The laws and rules relating to medical marijuana and industrial hemp have been subject to recent changes, and more changes are expected on both the state and federal level. Anyone attempting to start or grow an existing business should be aware of the numerous ways in which the business may be impacted by current laws, regulations, and policies, as well as changes that will continue to occur as the industry develops. Business owners will likely encounter questions relating to a wide variety of legal issues, including but not limited to, the following:
- the criminal status of cannabis possession, cultivation, distribution and sale;
- the growth, processing and manufacturing of industrial hemp;
- labor and employment laws;
- federal/state/local regulatory licensing and compliance;
- business formation and acquisitions;
- investing in, and funding, cannabis-hemp businesses;
- purchasing and leasing property on which cannabis-hemp businesses will operate;
- CBD production, distribution and sale;
- advertising of cannabis-hemp businesses;
- intellectual property (patent, trademark and copyright) protection for cannabis-hemp businesses;
- environmental regulations;
- products liability and negligence actions; and
- insurance and banking rules and regulations affecting cannabis-hemp businesses.
This resource guide is not intended to provide legal counsel but serves only as a basic primer on various points of Missouri law as of March 15, 2019, in order to identify issues that may arise in the cannabis or industrial-hemp industries. The law is rapidly evolving, and the issues that have arisen, or will arise in the future, are so expansive that the guide should not serve as a substitute for legal counsel of your choice.
The United States, on a federal level, continues to classify marijuana (cannabis) as an illegal, Schedule 1 drug under the Controlled Substance Act. The possession, cultivation, distribution, or use of marijuana violates the federal criminal code, with varying degrees of penalties depending on the possession amount and the number of previous convictions.
However, in 2018, Missouri legalized medical marijuana on a state level when voters approved Amendment 2, which permits state-licensed physicians to recommend marijuana for medical purposes for Missouri residents with certain serious illnesses and medical conditions, such as cancer. With the adoption of Amendment 2, Missouri joined the now 33 states that have legalized or decriminalized marijuana to some extent under their state laws. It is unknown whether the federal authorities will attempt to prosecute persons who possess, cultivate, distribute, or use marijuana under the federal Controlled Substance Act in the states that have legalized or decriminalized marijuana.
Amendment 2 provides that qualifying patients may use medical marijuana, under the supervision of a Missouri physician, for treatment purposes. Notwithstanding, it is illegal to consume medical marijuana in a public place; undertake any task under the influence of medical marijuana when doing so would constitute negligence or public malpractice; operate any dangerous device or motor vehicle, aircraft or motorboat while under the influence; or bring a claim against an employer relating to working while under the influence of marijuana, among other things.
The Missouri Department of Health and Senior Services (“Department”) has been given the authority to administer and regulate the medical marijuana program. Tax revenues generated from marijuana sales beyond the program’s administrative costs go to services for veterans.
Under Amendment 2, each of Missouri's eight congressional districts is expected to be allowed a minimum of 24 dispensaries. The state will also issue at least 61 licenses to cultivate marijuana, which works out to about 1 cultivator license per 100,000 Missouri residents, and 192 dispensaries. To be eligible to obtain a license to run a commercial medical marijuana facility, a business or individual will have to meet strict application requirements and will be subject to rigorous compliance and enforcement standards.
The Department has until June 4, 2019, to write the regulations for the medical marijuana program. The Department will start its acceptance of applications for identification cards in July of 2019. By the end of 2019, the Department must have issued licenses for dispensaries, manufacturing, and cultivation. Anyone who is interested in pursuing business in this sector is encouraged to consult with legal counsel at the earliest opportunity in order to discuss the further particulars of the Amendment, compliance-related issues, and deadlines.
Labor and Employment Law:
Due to Amendment 2, employers in Missouri will soon need to have answers for questions that they may not have previously considered in developing and implementing their workplace policies and procedures:
1. Must employers allow an employee using marijuana in accordance with the state’s medical marijuana program to work while high?
No. Amendment 2 prohibits claims by employees against employers if they prohibit workers from being under the influence of marijuana at work. Similarly, it bars claims against employers if they take adverse action against employees because they either work, or attempt to work, while under the influence of marijuana. Employers should seek legal counsel regarding the particulars of the law in the context of the employer’s situation.
2. Must employers make a reasonable accommodation to an employee’s use of marijuana administered under the state’s medical marijuana program?
Under Amendment 2, it does not appear an employer will have to make an accommodation allowing an employee to use marijuana while at work. Depending on the circumstances, though, the employer may still have a duty to provide an alternative reasonable accommodation. Employers should seek legal counsel regarding the law in the context of the employer’s and employee’s particular situation.
3. How does Amendment 2 affect the right of employers to require applicants and employees to submit to drug tests?
Under Amendment 2, employers may still require applicants and employees to submit to drug tests. The results of a drug test, however, furnish only part of the basis upon which an employer should determine whether to reject an applicant, discipline an employee, or to fire an employee. Certain employers, moreover, must conduct drug testing because of various legal requirements.
4. If an applicant or employee tests positive for marijuana during a drug test, how does Amendment 2 affect the employer’s right to impose discipline, fire a worker, or reject an applicant if she or he takes medical marijuana in accordance with the state’s medical marijuana program?
Amendment 2 prohibits a worker from suing an employer because the employer takes an adverse employment action against the worker for “being under the influence of marijuana while at work.” Unlike alcohol testing, however, drug tests for marijuana afford no direct way to tell whether a person is currently under the influence of marijuana. The limitations of the test results means that employers may have to gather additional evidence before they take an adverse employment action against an employee that tests positive for marijuana. Employers should seek legal counsel regarding the particulars of the law in the context of the employer’s situation.
In addition to those issues expressly addressed in Amendment 2, there are a number of questions that remain unanswered. For example:
If an employer fires an employee for marijuana use while at work will a physician’s certification of the employee’s suffering from a qualifying condition enable him to collect unemployment compensation benefits?
Will a positive drug test result for marijuana administered to a worker less than 24 hours after a work-related injury is suffered activate the 50% reduction in workers’ compensation benefits if the worker is using medical marijuana for the treatment of a qualifying condition?
May an employer discipline or fire an employee for using medical marijuana during non-working hours outside of the workplace?
Moreover, employers will continue to confront issues relating to unfitness for duty and safety risks. The law imposes duties on employers to exercise reasonable care to provide a safe workplace to their workers under both the common law and the Occupational Safety and Health Act. The use of medical marijuana in a workplace can raise implications regarding workplace safety and the fitness of workers using medical marijuana to do their jobs., Because of such implications and resulting liability, employers may need to implement disclosure policies, similar to those used for the use of narcotic or opioid medications by workers.
It will take the Department until the end of 2019 to implement Amendment 2. In the meantime, employers should take steps to address the challenges that medical marijuana poses for them. Among other things, for example, employers need to consider:
Will the employer allow medical marijuana in the workplace, and if so, what will be the guidelines for acceptable use?
Do the employer’s drug-testing policies need be revised?
Should the employer implement training programs for identifying marijuana use?
Does the employer have a protocol for responding to requests for reasonable accommodations?
Employers with operations in more than one state must know the law in each state where they operate with respect to marijuana use. The 33 states that have legalized or decriminalized marijuana to some extent vary widely in their approaches. Employers should consult legal counsel to review and revise their employee handbooks and policies to make them compliant with all of the implications of Amendment 2.
Hemp can be used in a wide range of products, including CBD oil, fibers, textiles, paper, construction and insulation materials, animal feed and care products, and some food and beverages. CBD and hemp extract have been used in the treatment of epilepsy. Yet, clear regulatory guidance on the production, processing, and selling of hemp is lacking and varies from state to state. Businesses engaged in the industrial-hemp market need trusted legal counsel to help navigate the complex and changing legal landscape, accurately assess risk, and make sound business decisions in each of the states in which they conduct business.
Business Growth, Funding-Banking:
As with any growing venture, businesses entering in and conducting business in the cannabis-hemp sector will have to address issues relating to the formation, growth, sale, purchase, merger, structure and operation of their business. These issues involve many different legal considerations, including structuring, finance, securities and employee benefits.
Due to federal laws listing cannabis as a controlled substance, cannabis businesses may experience difficulty securing banking services for their businesses, even though the business may be legally sanctioned under state law.
Intellectual Property Issues:
As of the writing of this posting, the intellectual property landscape for cannabis-hemp products is a mixed bag, but subject to increased pressure to change, at least insofar as trademarks are concerned, the following issues should be considered:
Federal law allows patents on plant strains. Similarly, patents on cannabis or hemp-based products may also be obtained, including on such items as smoking vehicles (e.g., pipes, bongs). Patents are also available on methods related to extraction, purification and processing hemp and cannabis derivatives such as cannabinoids. In short, patents on plants, methods, compositions, apparatuses and systems relating to cannabis and hemp are allowed.
On December 20, 2018, President Trump signed the Agriculture Improvement Act. This statute removed hemp products with less than 0.3% THC from the federal definition of a controlled substance under the Controlled Substances Act. Prior to this date, with few exceptions the trademark division of the United States Patent and Trademark Office was consistently refusing registrations for marks that were ostensibly to be used for products illegal in interstate commerce. In addition, many CBD products were refused registration based upon their being illegal in interstate commerce.
With the signing of the Agriculture Improvement Act, the Food and Drug Administration issued certain reminders with respect to cannabis-hemp products:
a) the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce; and
b) it is unlawful to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.
Despite the roadblocks and unclear legal landscape, businesses seem to be filing federal applications to register trademarks on the hope that the legal barriers will be removed in the near future such that registrations will be granted.
Other avenues to explore are state trademark and service mark registrations.
The legal issues surrounding cannabis have not affected the copyrightability of cannabis-related works. Accordingly, one way to protect a brand, at least one with a modicum of design features, is to consider getting a copyright on the brand.
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