oregon and California have struggled to pass legislation protecting employee’s off-work medical marijuana use, other states have managed. These laws typically create a carve-out for employers who contract with the federal government and therefore are required to have a drug-free workplace. Federal legislators also have recently introduced legislation  to protect off-work marijuana use. Currently the bipartisan bill is stalled in the Oversight and Government Reform Committee.

I suspect eventually the states discussed in this blog post will catch up with the changing of the times, but until then, be aware that many states allow employers to terminate employees for their legal use of marijuana—medical or otherwise.

Editor’s Note: This blog post first ran on December 6. We are re-publishing it here because a platform glitch erased the initial publication.