By Michele Brooke, Esq.By Michele Brooke, Esq.
The California Legislature is currently considering two important Assembly Bills: Assembly Bill 266 (“AB 266”) and Senate Bill 643 ("SB 643"). AB 266 passed in the Assembly in early June and now moves on to the Senate for a vote; SB 643 passed Wednesday in the Assembly Business and Professions Committee and now moves to the Committee on Health.
Depending on which bill passes (presuming one does), California likely will enact regulations by the end of this summer. These regulations will set up a new state licensing and regulatory framework for cultivation, manufacture, transportation, storage, distribution and sale of medical marijuana, and they will impact the way the cannabis industry operates in California going forward.
As a marijuana business lawyer, I meet regularly with cannabis entrepreneurs wanting to get a foothold in the anticipated cannabis industry; so, in order to guide these clients, I have reviewed AB 266 and SB 643 with some interest, because it seems they lay out changes that will likely affect the cannabis industry in both the short and long run. The bills are complex, but here I will briefly highlight important terms in these bills that may be most immediately pertinent to medical marijuana patients who own collectives and to cannabis entrepreneurs. I also will highlight other noteworthy items that represent imminent changes coming to the industry and look at what is not likely to change until or unless recreational marijuana is enacted in California in the November 2016 election.
Conditional or Provisional Licenses—Act Now!
According to either bill, the new licensing and regulation framework likely will begin Jan. 1, 2016. However, prior to Jan. 1, both bills provide for provisional or conditional state licensing for persons already engaged in the industry.
AB 266 Article 6 currently provides for addition to the Health and Safety Code 19330(c) for provisional licenses to qualified applicants three months prior to Jan. 1, 2016—in other words, Oct. 1, 2015 (in just a few months). In addition, an applicant will have to make its business records available to the licensing authority upon request; applicants must be in compliance with local ordinances; and, of course, there will be background checks. The next licensing opportunity under AB 266 will not be until sometime in 2017. Beginning Jan. 1, 2018, any person engaging in commercial cannabis activities without a state license and local permit will be prohibited from doing so. The Senate Health Committee is considering the bill.
In contrast, SB 643 authorizes a facility or entity operating in conformance with local zoning ordinances, and other state and local requirements on Jan. 1, 2016, to continue its operations until its application for conditional licensure is approved or denied. This gives potential applicants less than six months to have their business entities established, if they are not already, and to find a location to obtain a business license.
What Will Change.
Under both bills the changes are monumental. Some items we will be looking at are state-issued requirements for sale, cultivation, transporting, manufacturing, testing and other commercial activities. AB 266 even envisions training or certification requirements for employees. In addition, AB 266 requires the applicant to be able to provide to the licensing agency detailed operating procedures and financial records. Both bills likely will want to see operating procedures put into place, and will require that labor and employment laws be followed. In some establishments today, collective or dispensary owners are not following labor and employment laws. Product-labeling requirements are part of both bills. When I say product-labeling requirements, I mean more than the little stickers you buy on the Internet identifying an item as permitted under Proposition 215. Products will require standardized labeling that comports with specific standards.
What Will Not Change.
First, for now, what will not change is that the Compassionate Use Act of 1996 will remain for patients or their designated caregivers who have a valid physician’s recommendation. This could change if California votes for recreational marijuana in 2016. So, for now, physician recommendations still will be issued by physicians, but a more stringent requirement for a good-faith medical examination will be emphasized. Doctors who recommend that the patient may grow large quantities of marijuana, such as 99 plants, will come under greater scrutiny.
Additionally, local ordinances will continue to have preeminence over any state law. This means that if a city or county does not permit certain marijuana activity, this will not change (unless, of course, the patients take steps to challenge local ordinances through voter initiatives.) Thus, Collective or Cooperative organizations that do not have a valid business license, conditional-use permit, or other license to operate in a particular city or county (including unincorporated areas) will continue to be illegal. Under either bill, it appears that if charges or suits are brought against illegal operators, those illegal operators will be subject to stiff fines, in addition to disqualifying themselves from the ability to obtain a license in the future. Finally, patients and Primary Caregivers may also continue to grow cannabis pursuant to the California law for personal use, subject to local laws.
Be Prepared for the New Future of Medical Marijuana Business.
It is recommended that any patient interested in applying for a state license, whether provisionally or conditionally in the first “wave” of permit issuances, begin to take a hard look at becoming as organized as possible to stand the scrutiny of the licensing process. Under the passage of either of these bills, or any other bill, the standards are likely to be similar, and there also may be some residency requirements to consider for those hoping to enter this industry during the second wave of licensing. Thus, positioning and preparation must become immediate priorities for those who hope to engage in the California market.
Michele Brooke is an attorney in California who practices civil litigation and civil cannabis law. She is a member of Americans for Safe Access, NORML, and the American Herbal Products Association, Cannabis Committee. Visit her website: www.brookelawgroup.com . Brooke will be speaking at the Medical and Recreational Marijuana in Southern California seminar, Oct. 9, in Santa Monica.
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