A COVID-19 legal checklist for California cannabis businesses

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COVID-19, A COVID-19 legal checklist for California cannabis businesses

(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the cannabis industry. Ariel Clark and Nicole Howell are founding partners of Clark Howell, a cannabis law firm with offices across California.)

With COVID-19 cases skyrocketing across California, Gov. Gavin Newsom in March wisely designated cannabis companies as “essential” businesses.

COVID-19, A COVID-19 legal checklist for California cannabis businesses
Ariel Clark

Not only did this set an important precedent for other states, but on a practical level, it means California’s retail licensees and the supply chain that supports them can remain open during the statewide stay-at-home order.

As essential businesses, cannabis licensees have both rights and significant responsibilities to employees, customers and regulators – so the stakes of understanding the letter and intention of the law have never been higher.

To help businesses during what is an incredibly traumatic time, we’ve created a checklist for California cannabis companies to promote safety and legal compliance during this crisis.

1. Check your local order.

Although California has designated cannabis companies as essential, the state does allow local jurisdictions to set more restrictive policies – provided local direction is consistent with the statewide stay-at-home order.

COVID-19, A COVID-19 legal checklist for California cannabis businesses
Nicole Howell

This suggests local jurisdictions can place limits on cannabis businesses but cannot prevent all cannabis businesses from operating.

Check if your local jurisdiction has issued a shelter-in-place, stay-at-home or equivalent order and determine whether your local government has categorized your business as “essential” or “exempt” as a health-care provider.

If so, you may continue to operate, provided you follow local and state rules. If your business isn’t essential or exempt, we advise you to speak with your local officials.

2. Keep your employees and customers safe.

Safety protocols have never been more important.

Fortunately, cannabis businesses are accustomed to following extremely specific documentation, distribution and product-handling policies – so pivoting to new and additional policies is in their DNA.

California’s Bureau of Cannabis Control (BCC) requires licensees to comply with the Centers for Disease Control and Prevention’s Interim Guidance for Businesses to Plan and Respond to Coronavirus Disease at all times.

We suggest all businesses review the CDC’s guidelines and these excellent COVID-19 protocols for retail and delivery safety as well as sanitation put together by the dedicated team at cannabis software provider Meadow.

If you are a storefront retailer looking to switch to curbside pickup, seek permission from the BCC and your local jurisdiction.

Our contacts at the BCC have advised that retailers can email the agency at bcc@dca.ca.gov for permission to offer “curbside pickup” outside a store.

Before offering such a service, we recommend securing the written consent of your local authority, too.

We also strongly suggest crafting any curbside-pickup program with employee health and safety in mind. For example, handling cash payments outside a controlled checkout environment might put your employees at risk, so plan to mitigate that.

3. Understand your obligations as an employer.

Employees might be fearful, ill or facing other hardships.

Owners might be anticipating layoffs or staff shortages – in addition to managing their own fears and personal challenges.

Adding to the complexity is this new reality: Various state and federal laws impact your legal obligations when making employment-related decisions in response to COVID-19 – including the new federal Families First Coronavirus Response Act (FFCRA) signed into law on March 18.

Your obligations will change, however, if your local jurisdiction considers cannabis to be an “essential” or “exempt” business.

4. Mind your tax filings and be aware of extensions.

Don’t lose sight of your tax obligations. If you have any doubt as to your federal or state tax responsibilities or deadlines, contact your tax adviser.

The federal income tax filing deadline has been extended to July 15, and the state of California has issued state filing guidance for small businesses.

In addition, the California Department of Tax and Fee Administration has been given special permission to assist taxpayers impacted by COVID-19, including granting extensions for filing returns and making payments, relief from interest and penalties as well as filing a claim for refund.

The CDTFA can be reached at 800-400-7115.

5. Evaluate contractual obligations.

Despite the ability of cannabis businesses to continue operating if they meet local and state requirements, it is possible that you or your business partners might not be able to honor a contractual commitment – for example, to make timely payments or deliveries – because of coronavirus-related circumstances.

Contracts typically account for what happens when failure to perform is caused by a “force majeure” event such as a national emergency, but the exact language of such clauses varies.

If you anticipate that you or a business partner will fail to meet a contractual obligation because of coronavirus-related circumstances, review how your contract allocates risk and responsibility in the event of an emergency.

6. Keep these other items top of mind.

  • Check your insurance policies and understand what types of losses might be covered.
  • For those clients with pending local and/or state licenses and permits, expect delays.
  • Upcoming permit hearings might be canceled, and application deadlines might be pushed. Plan accordingly with respect to cash-flow management, and feel free to reach out to us for assistance navigating any state or local permitting regime.

We stand with the industry during this stressful time and urge everyone to look for updated legal and regulatory updates as this unprecedented situation continues to evolve. Stay strong.

Ariel Clark and Nicole Howell can be reached at clarkhowell.com.

The previous installment of this series is available here.

To be considered for publication as a guest columnist, please submit your request to editorial@mjbizdaily.com with the subject line “Guest Column.”

For more of Marijuana Business Daily’s ongoing coverage of the coronavirus pandemic and its effects on the cannabis industry, click here.