Cannabis Insights

On Feb. 22, 2021 Gov. Phil Murphy signed into law the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, which established the framework for a legal, adult-use cannabis industry in New Jersey. By some estimates, recreational cannabis may grow to be a billion-dollar industry in the state over the next few years. Many have worried that much of this growing economic pie may be grabbed by large, well-capitalized cannabis companies from out of state that have already established themselves in those other markets where recreational cannabis was legalized earlier than New Jersey.

Enter the microbusiness license.

Per New Jersey’s cannabis licensing laws, a microbusiness is a cannabis business with strong established connections with New Jersey that is subject to certain size and operational limitations. A significant number of licenses to operate in the cannabis industry will be earmarked solely for such microbusinesses. As such, microbusinesses will only need to compete against one another during the application process, rather than needing to compete directly with larger, more established businesses. This potentially gives entrepreneurial start-up companies seeking to delve into the cannabis industry a path forward without getting pushed aside by multi-state operators (MSOs) in the frenzy once New Jersey begins accepting applications.

After much anticipation, New Jersey’s Governor Murphy signed the “New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act” into law on February 22, 2021. While this law made adult use recreational cannabis legal, the extensive law, together with a few “clean up bills,” did a whole lot more than legalization. In hundreds of pages, this law created the broad framework for the development and regulation of the entire cannabis industry including licensing, manufacture, distribution, taxation, enforcement, as well as criminal and social justice reforms for the possession and use of cannabis. It is therefore not surprising that some issues of particular importance to employers, such as drug testing and carve-outs for certain industries, are still hazy.

Importantly, while some provisions of the law became effective immediately, the provisions governing employment and those “activities associated with the personal use of cannabis,” are not operative until the newly appointed five member Cannabis Regulatory Commission adopts initial rules and regulations. These regulations, which will interpret and instruct how the law will be implemented, are required sometime within 180 days of the law’s adoption, or by mid-August 2021.

How does recreational marijuana impact Zero Tolerance Marijuana Policies?

On December 17, 2020, the New Jersey legislature passed the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (the “Act”), providing the framework for legal adult recreational cannabis use in New Jersey.  The Act lays out the ground rules for licensing arrangements for the cultivation, packaging, distribution, advertising, and retail sale of recreational cannabis to persons 21 years old or older.  Governor Murphy signed the legislation into law on February 22, 2021.

It is important to note that the passage of the Act does not immediately make “street pot” legal—instead, it provides the roadmap for businesses to become licensed so that they may take part in the future legal adult recreational cannabis market in New Jersey.  Cannabis, however, will no longer be a Schedule 1 controlled dangerous drug under New Jersey law (although it remains so at the Federal level).

Although the Act is over 200 pages long, it still requires that the New Jersey Cannabis Regulatory Commission (“CRC”) develop regulations to flesh out the details of how these arrangements will all be put into practice.  For example, there are currently no application forms to apply for any license to operate in the cannabis market in New Jersey.  These forms, their instructions, and a host of other details all need to be developed before any business can apply for one of the required licenses.  The CRC has been given 180 days to develop these enabling regulations and forms.  That said, individuals and businesses interested in entering into this market will want to keep apprised of the details of these ongoing regulatory developments so that they can position themselves to have already put arrangements in place which will allow them to immediately move forward with the application process as soon as it becomes available.

In November 2020, by a vote of 67.08% to 32.92%, the voters of New Jersey passed a ballot measure to amend New Jersey’s Constitution to make use of recreational marijuana by those over age 21 legal in New Jersey beginning on January 1, 2021. However, until legislation is signed by the Governor and rules and regulations are issued by the Commission, the details on legalization and the cannabis industry rollout are hazy.  And, what may be worse for New Jersey employers, is the considerable uncertainty regarding how they can maintain a drug free workplace.

When will recreational marijuana become legal?

With voter approval to legalize weed, it is clear that there exists considerable pressure to quickly pass legislation which explains how New Jersey’s recreational marijuana program will roll out. And while some might suggest that recreational marijuana became legal in New Jersey on January 1, 2021, because the ballot measure contemplated a highly regulated and taxed recreational cannabis market, most agree that recreational marijuana is not, in fact, legal until New Jersey’s recreational marijuana law and regulations are enacted.

On the heels of the victory of the recreational marijuana referendum at the polls, the New Jersey Senate and Assembly moved swiftly to introduce proposed legislation regulating the use, licensing and taxation of marijuana.    As of this writing the Legislature was close to sealing a deal and a vote could come as early as December 18, 2020.   Despite the fact that marijuana use in the workplace has significant consequences for employers, especially those with high populations of safety sensitive workers, the most recent version of the bill is long on employee protections and short on protections for employers.

Preserved Employer Rights.  Similar to the earlier Jake Honig Compassionate Use Medical Cannabis Act affording workplace protections to medical marijuana users, the proposed legislation provides that nothing in the Act shall be deemed to:

  1. Restrict or preempt an employer’s right or obligation (as required for federal contractors) to maintain a drug- and alcohol-free workplace;

With more than 750,000 acres in farmland, hemp has long been viewed as a viable crop for the Garden State as it would allow farmers to diversify their products and earn additional profits.

In the wake of the 2014 Farm Bill, New Jersey passed its Industrial Hemp Pilot Program, whereby certain individuals partnered with educational institutions to cultivate, process, research, test, and market safe and effective industrial hemp. The passage of the 2018 Farm Bill removed hemp from the Controlled Substances Act and it is now regulated as an agricultural commodity by the United States Department of Agriculture (USDOA).

Upon the passage of this bill, lawmakers sought to repeal the New Jersey Industrial Pilot Program and replace it with the New Jersey Hemp Farming Act, which would establish a program for cultivation, processing, transport, and sale of hemp to be administered by the New Jersey Department of Agriculture (NJDOA).

A5322, known as the “New Jersey Hemp Farming Act” finally became law on Friday August 9, 2019. The New Jersey Hemp Farming Act (“NJHFA”) establishes a program for the cultivation, handling, processing, transport, and sale of hemp and hemp products in the State in accordance with federal law. The bill also repeals New Jersey’s hemp pilot program, and replaces it with a permanent program, administered by the New Jersey Department of Agriculture that complies with federal law.

Just like the 2018 Farm Bill, NJHFA defines “hemp” the plant Cannabis sativa L., any part of the plant, and all derivatives thereof with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3 percent, consistent with federal law. In other words, if the hemp has more than .3 percent THC, it will no longer be legal on a state or federal level.

Because hemp is a viable agricultural crop and the state wants to promote the cultivation and processing of hemp, the New Jersey now allows famers and businesses to cultivate (plant, grow, or harvest), handle (possessing or storing – exclusive of finished hemp products), process (convert hemp into a marketable form) and sell hemp products for commercial purposes. Farmers and businesses looking to cultivate, handle, process and sell hemp products for commercial purposes must submit an application to the New Jersey Department of Agriculture (“NJDOA”). The application must contain GPS coordinates of the hemp farm, written consent from the cultivator allowing law enforcement and other officials to enter the property at will, a criminal background check of the applicant, and a non-refundable application fee. Other information may be required by the NJDOA as they implement this application process.

Kathleen M. Connelly, a member of Lindabury’s Employment Law practice group,  was recently interviewed by ROI-NJ regarding the Jake Honig Compassionate Use Medical Cannabis Act, which was signed into law by Gov. Phil Murphy on July 2nd.  New Jersey joins a growing list of states enforcing workplace protections for medical marijuana users.  Kathleen said the difficulty from the employer standpoint is the tension between understanding that people see benefits from cannabis in medical treatment but also needing to ensure these individuals aren’t under the influence while performing job duties.

You can read the full article here.

Industrial hemp has a long and rich history throughout the world. This is largely because hemp is dynamic and can evolve into products such as clothing, animal feed, building materials, bio plastics, biofuels, paper, fiber and food. Hemp seeds, or grains, are smooth and about one-eighth to one-fourth of an inch long. Hemp seeds can also be used to make a variety of products for industrial and cosmetic use. Of particular interest in New Jersey are the agricultural benefits associated with the hemp plant. Hemp has been known to kill weeds, thereby negating the need for herbicides on crops. Hemp also can absorb metals in the soil thereby acting as a natural filter, mitigating sediment runoff, through which eroded soils carry nutrient pollution into water resources.

Given its multipurpose capabilities, it is no surprise that Congress passed the Agriculture Improvement Act of 2018 (“2018 Farm Bill” or “Farm Bill”). Section 297A of the Farm Bill defines hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” The Farm Bill effectively decriminalizes hemp by removing it from the Controlled Substances Act. The Farm Bill also expands the commercial cultivation of hemp beyond the limited state-approved pilot programs, legalizes hemp production in US territories and on Indian tribal land and authorizes the coverage of hemp as a commodity under crop insurance.

Because hemp is no longer viewed as a controlled substance, the Drug Enforcement Agency has been removed from oversight and replaced with United States Department of Agriculture (“USDA”). As such, the USDA exercises primary regulatory authority over hemp production. According to the New Jersey Department of Agriculture (“NJDOA”), the USDA intends to issue regulations in the fall of 2019 for states that wish to submit hemp production plans. These regulations will address requirements for testing the THC levels of hemp and address disposal of hemp plants and products produced that contain more than .3% THC.

Spring 2019 has been a busy season for New Jersey’s Cannabis Industry. On May 23, 2019 the New Jersey Assembly approved proposed revisions to the Jake Honig Compassionate Use Medical Marijuana Act that would effectively expand the state’s existing Medicinal Marijuana Program. The following week the Senate passed the bill 33-4.

May 31, 2019 saw the Food and Drug Administration (“FDA”) hold its first public hearing to assess the safety of CBD products. In opening remarks, Acting Commissioner of the FDA, Ned Sharpless, acknowledged that hemp derived CBD in food products is unchartered territory for the Agency. As such, in order to carefully evaluate potential pathways for CBD products, the FDA has formed an internal working group to address concerns such as how much CBD is safe for daily consumption, CBD’s combined effect if used both topically and orally and potential dangers to children should they consume a CBD edible.

On June 3, 2019, the New Jersey Department of Health announced that it is seeking new applicants to operate up to 108 additional Alternative Treatment Centers (“ATC”): Up to 38 in the northern region of the state, up to 38 in the central region, and up to 32 in the southern region. Three types of endorsements will be available for ATCs: cultivation, manufacturing and dispensary. In total, the Department will seek up to 24 cultivation endorsements, up to 30 manufacturing endorsements, and up to 54 dispensary endorsements. Permit application forms for ATCs will be available on July 1. Applications are due August 15.

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