oregon cannabis employment sick leave
Tell sick employees to stay home! And don’t skirt pay laws.

Oregon was one of the first west coast states to require employers to provide sick leave to employees. Oregon law requires cannabis business (as well as all other businesses) to provide at least 40 hours of protected sick leave a year to its employees. The law is still relatively new and therefore there have been few reported violations. However, on July 3, 2018 Oregon Bureau of Labor and Industries (BOLI) issued sanctions against Lioness Holdings, LLC DBA Tan Republic for violation of the sick leave laws. The BOLI order gives us an idea of what kind of penalties we can expect against businesses that fail to comply with the law.

Tan Republic’s employee handbook required employees to find coverage for their duties in the event of illness and to obtain a physician’s note. Sarah Levin, an employee of Tan Republic, requested to use her sick leave in mid-October. She was unable to find coverage for her shift and her manager requested she appear as scheduled for work. She did so and her illness progressed. The next day Ms. Levin again requested sick leave accommodations. Her manager requested she provide a physician’s note the same day.  Ms. Levin was unable to do so and the same day her employer emailed her informing her that she was suspended for 30 days due to misuse of paid time, insubordination, and lack of professionalism. Ms. Levin could not afford a 30 day suspension and did not return to Tan Republic after she received the email.

The Oregon sick leave law forbids employers from requiring employees to search for or find a replacement worker as a condition of the employee’s use of accrued sick time. BOLI easily determined Tan Republic violated the Oregon sick leave law by requiring employees to find coverage.

BOLI also determined Tan Republic took adverse employment action against Ms. Levin for her use of protected sick leave. BOLI determined Ms. Levin’s suspension was related to her request for sick leave rather than actual merit based misuse of paid time or insubordination.

Most significantly, BOLI linked Oregon sick leave law with Oregon retaliation laws. BOLI determined Ms. Levin was constructively discharged. Constructive discharge occurs when employment conditions are so awful an employee has no choice but to end the employment relationship. Here, BOLI determined Tan Republic should have reasonably known that Ms. Levin would end her employment relationship with them when they suspended her for thirty days. BOLI treated this as retaliation for Ms. Levin’s lawful use of sick leave. The constructive discharge finding is significant because BOLI used it to increase damages awarded to Ms. Levin. In total based on violations of Oregon sick leave laws and Oregon’s anti-retaliation laws BOLI awarded Ms. Levin $20,000 plus interest, payable by Tan Republic. Of note, BOLI did not break down the award based on the amount related to the violation of the Oregon sick leave law versus violation of the anti-retaliation laws. Regardless of the breakdown, this case is important going forward. Employers have been warned: comply with sick leave or face big penalties.

There is an easy yet important lesson to be learned from the Tan Republic case: it is much cheaper to allow your employees to take leave in accordance with Oregon sick leave laws rather than face a $20,000 bill plus attorney fees. As we have discussed in the past, employee handbooks are a necessity for every cannabis business. If yours has not been updated recently or does not contain a sick leave policy, now is the time to update.

In the past year, we have seen a remarkable uptick in individuals and businesses pursuing Oregon industrial hemp production, processing and sale. This accelerated interest has coincided with the CBD craze, and fortunately, Oregon has been working steadily to build out its hemp program over the past year or two. Today’s blog post answers some questions commonly fielded by our Oregon cannabis lawyers, and summarizes the state of the state with regard to hemp.

What is the latest, as far as program rules?

The rules have undergone steady revision for a few years now. The most recent changes are shown in the Oregon Department of Agriculture’s (“ODA”) proposed rule changes, which should take effect very soon. These updates will stem from bills passed by the legislature earlier this year, which we wrote about back in March. A few of the biggest pending changes include the requirement that industrial hemp and seed can only be transferred to another ODA registrant or qualifying Oregon Liquor Control Commission (OLCC) licensee (in accordance with certain OLCC rules), and that any hemp sold to a consumer has to be tested by an OLCC licensed lab.

How easy is it to get a hemp handler’s permit?

It’s not quite as easy as it used to be, but it’s not bad, and it’s still faster and cheaper than getting an OLCC license. In our office, we have paralegals process these applications, and both grower and handler registrations often issue in a month or less when the client is organized.

Who can ODA permittees sell to, in the OLCC system?

ODA handlers can only sell to OLCC processors with a current OLCC endorsement to receive ODA hemp. Those processors can then move the industrial hemp products along the supply chain, to OLCC wholesalers and retailers.

I’m an ODA hemp handler. How do I get an OLCC hemp certificate?

You can’t right now. OLCC stopped accepting applications for the certificates back in April. Once the ODA proposed rule changes are final (hopefully very soon), OLCC should start issuing these applications once again. As to OLCC processors, those entities can still apply for hemp endorsements to add to their licenses.

Once I get an OLCC hemp certificate, how do those sales work?

You will have recordkeeping requirements for all hemp and related products transferred into the OLCC system. This means you will have to log information in the METRC Cannabis Tracking System, like OLCC licensees. Note that hemp products in METRC are not subject to tax, unless they are later mixed with marijuana. Note also that once you transfer hemp to an OLCC processor, it has to stay in the OLCC system. This means you cannot take it back and sell it outside of METRC.

Can I legally ship Oregon industrial hemp to other states?

Oregon does not restrict such sales, but the state does not create a safe harbor from federal law, either. In fact, the new rules will provide that no one participating in the Oregon hemp program is immune from federal law enforcement, even if they are not shipping hemp interstate. So what does federal law say about shipping industrial hemp and CBD interstate? It’s complicated.

Can I apply for an ODA permit on the same tax lot as my OLCC marijuana production? 

Yes, you can. But OLCC is going to require an approved “control plan” describing how the two production facilities will be separated, and ensuring that no industrial hemp winds up on the OLCC premises.

Can I get a bank account?

Yes. Maps Credit Union has announced it will begin servicing both plant-touching and ancillary hemp businesses on August 1. There may be other options in the pipeline as well.

Where can I find more information on all of this?

Aside from checking this blog, the best place to go are the relevant portions of the ODA and OLCC websites. Unlike OLCC, the ODA hasn’t done a great job of aggregating information in FAQ format or issuing bulletins, so you may have to actually read through the administrative rules (fun!), or call ODA itself with questions.

oregon marijuana cannabis subsidyRecently, there has been some talk here in Oregon that the state is not doing enough to support licensed cannabis businesses economically. These businesses generated more than $70 million in state tax revenue in FY 2017, after all. Although that revenue does not yet approach the combined $373 million in average annual revenue for beer, wine and spirits (combined), it appears to be closing the gap quickly, despite no option for interstate sales.

Comparing marijuana and alcohol receipts in Oregon is an awkward proposition, given the fact that Oregon marijuana revenues are collected through sales tax, whereas beer and wine vendors pay the state an excise tax, and liquor is distributed and sold by the state itself. At the end of the day, though, the economic impact of regulated cannabis will continue to gain on–and eat into–the alcohol economy, both in Oregon and nationwide. That is especially true if we factor in industrial hemp.

So what is the state doing to subsidize cannabis businesses in Oregon? Not much. The state did pass House Bill 4014 a few years back, which allows cannabis establishments to deduct business expenses allowable under the federal tax code when filing state returns; but that modest gesture pales in comparison to the institutional support given to craft beer and wine. Specifically, here are a few of the ways the wine industry is supported and subsidized by the state of Oregon:

  • The state created the Oregon Wine Board (OWB) to promote development of the wine industry within the state, and coordinate both domestic and report marketing efforts for the industry. OWB receives administrative support from the Oregon Department of Consumer and Business Services, and spends around $2.2 million annually on promoting the Oregon industry.
  • The state created the Oregon Wine Research Institute, housed at Oregon State University, to support Oregon grape growing and wine production.
  • Oregon statutes offer a tax exemption for the first 40,000 gallons, or 151,000 liters, of wine sold annually by any producer in Oregon, which effectively exempts 90% of them from paying any state excise tax.
  • The state offers grants for vineyards in an effort to increase tourism, as well as OWB grants related to viticulture and enology.
  • Oregon winery license fees are paltry compared to cannabis license fees. (Both licenses are issued and billed through the Oregon Liquor Control Commission.)

The above list is not exhaustive: It represents about five minutes of Google research. And at first glance, the favoritism shown to alcohol by the state feels unfair: As with the local wine industry, the Oregon cannabis industry has a world-renowned product, crowned with distinctive appellations. So why doesn’t the state do much for cannabis, aside from fulfilling its democratic mandate to roll out the program, and defending that program from the feds?

There are probably several factors at play:

  • “Marijuana” remains a Schedule I controlled substance at the federal level. While states may see a path forward to licensing cannabis businesses under the Tenth Amendment (see here and here), actually using public dollars to support specific businesses may feel like a bridge too far.
  • More people oppose the cannabis industry than the alcohol industry, so subsidies would likely face strong pushback from a vocal segment of the population.
  • Many of the Oregon wine subsidies listed above were enacted in periods of greater budget stability for the state, back when timber revenues and related federal subsidies were a real thing, and the state pension system was not $22 billion in the hole. Today, those alcohol subsidies are entrenched (although recent efforts at further subsidies have failed.)
  • The Oregon cannabis lobbies are smaller than alcohol lobbies.
  • The creation of a cannabis regulatory regime has been a heavy legislative lift over the past few years here in Oregon, crowding out other conversations related to cannabis.

With all of that said, Oregon could probably do more for the cannabis industry, and it could be more creative. California has at least explored the idea of a state-chartered bank. Along those lines, Washington has helped its legal businesses to open bank accounts, and Hawaii has announced a cashless system for buying medical marijuana. None of these actions are subsidies, but they do make business operations easier and they ultimately contribute to economic efficiency.

Other jurisdictions have gone even further. Colorado, for example, has had a research grant program going back to 2014. And certain cities, like Oakland and San Francisco, have offered bona fide, traditional subsidies like free rent and incubator programs for select marijuana entrepreneurs. So it is possible to funnel public funding into cannabis businesses — at least certain types of businesses, in certain cases.

Oregon will kick off another legislative session in early 2019. Most likely, the state will discuss important regulatory issues, like our U.S. Attorney’s concern with oversupply, alongside the usual re-tread items, like social consumption and event permits. Although these new business permissions would be marginally helpful, hopefully there is also room for discussion on how the state can support its regulated cannabis industry more directly, as it does with alcohol. Then, when federal prohibition ends in a couple of years, we will want it looking something like this.

Now required by OMMP.

Back in March 2018, the Oregon Health Authority (OHA) issued temporary rules outlining the requirements for Oregon Medical Marijuana Program (OMMP) grow sites to track the propagation and production of medical marijuana. The deadline to start tracking in the Cannabis Tracking System (Oregon uses METRC) is today, July 1. You can view the OHA Notice of Proposed Rulemaking, which contains a draft of the new rule, here.

The temporary OHA rules required medical marijuana grow sites that service three or more patients to designate someone as the “grow site administrator” by May 31, 2018. The grow site administrator is responsible for signing up for METRC, successfully complete all required METRC training; and ordering unique identification tags and tagging all marijuana items. Oregon Medical Marijuana Program notified grow sites regarding the requirement to designate a grow site administrator by May 31, 2018, so hopefully no registrants missed this deadline. Failure to meet this deadline could result in revocation of the grow site and revocation of the registration of all persons responsible for the marijuana grow site.

The other important deadline is today. Required growers (those who grow for three or more patients) must start using METRC at all times going forward. Medical marijuana producers must also have an approved grow site administrator capable of entering required information in METRC (meaning you must have completed the training); an active METRC user account; unique identification tags for the plants; and all medical marijuana items tagged with UID tags and all inventory recorded in METRC. Not coincidentally, today is also the cut-off under Oregon Liquor Control Commission (OLCC) rules for nondisclosure of “start-up” inventory by new producer licensees. Previously, that inventory could be from “any source in Oregon” under OAR 845-025-2060(1)(a).

Beyond having inventory recorded in METRC, required grows must use METRC to record all transfers of marijuana items to patients, designated primary caregivers, registered medical marijuana dispensaries, processing site, and laboratories. The rules require the following be entered into METRC:

  1. the amount of usable marijuana transferred to each patient or designated primary caregiver, the patient or caregiver’s OMMP card number, and the date of the transfer;
  2. the amount of usable marijuana, seeds and number of immature plants transferred to each registered dispensary, the dispensary’s OMMP registration number (if any still exist!) and the date of transfer;
  3. the amount of usable marijuana transferred to each registered processing site, the processing site’s OMMP registration number and the date of the transfer; and
  4. the amount of usable marijuana transferred to each laboratory for testing, the laboratory’s license number, and the date of the transfer.

METRC must be reconciled at the end of each day. That means, each day, METRC needs to be updated an essentially perfect. Failure to meet the requirements of the temporary rules caould mean registration revocation.

This might seem like a lot—and it is for medical marijuana growers that have not seen the regulation the recreational growers have. These rules are one of the responses the OMMP and OLCC have adopted to curtail the black-market and out of state transfers. If all goes well, compliance with the rules just might keep the federal government out of Oregon’s legal marijuana market.

No shortage of cannabis news in Oregon.

Here we are a few years into legalization of recreational cannabis sales in Oregon, and it’s never a dull moment. Over the past week or so, there were three significant developments around the state with respect to marijuana law and policy. We summarize each below.

     1.     The OLCC hit “pause” on accepting license applications.

A few weeks back, we covered the dramatic Oregon Liquor Control Commission (OLCC) announcement that it would “pause acceptance of marijuana applications” effective June 15th. The apparent goal was to ensure that our licensing paralegal, Meghan Saunders, would receive hundreds of urgent client emails and phone calls over a two-week period. And she definitely did.

The official explanation, of course, is that the agency was simply too far behind to perform adequate services for existing applicants and licensees. That is the explanation OLCC Executive Director Steve Marks gave in the May 30th announcement, and it’s the explanation OLCC Policy Director Jesse Sweet gave at the seminar that he and I co-chaired on June 7th. All in all, it seems like a reasonable explanation.

Fortunately, some of the pressure from the initial announcement was alleviated on June 8th, when OLCC clarified that it would consider an application to be timely received for deadline purposes, even if it did not include an approved Land Use Compatibility Statement (LUCS). The pause ultimately took effect last Friday as promised, but not before dozens of our clients submitted last ditch applications (with and without LUCS) and made their way into the forward moving queue. In all, OLCC reports that an astonishing 1,001 additional applications were received in the two week period between its big announcement and the June 15thdeadline.

If you are looking for more evidence that people are extremely interested in being involved in the Oregon marijuana industry, the OLCC reports that as of yesterday morning a grand total of 1,915 active licenses currently exist in the state (over half of them producers), with another 766 applicants assigned to investigators, 530 ready for assignment and 1,070 businesses in line but without an approved LUCS. There are also 30,018 active marijuana worker permits statewide, with another 17,217 approved and awaiting payment. Despite intense competition and price instability, people keep on coming.

     2.     Billy Williams went to court.

Last month, we wrote about the Williams Memo, a policy document authored by Oregon U.S. Attorney Billy Williams regarding his concerns about overproduction of marijuana in Oregon and black market activity. We observed that industry seemed unfazed by the memo, because it would be too costly, too politically hazardous, and ultimately, too late for U.S. Attorneys to attempt to shutter Oregon’s state-sanctioned cannabis programs.

Mr. Williams and others instead have begun working around the edges, drawing lines in the sand on policy and going after bad (black market) actors. Last week, Mr. Williams filed two federal criminal lawsuits concurrent with law enforcement raiding a licensed Corvallis retailer for allegedly selling pot across state lines, and running an illegal credit card scheme. The raid was led by DEA in concert with Corvallis police, and based upon information gathered by the FBI and the U.S. Postal Service. Those agencies, in turn, began their investigations back in December 2016.

For anyone thinking running a state licensed cannabis business is cover for committing state and federal crimes – including the export of marijuana beyond Oregon – hopefully last week’s news will serve as a wake-up call. And hopefully, Billy Williams and the feds continue to chase these people down.

     3.     Josephine County lost again.

Josephine County has had a rough go with cannabis, especially as of late. We covered its half-baked efforts to curb marijuana farming through restrictive zoning ordinances here, here, here and here, and examined the problematic dynamics in southern Oregon cannabis production more generally here and here. Last week, the Oregon Court of Appeals rejected the County’s appeal of a decision that it had failed to give land owners proper notice of the County’s proposal to ban cannabis farming on smaller, rural residential lots.

The decision being appealed was handed down by the Land Use Board of Appeals, a somewhat obscure Oregon court that rules on the validity of governmental land use decisions. In theory, the County could petition the Oregon Supreme Court for certiorari, and seek a reversal of last week’s Court of Appeals decision. But it seems unlikely that the Oregon Supreme Court would take the case, and less likely still that the County would win.

In that sense, the County is in the same position as with its seemingly desperate federal court lawsuit to quash all cannabis production entirely, and hearken back to the days of prohibition. We expect them to lose that one, too.

Oregon safety marijauana
The OSHA model. And a good look for cannabis business.

So, what is Oregon OSHA (“OR OSHA”)?

OR OSHA is the Oregon Occupational Safety and Health Act. This law requires employers to “furnish employment and a place of employment which are safe and healthful for employees.” In other words, employers are required to maintain safe workplaces. This means that employers are required to identify potential workplace hazards, prevent such hazards, and provide safety measures to employees to protect their health and safety, in all situations where hazards are inherent in the job or otherwise unavoidable. Does this law apply to cannabis employers? You bet.

OR OSHA also identifies certain conditions as inherently hazardous or unsafe, and regulates the condition or practice by imposing employer requirements to mitigate the condition or practice (think fall protection when on a ladder). The kind of marijuana business you run will dictate what OR OSHA regulations are triggered.

For example: marijuana producers are subject to the OSHA agricultural rules. These rules require employers to protect employees from things such as machine hazards, mold, electrical hazards, and heat exposure, among other things agricultural employees are subject to.  Marijuana processors must comply with special requirements for employees handling extraction chemicals. Retail operators must ensure employees are safe from slips, trips, and falls. Etc.

In addition to protecting employees from hazards at work, OSHA imposes reporting requirements on employers. Employers must report to OR OSHA within eight hours epodes like the death of an employee or a catastrophe. A catastrophe is defined as two or more employees fatally injured or three or more employees admitted to a hospital or an equivalent medical facility. Employers must report to OR OSHA within 24 hour of any employee being hospitalized, losing an eye or an amputation, or avulsion that results in bone loss. In addition to these reporting requirements, employers with 10 or more employees must record their injuries and illnesses that are a result of the work environment on a form called the OSHA 300 Log. Employers must also summarize the 300 log on a form called an OSHA 300-A.

Somewhat similar to the Oregon Liquor Control Commission (“OLCC”) — which is the state agency that administers marijuana licenses — OR OSHA has the power to investigate employers to determine whether or not they are compliant with OSHA requirements. OR OSHA does not have to provide advance notice of inspections, and the agency may randomly show up at an employer’s place of business to conduct an inspection.

So where might the agency show up? OR OSHA prioritizes inspections at locations that are determined to be the most unsafe. An OR OSHA investigator will investigate the employer’s property to determine if there are any violations. If there are violations, the investigator can issue a citation based on the type of violation. As with OLCC citation powers, the type of penalty associated with the citation depends on how serious the violation is.

OR OSHA safety requirements are comprehensive. The agency encourages employer compliance and has a series of free tools available to employers to assist with that compliance. OR OSHA’s most significant tool is its consultation services. Free of charge, an OSHA consultant will inspect a work site and provide safety, health, and ergonomic hazard assessments, recommendations to control and eliminate hazards, a written program evaluation, industrial hygiene services, training on health and safety topics, and assistance with safety and health programs. In short, a consultant will come out and point out potential OSHA violations and provide a plan to help with compliance.

Pro tip: A consultant is a great and free way to assess your compliance with OSHA prior to an inspector coming to your place of business.

Like with most employer regulations, compliance in the first place is the best way to avoid a hefty civil penalty or litigation. However, citations happen even when the best intentions are in place. This post has only scratched the surface of OSHA requirements. If you have additional questions, give us a call.

industrial hemp CBD legal

As CBD and hemp continue to grow in popularity we are receiving an increasing number of calls and emails from companies that want to distribute hemp across the country. We have written about the legality of hemp and CBD under federal law:

This post focuses on another topic: state law on CBD and Industrial Hemp.

The 2014 Farm Bill grants states the authority to regulate Industrial Hemp, which contains less than .3%  THC on a dry weight basis, through an Agricultural Pilot Program. The Farm Bill also requires that Industrial Hemp is overseen by a state’s department of agriculture. The Farm Bill is light on additional details and states have taken different approaches to regulating Industrial Hemp and CBD derived from Industrial Hemp.

Colorado cemented its place in history as a cannabis pioneer by legalizing marijuana in 2012 along with Washington. Colorado’s hemp credentials are also solid as it has dedicated more acreage to the cultivation of hemp than any other state. Cultivators are permitted to sell hemp to the public. Colorado does not oversee the processing of hemp though which makes the extraction process largely unregulated.

Unlike Colorado, Oregon regulates both the production and processing of Industrial Hemp. Oregon’s Department of Agriculture (ODA) oversees the state’s industrial hemp program. “Growers” must register with the ODA in order to produce Industrial Hemp and “Handlers” must register to process Industrial Hemp. Oregon differs from Colorado in that it does not permit its Growers to sell Industrial Hemp directly to the public. Conversely, Handlers are permitted to sell Industrial Hemp to any person. Growers and Handlers may also sell their products to licensed recreational marijuana businesses giving them access the state’s recreational marijuana market. Growers and Handlers can apply to the Oregon Liquor Control Commission (OLCC) for an Industrial Hemp certificate to transfer hemp to recreational processors. OLCC retailers can then turn around and sell these hemp-based products to Oregon consumers.

Washington recently passed a law that sets up a similar structure. You can read about this law here, as we covered it a few months ago when it was still a proposed  bill. Washington’s licensed processors will soon be allowed to use additives derived from hemp-based products that were grown outside of its licensed marijuana system. These additives may come from Washington’s own Industrial Hemp program, which has been stalled for the last few years due to budget issues, or from Industrial Hemp sourced from other sources.

California has followed a similar path to Washington in that its hemp program has failed to launch in a meaningful way. Part of the hold up has been that California requires that Industrial Hemp only be grown by those on the list of approved hemp seed cultivars. That list includes only hemp seed cultivars certified on or before January 1, 2013. Industrial hemp may only be grown as a densely planted fiber or oilseed crop, or both, in minimum acreages. Growers of industrial hemp and seed breeders must register with the county agricultural commissioner and pay a registration and/or renewal fee. We wrote about proposed changes to California’s program here.

Michigan‘s office of Licensing and Regulatory Affairs (LARA) recently issued an Advisory Bulletin that only permits the sale of CBD in licensed medical marijuana dispensaries. The Bulletin first states that CBD cannot be found in portions of the cannabis plant that fall outside the state’s definition of “marihuana” (i.e., the mature stalks, seeds incapable of germination, fiber from stalks, oil or cake made from seeds or other derivatives of the mature stalks) other than in trace amounts. The Bulletin goes onto state that Michigan’s Industrial Hemp program does not authorize the “sale or transfer” of Industrial Hemp.

This is significant as it means that CBD derived from Industrial Hemp cannot be sold and that CBD derived from marijuana can only be sold in dispensaries. The Bulletin also seems to include Industrial Hemp from other states as it concludes with the following:

Any possession or transfer of industrial hemp – or any product claimed to be “hemp”-related – must be done in compliance with Michigan’s Industrial Hemp Research Act.

The bottom line in Michigan is that to sell CBD in that state, whether from marijuana or hemp, you need to go through a dispensary.

Also keep in mind that some states do not regulate Industrial Hemp at all. This should not be interpreted to mean that they will turn a blind eye to hemp products distributed within their borders. Other states, regulate CBD specifically, which can be found in Industrial Hemp, and those states limit the use of CBD to patients who have received an authorization from a physician for its medical use.

If you want to distribute Industrial Hemp across the country it is not as simple as making sure that you have a licensed cultivator. Sure, you need to know the laws of the state in which you are sourcing hemp, but that’s not enough. You need to also consider the legal landscape of the places you intend to ship and sell Industrial Hemp products.

marijuana cannabis oregon initiative
The goal of your ballot initiative is to get to a vote.

Oregon successfully legalized the use, sale, processing, and production of recreational marijuana in 2014 through the initiative process. The initiative process is a method of direct democracy that allows people to propose laws outside of the normal legislative process. Oregon’s marijuana statute (ORS 475B) allows cities and counties to “opt-out” of commercial recreational marijuana. In other words, cities and counties do not have to allow for the sale, processing, or producing of marijuana within their jurisdictional borders. ORS 475B, as originally written, allowed cities and counties to automatically opt-out if registered voters in the jurisdiction voted at least 55% against the legalization. All other cities or counties could either create reasonable time, place, and manner restrictions for marijuana businesses or could put up an opt-out vote to the public at the next general election.

Many cities and counties chose to opt-out from legalized recreational marijuana. In these jurisdictions, citizens can still use and possess marijuana, but licensed recreational businesses are not allowed to operate in jurisdictions that opted-out. Still, citizens can use the initiative process to change these local laws. The initiative process allows for citizens to propose a city or county ordinance allowing Oregon Liquor Control Commission (OLCC) licensed marijuana businesses within the jurisdiction. We have expertise in navigating this process and we are, in fact, running one initiative in an “opt out” jurisdiction right now.

The initiative process, much like many forms of our government, is overly complicated with a host of rules and technical requirements. It requires a lot of steps, careful planning, patience, and organization. Once an entrepreneur decides he or she wants to change the laws, the initiative process starts by filing a prospective petition with the local elections official. The prospective petition includes the language of the proposed ordinance. The language is an opportunity to develop a local ordinance that fulfills your goals and the citizens goals for licensed marijuana businesses.

After the prospective petition is submitted, the city or county will approve it for circulation. This is when the real work starts. Initiative petitions are not automatically guaranteed a spot on the ballot. Instead, initiative petitions must gather the support of the public to be included on the next election’s ballot. Almost all of us have been accosted by a circulator on the MAX or downtown in Portland asking if we are a registered voter and if we’ll sign the petition sheet to get a measure on the ballot. City initiative petitions require valid signatures from 15% of the registered voters in the city and County initiative petitions require 8% of registered voters.

If the local elections official determines enough valid signatures were received, the initiative will be referred to the local governing body. The local governing body has the option to adopt the petition without sending it to the ballot. They can also choose to allow the petition to be voted on in the next election. If it makes it onto the ballot, the initiative must receive a majority of approval from the voters to pass. If it receives a majority of votes, the initiative will be enacted as law.

Initiative petitions are one way to attempt to change local laws surrounding marijuana businesses. These petitions can be drafted in favor of their drafters, who may attempt to set themselves up for success once an initiative passes. Over the past few years, some citizens in Oregon have attempted and failed, while others have successfully changed local law to allow for recreational marijuana licensees. The process is long and complex, but the upside can be tremendous.

marijuana cannabis oregon CLEThis Thursday, June 7th, our own Vince Sliwoski will co-chair an all-day continuing legal education (CLE) event in Portland called The Business of Marijuana in Oregon, along with Jesse Sweet, a lawyer and senior policy analyst at the Oregon Liquor Control Commission (OLCC). The roster of speakers lined up for this CLE is better than any year to date, and everyone, including non-lawyers, would be well served to attend. Other Harris Bricken lawyers presenting include Megan Vaniman (employment) and John Mansfield (litigation). For a full event description, including topics, speakers and registration links, click here.

Looking back over the past four years, it is amazing to see how much things have changed in Oregon cannabis. At this point, the OLCC’s recreational marijuana program is fully built out, with over 3,400 applicants now on file with the state. We are proud to call many of these Oregon producers, processors, wholesalers and retailers our clients, alongside the many investors and ancillary service providers we represent.

Sometimes, it is said that pioneers get slaughtered and settlers get rich. Now that the Oregon regulatory groundwork has stabilized, we have begun to see a second wave of entrepreneurs and investors move in on the local industry. Many of these new entrants bring skills, capital and experience from other regulated markets, while others are new to the space. Over the next year or so, we expect to see big changes in the marijuana industry, especially given OLCC’s announcement last week to pause the acceptance of new applications.

Oregon attorneys and business owners alike need to be familiar with the unique regulatory concepts and industry dynamics that will be discussed on Thursday in order to best serve the Oregon cannabis industry. These concepts 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 regulators, bankers, CPAs, and, of course, lawyers aplenty.

If you are in or around Portland, we hope you will join us on Thursday for an eight-hour survey of Oregon cannabis 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.

Yesterday afternoon, the Oregon Liquor Control Commission (“OLCC”) published a news release titled “OLCC Will Pause Acceptance of Marijuana License Applications.” This “pause” takes effect Friday, June 15th. The agency’s sudden announcement was a big surprise to almost everyone, and we received a flood of emails and phone calls throughout the afternoon.

Personally, I cannot remember receiving so many urgent calls and emails related to an administrative or political development at any point in the past seven years of working with cannabis businesses. That includes industry shakeout after recent seismic events like the election of Donald Trump, the appointment of Jeff Sessions as U.S. Attorney General, and Mr. Sessions’ rescission of the Cole Memo. In all, the OLCC announcement caused a major stir.

This post will address questions along the lines of those we received yesterday afternoon, in an attempt to give some consolidated thoughts as to what is going on with Oregon marijuana licensing.

The OLCC announcement says it will “temporarily shift licensing staff to exclusively process recreational marijuana license renewals and applications…”. Does the word “applications” refer to new applications, as well as change in ownership applications? What about “applications” for changes in financial interest?

We have confirmed with OLCC that the announcement refers only to new applications. We also have confirmed that the agency will continue to accept new applications after June 15th cut-off. However, OLCC will not move those applications forward in the queue or begin to process them. The focus will shift entirely on applications submitted prior to June 15th, changes within existing licenses, and renewals.

How long is the pause?

We don’t know. And OLCC probably doesn’t even know at this point. Conceivably, it could last through the next legislative session, beginning in early 2019, when the OLCC may look to the legislature to set some parameters on new license issuances. At a minimum, it seems likely that the pause will extend into the fall, given the application backlog and given the fact that the announcement states OLCC’s intent to put “additional resources into the field for compliance activity, with a focus on targeting Oregon’s 2018 fall outdoor harvest.”

Can the pause go on indefinitely?

Probably not, unless the legislature changes something. In our discussions with OLCC over the past few years, the agency has always acknowledged that the current statutory structure prevents it from capping the number of licenses it awards. Thus, under current law, the only way OLCC can limit the amount of marijuana being produced in Oregon is through controlling canopy sizes (which it has not sought to do).

Is OLCC going to ask the legislature for further statutory controls for licensing in 2019?

It seems likely, yes.

I am closing a large real estate transaction next week! There is no way I can get a LUCS and everything else I need to apply by June 15th. Am I screwed?

You might be. If you aren’t willing to forfeit your earnest money and walk away, the best you can do is close the deal and apply for a license, and wait and hope for OLCC to re-start its conveyor belt.

Is there any chance OLCC will extend this abrupt deadline?

Anything is possible but that seems unlikely. It’s also possible that we could see a carve-out for prospective applicants who can somehow prove compelling circumstances or financial hardship due to the abrupt deadline. But that also seems unlikely, and it’s hard to know how those parameters would even be set.

Why are they really doing this?

The reasons stated in the news release are compelling. Given all of the mergers and acquisitions going on in the Oregon industry, our Portland office processes a large amount of change-in-ownership, loan clearance, and other types of transactions with OLCC. We can confirm that the process has become painstakingly slow for businesses and investors, despite OLCC’s best efforts. Applications for new businesses are also very slow. In addition, the announcement references the need to “put additional resources into compliance activity” as stated above. That’s a good idea generally, but there is doubtless some political pressure behind this objective, too.

What do we do next?

More information will be available in the coming days and weeks. So sit tight and stay tuned. Alternatively, you can always head to California. They have the opposite problem.