Although the November 2016 election set the country into a state of turmoil, it represented a huge victory for marijuana initiatives in several states. Four states — California, Massachusetts, Maine and Nevada — legalized cannabis for recreational use. Additionally, three typically conservative states — Arkansas, Florida and North Dakota — surprised America by legalizing medical marijuana. Each of the recreational laws have varied intricacies that can affect existing and potential cannabis businesses.
California
California’s Proposition 64 (the Adult Use of Marijuana Act) allows adults 21 and older to possess up to one ounce of marijuana and grow up to six plants in their homes. Prop 64 received 56% of the vote, immediately putting into effect the portions of the law allowing possession and personal growing. The other tax and licensing provisions of the law will not take effect until January 2018. The Bureau of Medical Cannabis Regulation has been renamed the Bureau of Marijuana Control and is responsible for the licensing of retail establishments. State officials estimate it will take up to a year to develop the regulations necessary to license retail stores, meaning recreational users might have to wait two more years to be able to purchase cannabis from a retail establishment in California.
It’s important to note that individual counties and municipalities have the ability to limit or ban commercial marijuana operations, as well as set local tax rates. The initial taxes imposed would be a 15% state excise tax on retail sales, and cultivation taxes of $9.25 per ounce of flower and $2.75 per ounce of trim/leaves. This number will adjust for inflation each year beginning in 2020. It is estimated that the Adult Use of Marijuana Act could result in $1 billion annually in state tax revenue.
Maine
Voters in Maine narrowly approved Question 1, the Marijuana Legalization Act, allowing cannabis for recreational use. The Associated Press reported the final vote at 50.17% in favor, with 49.83% in opposition. Officials expect a recount that is currently under way to be completed in mid-January.
Maine and Massachusetts were the first states on the East Coast to legalize recreational marijuana for recreational use.
Question 1 permits adults to legally grow up to six plants, allowing possession of all the harvest from those plants, and/or up to 12 immature plants and personal-use quantities of up to 2.5 ounces cannabis. It also allows licensing for commercial cannabis production and retail sales. The law imposes a 10% tax on commercial marijuana sales. Under the law, localities have the authority to regulate, limit, or prohibit the operation of marijuana businesses. On-site consumption is permitted under the law in establishments licensed for such activity.
The new law took effect on Dec. 16, 2016. Regulations for marijuana-related businesses are scheduled to be in place by Aug. 8, 2017, meaning retail stores will likely open in early 2018.
Massachusetts
Massachusetts voters approved Question 4 on Election Day 2016 with 53.6% of the vote, legalizing recreational marijuana for adults. Massachusetts is home to more than 6 million people, and its geographic location instantly makes it a cannabis industry leader.
The law took effect Dec. 15, 2016, but the details for the industry will take some time to develop. Rules and business licenses need to be issued long before legal purchases can be made in Massachusetts.
Adults 21 and older may now possess, use, purchase, process or manufacture up to one ounce of cannabis; however, not more than five grams of marijuana may be in the form of a concentrate. Residents are also able to possess up to 10 ounces of marijuana and any marijuana produced by marijuana plants cultivated on the premises. These possession limits in a private residence give Massachusetts the most favorable laws in the country.
Once licensed stores open, marijuana sold by licensed retailers will be subject to an excise tax of 3.75%, in addition to Massachusetts’ 6.25% state sales tax. Additionally, the initiative allows for the creation of a 15-member cannabis advisory board to study and make recommendations on regulations and marijuana products.
Like California and Maine, individual counties, cities and towns can enact bans and additional taxes on recreational marijuana operations.
The use of marijuana would be restricted to private places.
Nevada
Nevada voters passed Question 2 with 54% of the popular vote, allowing adults 21 and older to legally grow up to six plants, and possess all of the harvest from those plants. Nevada residents can possess up to one ounce of marijuana beginning Jan. 1. Question 2 also provides for the licensing of commercial cannabis production and retail stores; regulations governing commercial marijuana activities must be in place by Jan. 1, 2018. With this deadline, consumers could see the first retail marijuana stores in late summer 2017 at the earliest and late 2018 at latest.
Commercial marijuana production is subject to a 15% excise tax, much of which is earmarked to the State Distributive School Account. Question 2 is projected to generate more than $60 million in annual tax revenue, including approximately $20 million per year for Nevada schools. Additionally, it is estimated that more than 6,000 jobs will be created and there will be a contribution of more than $1.1 billion to the overall economic activity in the state.
Victories on the Medical Front
There were also some important victories in traditionally conservative states where the medicinal use of marijuana was approved. Arkansas’ Issue 6, the Arkansas Medical Marijuana Amendment, writes into the state Constitution a right to medical cannabis and a basic regulatory structure under which it will be administered to patients. Under the amendment, 60% of those who own dispensaries and cultivation facilities must be Arkansans who have lived in the state for seven consecutive years. The initial dispensary application fee will be $7,500 and the initial cultivation facility application fee will be $15,000.
Florida’s Amendment 2, the Florida Medical Marijuana Legalization Initiative, allows medical use of marijuana for individuals with specific debilitating diseases as determined by a licensed state physician, and additionally allows caregivers to assist patients’ medical use of marijuana.
Under the North Dakota Compassionate Care Act, those who receive a doctor’s permission to use marijuana for medicine can possess up to three ounces that is from either a state-licensed dispensary or a personally grown supply.
From left to right: Derek Morris, Lisa Glazer, Chelsea Harrison and Suzanne Hickman of Herbal Outfitters.
Impact on Employers
Marijuana use — whether for recreational or medicinal purposes — is of course still prohibited under federal law. That being said, the Feds have not openly gone after marijuana businesses that have been complying with state laws. However, the business environment will remain volatile in the early months of the Trump administration.
For employers, not much will change. Each of the state initiatives for recreational marijuana provide that employers are still entitled to prohibit employees from being under the influence of marijuana. The trickier question will come when cases arise addressing the issue that marijuana remains in a person’s system long after use and long after any affects from using cannabis have occurred. Businesses may run the risk of violating employees’ rights to not have their legal off-duty activities monitored and regulated. California and Nevada, for example, have various laws in place to protect employees from retaliation for lawful activities performed outside of working hours. When it comes to marijuana use, Maine has had a law in effect for its medicinal users in which employers may not discriminate against an employee for using medical marijuana.
This area of the law is hazy to say the least; while it is clear that employers will be able to prohibit employees from being impaired by recreational or medicinal cannabis, states’ off-duty privacy laws may impact how much employers can discipline employees in the future. It is best for employers to stay tuned as the law develops and is interpreted by courts to reflect the needs of this up-and-coming industry.
Danielle Garcia and Danielle Moore are attorneys at Fisher Phillips (www.fisherphillips.com). Danielle Garcia’s practice focuses on representing clients in all aspects of labor and employment law, including traditional labor relations management, harassment and discrimination.
Danielle Moore represents and counsels employers in the cannabis industry in all aspects of labor and employment law, including discrimination, wrongful termination, harassment, retaliation, wage-hour class action lawsuits, and general preventive advice.
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