Cannabis: In Focus

  • FDA Rejects Citizen Petitions, Declines To Regulate CBD as a Dietary Supplement
  • Ninth Circuit Affirms Dismissal of Cannabis Company’s RICO Claims
  • Tenth Circuit Holds that 2018 Farm Bill Doesn’t Create Private Cause of Action for Hemp Farmers
  • US Virgin Islands Legalizes Recreational Cannabis
Continue Reading Cannabis Legal Report—Week of January 30, 2023

This blog series addresses common employment-related issues for cannabis industry professionals.

This post addresses overtime rate requirements that manufacturers and retailers of cannabis products should consider to ensure compliance with applicable state and federal law.

In addition to ensuring that employee time is accurately recorded, employers should be mindful of the applicable overtime requirements and the rate at which overtime must be paid under state and federal law. For example, California law generally requires employers to pay nonexempt employees an overtime rate of 1.5 times the employees’ regular rate after eight hours in a single workday, 40 hours in a single workweek, and for time worked on the seventh consecutive workday in a workweek. California law also generally requires employers to pay double time to nonexempt employees for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

While calculating overtime should be a relatively simple process with respect to individuals who work in a single role and at a set schedule each week, it can become more burdensome with respect to employees who: (1) work in dual roles across the operation, (2) work during shifts that span multiple days, or (3) are paid at multiple pay rates during the applicable period—including due to receipt of bonuses or commissions. Actively monitoring payroll practices can enable employers to identify and correct underpayment—or overpayment—of overtime.

Along those lines, employers should be careful to ensure overtime compensation is paid at the employees’ “regular rate” of pay under the Fair Labor Standards Act (FLSA) and applicable state law. The overtime rate should reflect a multiplier of both the employee’s standard hourly rate and any other remuneration for employment paid to, or on behalf of, the employee.

For example, nondiscretionary bonuses, such as bonuses for meeting attendance or performance goals, must be added to employees’ hourly wages prior to calculating overtime for the applicable workweek. However, other categories of payments are not included in the regular rate calculation, including discretionary bonuses, discounts on company products, free samples of products, expense reimbursements, and payments made for occasional periods when no work is performed due to vacation, holiday, illness, and other categories identified under federal and state law.

This is one example of the wage and hour issues that employers should consider in the cannabis industry. We will issue further guidance on these and related topics. Companies and organizations should work with experienced legal counsel to determine the best approach to ensure compliance with these requirements.

Earlier this month, the medical journal Pediatrics published a new study analyzing reports of accidental child exposure to cannabis edibles from 2017 – 2022, finding that the number of young children accidentally ingesting cannabis in the United States has increased consistently and significantly over the past five years. According to the study, children, especially those under age five, are at particular risk as they may not be able to distinguish between copycat tetrahydrocannabinol (THC) products and the well-known treats they resemble.

As we’ve written elsewhere, states impose strict restrictions on underage access to cannabis products in the licensed marketplace and generally prohibit marketing cannabis products to minors. The study’s findings emphasize the risks posed by copycat THC products and echo concerns raised by the U.S. Food and Drug Administration (FDA) in a 2022 consumer alert. The agency noted many “edible products are designed to mimic the appearance of well-known branded foods by using similar brand names, logos, or pictures on their packaging. These copycats are easily mistaken for popular, well-recognized foods that appeal to children.” As the FDA detailed, “accidental ingestion of these products can lead to serious adverse events, especially in children.”

Continue Reading Preventing Accidental Exposure of Illicit Cannabis Products to Underage Consumers

Oregon became the first state to offer controlled use of psilocybin to the public on January 1, 2023. Psilocybin is a Schedule I psychoactive substance that is illegal at the federal level. Notwithstanding this federal illegality, psilocybin’s potential medical uses are being explored in medical research centers, and the substance is currently undergoing clinical trials, being designated by the U.S. Food and Drug Administration (FDA) as a breakthrough therapy. As part of a series of state initiatives aimed at improving access to mental healthcare, Oregon passed the Psilocybin Services Act as a ballot measure in 2020. This law directed the Oregon Health Authority (OHA) to license and regulate the manufacture, transportation, delivery, and purchase of psilocybin products and the provision of psilocybin services within the state. As of January 2, 2023, the OHA has begun accepting applications for licensure, with new psilocybin service centers expected to open later this year.

For more details about OHA’s regulations and compliance considerations, read the Perkins Coie Update.

To receive updates like this via email, subscribe here (and make sure to check the box for “Cannabis Law”).

The District Court for the Western District of New York denied a motion on January 6, 2023, to dismiss claims alleging that a publicly traded company misled investors regarding an investigation by the U.S. Securities and Exchange Commission (SEC). The company, 22nd Century, engineers cannabis plants to regulate their levels of cannabinoids. The court’s denial of the motion to dismiss is an important reminder to companies, especially those in the cannabis space, about the importance of compliance and disclosure.

Continue Reading New York Cannabis Co. Investor Suit Survives Motion To Dismiss

Cannabis: In Focus

  • New York City Attempts to Crack Down on Illicit Cannabis Market
  • Connecticut Launches Recreational Cannabis Sales, With More States Expected to Follow in 2023
  • Psilocybin State Updates
  • FDA Issues Three New Warning Letters to CBD Product Manufacturers Alleging COVID-19 Benefits
  • Congressional Research Service: Cannabis Banking and the Federal Reserve
Continue Reading Cannabis Legal Report—Week of January 23, 2023

A December 2022 survey from Data for Progress reports that American voters, regardless of political affiliation, support federal cannabis legalization. Specifically, 75% of Democrats, 67% of independents, and 52% of Republicans agreed that cannabis should be legalized at the federal level.

Data for Progress also asked about two equity policies enacted as part of New York’s Marihuana Regulations and Taxation Act (MRTA) that legalized recreational cannabis in the state.

One policy measure reserved 100-200 dispensary licenses for applicants disproportionately affected by cannabis prohibition. In general, voters surveyed supported this measure by a +23-point margin (57% in support, 34% opposed), with the party breakdown as follows: 69% of Democrats, 59% of independents, and 43% of Republicans.

The other policy stipulated that 40% of the taxes collected would go into a community grant fund for community reinvestment programs like job placement and skill services. This policy was supported by a majority of voters from all three parties: 76% of Democrats, 70% of independents, and 51% of Republicans.            

The poll indicates that American voters, regardless of political affiliation, support federal cannabis legalization as well as thoughtful social equity policies.

California Governor Gavin Newsom signed Assembly Bill 2188 (AB 2188) into law on September 18, 2022. AB 2188 will amend the state’s employment anti-discrimination law, the Fair Employment and Housing Act (FEHA), and make it an unlawful practice for an employer to discriminate against an adult applicant or employee based upon the “person’s use of cannabis off the job and away from the workplace.” The new law will take effect on January 1, 2024.

California joins several other states, including New York and New Jersey, that have adopted protections for applicants’ and/or employees’ off-duty cannabis use.

For more details, read the Perkins Coie Update.

To receive updates like this via email, subscribe here (and make sure to check the box for “Cannabis Law”).

This blog series addresses common employment-related issues for cannabis industry professionals.

This post addresses meal and rest break requirements manufacturers and retailers of cannabis products should consider to ensure compliance with applicable state and federal law.

In addition to ensuring accurate timekeeping, employers should be mindful of various state-level meal and rest break laws, if any, that are applicable to their nonexempt employees. For example, California state law generally requires employers to provide nonexempt employees with a paid rest period of 10 consecutive minutes for every four hours of work, or major fraction thereof, and a 30-minute unpaid meal period for every work period of five or more hours in a day. Other states have similar requirements.

Continue Reading Wage and Hour Compliance: Meal and Rest Breaks

As 2022 drew to a close, the Wall Street Journal reported that the FDA is finally considering releasing potential guidance regarding cannabidiol (“CBD”) in the coming year. While the exact timeline and scope of the FDA’s potential action is unclear, the Journal asserts that the agency will decide “within months” regarding the appropriate regulation of CBD and whether that regulation would require Congressional action or new agency rulemaking. Concurrently, the FDA continues to explore potential CBD safety risks.

The agency has generally pursued limited enforcement activity to-date regarding CBD, with a focus on products in foods and beverages that make unsubstantiated health claims, such as claims that CBD could treat or prevent cancer or Covid-19. Stopping short of taking aggressive action, the FDA has only issued warning letters on CBD, despite the widespread availability of largely-unregulated food and beverage products containing the hemp-derived cannabinoid.

Continue Reading Will The New Year Finally Bring FDA Guidance on CBD?