Breakthrough: CBD is Almost Legal

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We have posted previously about the difficult circumstances facing consumer product manufacturers who want to follow the popular trend to include CBD in their products, ranging from food to cosmetics and beyond.  We are now pleased to report that some clarity had been added in the just-enacted 2018 U.S. Farm Bill, and the path to including CBD in consumer products is becoming much easier.

The big breakthrough in the 2018 Farm Bill is that it legalized hemp by changing troublesome language in the federal Controlled Substances Act (CSA) in two important ways. First, it removes hemp and any hemp derivate from the definition of “marihuana.” Hemp is defined as any part or derivative of the cannabis plant with 0.3% or less THC (dry weight). This change means that CBD derived from hemp will no longer be considered a controlled substance under the CSA. Second, the Farm Bill amends the definition of “Tetrahydrocannabinols” or THC to exclude the THC that is found in trace amounts in hemp.  This was important because THC is a psychoactive ingredient, and trace amounts that are too small to cause psychoactive effects might otherwise compel hemp and its products to be treated as controlled substances.

This change is exciting news for companies who are eager to follow the market trends of adding CBD to products.  Even though CBD remained technically illegal under federal law prior to the passage of the 2018 Farm Bill, sales of consumer products containing CBD already exceeded $350 million in 2017. That number is expected to jump significantly with the availability of legal CBD and the entry into the market of companies who were hesitant to incorporate CBD into their products because of the questionable legality.  Still, companies that are eager to incorporate CBD into their products should proceed with caution if they want to ensure that their products are legal under federal law.

While some might believe that all CBD is now legal, that is not correct.  Not all CBD will be legal, and manufacturers must take care to assure and document that the CBD they use comes from legal sources.   For one example, CBD derived from cannabis plants with more than 0.3% THC (dry weight) remains illegal under federal law.  CBD is only legal if it is: (1) derived from hemp, and (2) produced by a licensed grower in a manner consistent with the Farm Bill and associated federal and state regulations.

The Farm Bill invites states to submit a plan to the US Department of Agriculture that outlines how the state will monitor, license, and regulate the production of hemp. State departments of agriculture must consult with the state’s governor and chief law enforcement officer on the plan. If a state does not have a plan approved by the USDA, the USDA will have available a federal program for monitoring, licensing, and regulating hemp production. Hemp and its derivatives are only legal if grown under license pursuant to these state or federal programs.

It is clear that not all CBD has become legal overnight. The state and federal licensing and regulatory programs under which hemp can be legally grown will take months to establish.  Once such programs are established, businesses should engage in due diligence to ensure that the CBD they are purchasing is derived from hemp grown under license from state or federal programs, and they should maintain documents to be able to demonstrate the chain of production.

This welcome development is a major crack in the dam that prevented cannabis-derived products from entering consumer markets.  Watch for more soon, as other federal regulatory agencies such as the FDA consider controlled ways to permit CBD to be added to foods and pharmaceuticals.

CK&E attorneys will continue to monitor and stay up to date on the development of state and federal CBD ingredient and hemp cultivation programs, and are ready to help clients navigate complex and rapidly-changing federal and state regulatory schemes. If you have questions in this or other regulatory areas, contact CK&E at [email protected] or 310-998-9100.

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How Does Marijuana Legalization Affect Employer Workplace Policies?

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Do I have to change my drug-free workplace policy now that marijuana is legal?

On January 1, 2018, recreational marijuana became legal in California.  That raises a few questions, to put it mildly.  For California employers and employees, one of the first questions is, must employers change their drug-free workplace policies now that cannabis use is legal?

Generally speaking, the answer is no.  A California employer can still keep its drug-free workplace policy (as long as it was legally compliant before January 1) that prohibits the use of alcohol and drugs, including cannabis, in the workplace.  There is even a California Health and Safety Code statute protecting employers: The legalization of cannabis use “does not amend, repeal, affect, restrict, or preempt…[t]he rights and obligations of public and private employers 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.”

Does this mean I can terminate an employee who tests positive for cannabis?

Yes, if you have a zero-tolerance policy that provides for dismissal of employees who test positive for drugs.  An employer can keep its drug-free workplace policy and test employees for alcohol and drugs, including cannabis, in compliance with the law.  That means that an employer can refuse to hire an employee who tests positive for cannabis.  It also means that an employer can ask an employee to take a drug test when the employer reasonably suspects the employee is under the influence of any substances prohibited under the employer’s policy.  An employer can terminate an employee who refuses to take the test, or who tests positive for those prohibited substances, including cannabis.

What if the employee is using marijuana to treat a disability?

With all the medical leave and disability discrimination laws protecting employees with certain medical conditions, employers are also understandably nervous about terminating an employee who relies on medical marijuana.  For now, employers can rest easy.  Because federal law still prohibits cannabis use, both state and federal law refuse to protect the employee’s illegal drug use, even if the employee is using medical marijuana, with a prescription, to treat a medical condition.

Of course, cannabis law is quickly evolving.  From legalizing marijuana at the state level in parts of the country, to rescinding “hands-off policies” at the federal level that were intended to leave states to decide on the cannabis issue on their own, cannabis laws are subject to change.  Employers should keep a close eye on the interaction between federal and state laws on cannabis use, and be prepared to modify their drug policies as needed.

Conkle, Kremer & Engel attorneys are experienced with counseling employers who face a constantly changing landscape of laws, ordinances, and regulations, and resolving employment issues as they arise.

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