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Marijuana Licensing Laws Translated for Everyone to Understand

Everyone knows that California passed legislation making marijuana legal for recreational use. Some know that in order to sell marijuana for recreational or for medicinal purposes, you must become licensed under these new laws. However, few know what these licensing procedures entail. Our attorneys read Assembly Bill 266 from front to back to translate these new laws into layman’s terms. If you plan on becoming licensed to sell marijuana under AB 266, this blog is a must-read. It is important to note that California law still differs greatly from federal law. The purpose of this blog is to break down the California law, and is not meant to advise on conflicting federal laws and/or regulations.

A basic understanding of administrative law

Administrative agencies are given authority by Congress to make and enforce regulations, which carry the weight of the law. This means that violating a regulation set out by an administrative agency may result in criminal and/or civil penalties. A basic understanding of administrative law is necessary, because Assembly Bill 266 (AB 266) gives several administrative agencies the power to make and regulate rules regarding marijuana and marijuana licensure for sales, cultivation, manufacturing, distribution, and transportation. Some of the involved administrative agencies include: the Department of Consumer Affairs, the Bureau of Medical Marijuana Regulation, the Board of Equalization, the Department of Food and Agriculture, and the Food and Drug Administration. Several administrative agencies will be involved in this highly regulated field. Under AB 266, the Medical Marijuana Regulation and Safety Act will regulate the licensure of medical marijuana.

Some things you should know if you plan to get licensed

If you are licensed to sell marijuana, this will be public information. While you need not disclose your personal address for public information purposes (you may use a PO Box), you will need to provide this information for internal use by the licensing agencies. Because the laws are so new, the Department of Consumer Affairs has yet to proscribe detailed rules involving the licensing and regulation of marijuana, however, the Medical Marijuana Regulation and Safety Act directs them to do so. In addition to getting licensed under the Medical Marijuana Regulation and Safety Act, those who wish to sell marijuana must become licensed under a city, county, or a city AND county. The rules and safeguards set by the Medical Marijuana Regulation and Safety Act are the minimum requirements – meaning local rules can create stricter licensing requirements by which everyone must comply.

Types of Licensing

Most are unaware that there are several classifications of licensing under the new laws. There are 10 classifications for cultivation licensing, 2 manufacturer license classifications, 1 testing licensing classification, 3 for distribution, and 1 for transportation. This means that depending on the role in which you wish to play under AB 266, you may need to apply for more than one license. However, under the new laws, a licensee may only hold a license in up to two separate categories. In other words, you cannot cultivate, manufacture, test, and distribute your own product. In fact, the strictest part of the law includes the licensing for testing. If you hold a license for testing the product, you are prohibited from holding a license in any other category. The purpose of this is to ensure that all marijuana products meet safety requirements. For example, if someone who holds a license for cultivating or manufacturing also held a license for testing, there would be incentive to lie and say that your product does meet safety guidelines, when it might not. Under the new law, any product that does not meet regulations must be destroyed.

While each licensee must obtain a separate license for each location where it engages in commercial medical cannabis activity, transporters only have to obtain licenses for each physical location where the licensee conducts business while NOT in transport OR where any equipment that is not currently transporting medical cannabis or medical cannabis products permanently resides.

What happens if you get caught selling without a license?

Under Art IV, section 19320 of AB 266, “no person shall engage in commercial cannabis activity without possessing both a state license and a local permit, license, or other authorization...” The legislature is not lenient when it comes to setting punishment for selling marijuana products without a proper license. Under the new law, you will be fined twice the amount that a licensee would be fined for any violation. In addition, each day you are engaged in the unlicensed practice constitutes a new violation – which may result in hundreds of thousands of dollars. In addition, a court may order that all of the unlicensed product be destroyed.

Once you are licensed, the license is good for one year, but each licensing authority will set procedures for renewal. This means that if you live in an area where licensure is regulated at the city or county levels, then you will have to renew under those procedures, as well as state procedures for renewal. Under AB 266, licensees are required to keep all records related to commercial cannabis activity for a minimum of seven years. In addition, the bureau has the right to examine books and records of the licensee on the premises of the location licensed – which is standard for other types of licensing, as well. If you are caught failing to maintain or provide these records, you may be cited up to $30,000 per violation.

For those who are already operating in compliance with local and state requirements, the law allows continued operations until the application for licensure is approved or denied. Those who can prove they were in lawful operation and good standing with the local jurisdiction by

January 2016 will receive priority determination in the application process. This means that those applications will be approved or denied before applicants who were not already in operation by January 2016.

Weed is legal – does this mean that employers can’t drug test anymore?

This is perhaps the most common question our lawyers receive concerning the new marijuana laws. Unfortunately, employers still have the right to require a drug and alcohol-free workplace, notwithstanding the new laws. Section 19330 states:

“[This law] shall not interfere with an employer’s rights and obligations to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of cannabis in the workplace or affect the ability of employers to have policies prohibiting the use of cannabis by employees and prospective employees, or prevent employers from complying with state or federal law...”

What does AB 266 say about the delivery of marijuana?

Deliveries are mainly governed under Article IX, section 19340 of AB 266. Under this section, deliveries can only be made by a dispensary and in a city, county, or city and county that does not explicitly prohibit it by local ordinance... so what does the law mean by “dispensary?” Under AB 266, a dispensary is defined as:

“[A] facility where medical cannabis, medical cannabis products, or devices for the use of medical cannabis or medical cannabis products are offered, either individually or in any combination, for retail sale, including an establishment that delivers, pursuant to express authorization by local ordinance, medical cannabis and medical cannabis products as part of a retail sale.”

When making deliveries, all employees of the dispensary must carry a copy of the dispensary’s current license with a government-issued ID. In addition, the licensee must keep a physical copy of the delivery request while making the delivery.

Article X – Licensed manufacturers and laboratories

Under Article X, section 19341, there are different rules for manufacturers and testing labs. Manufacturing level 1 licensees are known as those using nonvolatile solvents, while manufacturing level 2 licensees are known as those who do use volatile solvents. Testing licensees will be regulated separately, and must not have any ownership interest in any medical marijuana facility other than the laboratory. The State Department of Public Health will be creating regulations for these three categories.

Laboratories will be strictly regulated. They must be registered by the State Department of Public Health, and must be independent from all other persons and entities involved in the medical cannabis industry. In addition, laboratories must follow all regulations set by the State Department of Public Health, they are subject to reporting requirements, and provide adequate chain of custody controls for samples. Because AB 266 is still so new, the Department of Public Health has yet to promulgate specific regulatory guidelines. In addition to these guidelines, the Department of Public Health will also set licensing fees. AB 266 says that these fees shall not exceed “the reasonable regulatory cost of the licensing activities.”