Cannabis Wine? Not so fast, says Oregon Liquor Control Commission

With the legalization of marijuana spreading across major wine producing states, including Washington, Oregon and (most recently) California, many believed that it was only a matter of time before licensed cannabis retailers would stock their shelves with marijuana-infused wines.

But earlier this month, the Oregon agency in charge of regulating the sale of alcohol and recreational marijuana in the state, the Oregon Liquor Control (OLCC), issued guidance that prohibits the sale of marijuana-infused alcohol beverage products.  Under Oregon Rev. Statute 471.446(2), OLCC may “prohibit any licensee from selling, any brand of alcoholic liquor which in its judgment …contains injurious or adulterated ingredients.”   OLCC concluded that any alcohol beverage that contains “marijuana or marijuana items” (including extracts) should be deemed adulterated and, therefore, prohibited the sale of such products.  OLCC, however, created an exception for alcoholic beverages produced using industrial hemp (as that term is defined under ORS 571.300) so long as the U.S Alcohol and Tobacco Tax and Trade Bureau has issued a formula for that product and the product’s label complies with TTB requirements.

California may adopt a similar view of the sale of marijuana-infused alcohol beverage products.  Under California law adopted pursuant to Prop 64, a licensed marijuana retailer will be the only entity that could sell products infused with marijuana for recreational use (such as marijuana-infused wine).  However, in order to do so, that retailer would also have to hold an alcohol beverage  retail license issued by the Department of Alcoholic Beverage Control, and laws adopted under Prop 64 specifically prohibit a party from holding both licenses.   Thus, unless new rules are enacted that allow either an alcohol beverage retailer or a licensed marijuana retailer to sell marijuana infused alcoholic beverages, there is no legal sales outlet for such products in California.

There is also a serious question as to whether such products could be legally produced by a state licensed and federally bonded winery.  Those concerns are entirely separate from, and in addition to, concerns as to whether the current administration will impede state-sponsored efforts to legalize adult-use marijuana.

In short, cannabis wine entrepreneurs should proceed cautiously.



Important 2017 Employment Changes:

State Minimum Wage: $10.50 per hour for employers with 26 or more employees.  $10.00 per hour for those with 25 or less employees.  Cities throughout the state have higher minimum wages.  Consult local ordinances if employees regularly work in cities outside Sonoma or Napa Counties.  Note, exempt employees for employers with 26 or more employees must make at least $43,680. (For smaller employers it remains $41,600.) Exempt employees must back at least twice the minimum wage on an annualized basis based on full time employment (2080 hours).

IRS Mileage Rate:  The mileage reimbursement rate for cars, vans, pickups or panel trucks is 53.5 cents per mile.  This is down from 54 cents per mile for 2016.

New I-9 Form:  As of January 22, 2017 employers must use the new I-9 form to document that employees are authorized to work in the United States.  The new form can be found here.

Legalization of Marijuana:  Although California has now legalized recreational use of marijuana, employers may continue to prohibit marijuana use, possession or impairment on the job.  Employers can also continue to test for marijuana in pre-employment screening tests, subject to existing privacy rights disclosures.

Gender Neutral Bathrooms:  By March 1, 2017 all business establishments, places of public accommodation or state or local government agencies must designate single-user toilet facilities as “all-gender”.  A single-user toilet facility is a toilet facility with no more than one water closet or urinal with a locking mechanism controlled by the user.  There is no requirement in the law that the bathroom be available to the general public.

Piece-Rate:  If you pay any workers by piece-rate make sure your payroll practices are compliant with respect to calculating and reflecting rest/recovery breaks  and other non-productive time and pay.  Do not solely rely on your payroll service to do this properly.  Verify that it is being done correctly.  It is extremely complicated.

Federal Exempt Salary Increase:  The new Department of Labor overtime exemption rule is on hold through court action.  It is uncertain whether it will eventually be implemented, revised or squashed.  If implemented the new minimum salary threshold for exempt employees would be $46,467 (higher than the current California requirement).

FEHA Policies: Check your discrimination, harassment and prevention policies and training practices to make sure they are compliant with new Department of Fair Employment and Housing regulations.

For more information on these or any other employment laws impacting your business contact Jennifer Douglas Phillips.

USPTO Makes Cannabis Trademark Go Up In Smoke

This past week the Trademark Trial and Appeals Board of the U.S. Patent and Trademark Office issued a blow to cannabis businesses attempting to protect their brands. In a precedential decision, In re Morgan Brown (click here for full decision), the Board affirmed the refusal to register the mark HERBAL ACCESS for “retail store services featuring herbs.”  The HERBAL ACCESS trademark application was submitted by a Washington State cannabis dispensary operating a lawful business under Washington State law. Although the application was not for goods or services which explicitly identified “cannabis” or “marijuana,” the Trademark Office examining attorney determined that the “herbs” being offered for sale by the applicant were in fact marijuana. Thus, the examining attorney rejected the HERBAL ACCESS application on the basis that the use of the mark in commerce was not “lawful,” due to the fact that the retail sale of marijuana remains illegal under federal law, regardless of Washington State law which permits it.  The Board affirmed this analysis, stating that the lawfulness of certain services or goods identified in a federal trademark application is determined under federal law.

The Board made two important points in its decision which potential applicants for cannabis-related brands should note.  First, the Board made clear that while an application may broadly describe goods or services in a way which does not explicitly identify “marijuana” or “cannabis” the Trademark Office is not precluded from using external evidence (in this case the applicant’s website) from concluding that the identified goods or services encompass cannabis.  Second, the fact that an applicant’s goods or services are lawful pursuant to a particular state’s law is irrelevant to the Trademark Office’s determination of whether those goods are lawfully being used in commerce.  Unfortunately for cannabis businesses, that determination is to be made under Federal law, and nearly all state law compliant cannabis businesses remain illegal under the federal Controlled Substance Act.

While it appears that cannabis businesses remain precluded from obtaining an above-board federal trademark registration for cannabis goods and services, some of the states in which cannabis is legal do allow a state trademark registration for cannabis and a federal trademark registration will issue for goods and services under a cannabis brand which are not directly illegal (e.g. clothing).  But for now, cannabis businesses clearly have an uphill battle in protecting their brand at the federal level.

The Beginning of the End of Marijuana Prohibition? Not so Fast.

Earlier this month, medical marijuana proponents were elated over the federal appropriations bill. What does the federal appropriations bill have to do with the continuing movement to repeal the prohibition of marijuana? Well, buried in Section 538 of the appropriations bill is the following language:

“None of the funds made available in this Act to the Department of Justice (DOJ) may be used, with respect to the States of Alabama, Alaska, Arizona, California, [every other state that has passed laws permitting medical marijuana], to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”

Many pundits have interpreted this language as mandating an end to DOJ subsidized raids on medical marijuana dispensaries and growing operations. The LA Times reported that under the appropriations bill, “states where medical pot is legal would no longer need to worry about federal drug agents raiding retail operations. Agents would be prohibited from doing so.” Does the bill, dubbed by some the “Cromnibus,” demand a change in federal drug enforcement policy directed at medical marijuana dispensaries and the grow operations that support them?

The answer to this question may not be the definitive “yes” that some are suggesting. Under the plain language of the bill, the DOJ may not use federal funds “to prevent states from implementing their own State laws” authorizing medical marijuana (emphasis added). However, this language may not necessarily prohibit an FBI raid or a U.S. Attorney’s prosecution of a medical marijuana business under the notion that the business is non-compliant with the federal Controlled Substances Act, which criminalizes the possession and sale of marijuana. In other words, the appropriations bill does not clearly prohibit the use of federal funds to investigate and prosecute medical marijuana businesses under federal law. Instead the appropriations bill may merely maintain the status quo, allowing states to implement their own laws permitting the “use, distribution, possession, or cultivation” of medical marijuana without DOJ intervention, but leaving these businesses subject to the threat of DOJ investigation, raid and prosecution under federal law.

In California, medical marijuana cultivators and dispensaries have long suffered this status quo. The Compassionate Use Act of 1996 (CUA) was passed eighteen years ago with the express purpose of ensuring that individuals who have a bona fide medical need for marijuana and those that provide them with medical marijuana “are not subject to criminal prosecution or sanction.” Consequently, the CUA provides that state law criminalizing the “possession” or “cultivation” of marijuana does not apply to those legitimately using medical marijuana or those that provide it to them. Despite these state law exceptions, the DOJ through the FBI and local U.S. Attorney’s offices have continuously raided and prosecuted medical marijuana businesses in California.

Without question, the federal appropriations bill marks a significant event, with Congress for the first time enacting legislation aimed at curtailing federal drug policy related to marijuana. While the intent of Congress may have been to completely prohibit federal investigation and prosecution of state-law compliant marijuana businesses, the language of the bill may not be sufficient to affect the sea-change that marijuana proponents have been heralding. A much more clear end to marijuana prohibition in the U.S. would be achieved by amending the Controlled Substances Act to except or remove marijuana from the list of controlled substances. This would be more certain than an annual federal spending bill that may be repealed or changed with next year’s appropriations. One thing is clear, however. In the ensuing weeks and months, we will see how the DOJ interprets the “Chromnibus” and if this is indeed the beginning of the end of federal marijuana prohibition.

States Claim Colorado Marijuana Laws are Unconstitutional

Earlier this week, Oklahoma and Nebraska filed a motion and complaint with the U.S. Supreme Court challenging Colorado’’s implementation of Amendment 64, the state constitutional amendment legalizing the cultivation and sale of marijuana. According to the brief, both Oklahoma and Nebraska have suffered damages as a result of Colorado’’s legalization of marijuana in the form of increased costs for law enforcement because of the diversion of marijuana from Colorado into neighboring states. The U.S. Supreme Court has original and exclusive jurisdiction over all controversies between two or more States. 28 U.S.C. Sec. 1251.

Plaintiffs argue that Colorado’’s actions in legalizing and regulating marijuana, a schedule 1 drug under the federal Controlled Substances Act (“CSA”), violates the Supremacy Clause of the U.S. Constitution. Plaintiffs concede that the CSA was not intended to “occupy the field” to the exclusion of state laws on drug enforcement, but they argue that a “positive conflict” exists between federal drug laws and Colorado’’s marijuana laws such that they cannot consistently coexist. Moreover, Plaintiffs claim that Colorado has not simply decriminalized marijuana or exercised prosecutorial discretion, but instead that it has affirmatively authorized conduct prohibited by federal law. “”Colorado state and local officials, who are now required by Amendment 64 to support the establishment and maintenance of a commercialized-marijuana industry in Colorado, are violating the CSA.””

Of particular interest to anyone that has tried to navigate the complicated and Balkanized model of state alcohol beverage laws (a direct outgrowth of the 21st Amendment) is Plaintiff’’s claim that, due to federal drug laws, there is no room for ““a patchwork of state and local pro-drug policies and licensed distribution schemes throughout the country which conflict with federal laws.””

Colorado’’s attorney general has 60 days to file an opposition to Oklahoma’s and Nebraska’’s motion.

The Motion for Leave to File Complaint, Complaint, and Brief can be found here.

Under Proposed Bill, California ABC Would Regulate Medical Marijuana

A bill recently introduced by state assembly member Tom Ammiano in the California State Assembly (AB 1894) would create a Division of Medical Cannabis Regulation and Enforcement within the state’s Department of Alcoholic Beverage Control. The bill also gives the department the power to create a registration system for persons interested in cultivating, manufacturing, testing, transporting, storing, distributing, and selling medical marijuana within the state.

Should AB1894 pass, and should California voters pass a ballot initiative in 2016 to legalize recreational marijuana, it is highly likely that the state ABC would be in charge of both medical and recreational marijuana regulation.

The State Assembly’s Committee on Public Safety will hold a hearing on AB 1894 on April 22.

For more information, please contact John Trinidad at [email protected].