The cannabis industry in California is a new and exciting business landscape. People can finally bring their businesses out of the shadows, but there are still legal and financial risks. Whether you are operating a retail dispensary or cultivation facility, the new regulations and state guidelines are complicated, constantly evolving, and difficult to unravel. In the legal cannabis industry, remaining compliant is vital to your continued operation, and that means protecting your California cannabis business license.
You probably invested a lot into your legal marijuana business, and a violation for failing to adhere to the current state guidelines could put it all in jeopardy. The sanctions may involve crippling fines, lengthy suspensions, or having your cannabis business license revoked. To ensure compliance and defend against alleged violations, contact a skilled attorney with experience in cannabis business license defense matters.
San Diego Marijuana business attorney Jessica McElfresh has spent decades at the forefront of marijuana legalization and advocating for cannabis entrepreneurs in California. She has also been heavily involved in the local, state, and administrative policies that now govern theses business.
Who Oversees the CA Cannabis Industry?
The Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA) establishes uniform licensing requirements for both medical and adult-use cannabis. It also replaces previous legislation known as the Medical Cannabis Regulation & Safety Act (MCRSA), and makes adjustments to the Adult Use of Marijuana Act (AUMA). Specifically, MAUCRSA states that cannabis businesses are lawful in California as long as the activity is done under a valid state license with local approval and complies with state regulations.
California cannabis licenses fall under the authority of the California Department of Consumer Affairs (CDCA). However, three state agencies oversee the application, issuance, and enforcement of cannabis business licenses depending on the type of business:
- California Bureau of Cannabis Control (BCC) – Issues cannabis business licenses and regulates retail, distribution, testing, and microbusiness.
- California Department of Food and Agriculture (CDFA) – Issues licenses and governs cannabis cultivation businesses.
- California Department of Public Health (CDPH) – Issues licenses and manages businesses related to cannabis manufacturing.
Please note that while many cannabis businesses started with temporary licenses to allow California time to put permeant processes in place, the final license regulations were approved by the Office of Administrative Law (OAL) in January 2019. These temporary licenses can no longer be extended. Applicants must now apply for an annual license to ensure compliance.
Local Permits & Defense for Cannabis Businesses in California
Aside from the state-specific parameters, a prerequisite in California’s cannabis industry is local authorization. All cannabis businesses in California are required to have a local permit before applying for a state license. Each locality will set forth their own county cannabis ordinances, regulations, application procedures, and disciplinary process which can vary from city to city.
To successfully navigate and defend your local license in these municipalities, having an experienced attorney who knows the city-specific ordinances will be essential. While based in San Diego, McElfresh Law has assisted cannabis owners across California. Attorney Jessica McElfresh routinely represents people facing discipline from their local jurisdiction for violating the terms of their permit.
Regulatory Compliance and Violations
As the proprietor of a cannabis business in California, you will be expected to keep up with numerous state and local agencies, as well as the protocols for keeping your business license in good standing. With an extensive background assisting cannabis license holders in California to start, expand, and defend their businesses, attorney McElfresh can ensure you adhere to the latest compliance guidelines as well as address any administrative issues that may arise. This includes consumer complaints, zoning issues, labeling and inventory discrepancies, and allegations of maleficence.
While the violation and disciplinary process involved will vary based on the type of cannabis business you operate and its severity, the penalties include expensive fines, license suspensions, and possible revocation.
Some of the most common cannabis business violations include:
- Operating without a license
- Failure to display your license
- Failure to properly report/record inventory
- Violating daily purchase limits
- Sales to minors
- Local ordinance/disturbing the peace
- Unauthorized cannabis consumption
- Alcohol consumption on premises
- Delivery violations
- Improper labeling
- Inspection violations
- Improper documentation /cash handling
- Inadequate waste disposal
- Labor violations
- Violating packaging standards
- Improper plant handling
- Falsifying lab test results
- Failure to comply with surveillance/security rules
- Doing business with unlicensed persons
Bureau of Cannabis Control Disciplinary Guidelines
The Bureau of Cannabis Control (BCC) is responsible for licensing retailers, distributors, testing laboratories, microbusinesses, and temporary cannabis events in the state of California. The BCC also enforces discipline on license holders who fail to adhere to the BCC Text of Regulations.
While the BCC has been focused on unlicensed operators in the past, discipline against cannabis license holders is increasing, and can stem from complaints or mandatory inspections:
According to BCC regulations, the BCC and its representatives shall have full and immediate access to inspect any premises licensed by the Bureau. The BCC may test any equipment or cannabis-related goods or materials, and copy or inspect any records relating to commercial cannabis activity. Failure to cooperate with and participate in a BCC investigation may result in a licensing violation subject to discipline.
Notice to Comply
The first step in the BCC’s disciplinary process is to issue a notice to comply for any violations discovered or observed during an inspection. The notice to comply needs to be in writing and clearly describe the nature and facts of each violation, including a reference to the statute or regulation violated, and how the licensee should correct the violations. The license holder will be given 20 calendar days to comply, which means signing and returning the notice, declaring that each violation was corrected, and describing how compliance was achieved. Failure to correct issues will move on to discipline.
BCC Fines & Possible Discipline
The BCC handles most disciplinary matters by assessing fines (which can reach up to $5,000), or through administrative citations and abatement orders. Citations must be contested within 15 days, but if you fail to pay the allotted fine or correct the issue through reasonable steps, the BCC may punish a license holder through a license suspension, revocation, probation, or any combination. The appropriate punishments will be determined by considering factors such as the severity of the action, whether it posed harm, and if prior discipline was administered. This will classify the potential discipline into three tiers.
- Tier 1 – Discipline for potentially harmful violations. Examples include failure to pay fees, failure to notify the BCC when required, failure to comply with BCC labor/employment regulations, failure to confirm the age of customers, unauthorized hours of operations, failure to comply with track-trace, improper packaging and labeling. Penalties range between a stayed revocation, a 5-15 day suspension, and a complete license revocation.
- Tier 2 – These are violations that involve a serious potential for harm, and a great risk or disregard of public safety. Examples include unauthorized use of licensed premises, failure to comply with video surveillance, selling marijuana to minors, exceeding daily sales limits, consuming cannabis on premises, failure to comply with lab testing, displaying an altered license, or misdemeanor level offenses. The minimum and maximum penalties are the same as a Tier 1 violation.
- Tier 3 – Discipline for knowingly or willfully violating laws and regulations or for fraudulent activity. Tier 3 examples include failure to notify the BCC of a change in ownership, failing to notify of criminal acts, revocation of your local permit, selling untested goods, a significant inventory discrepancy, reporting false lab reports, sending cannabis goods outside California, failure to pay taxes, and securing your license by fraud, deceit or misrepresentation. Possible penalties include a stayed revocation, a 45-day license suspension, fines, a combination, or having your cannabis license revoked.
In some egregious situations, the BCC can shut your cannabis business down immediately ‘to prevent or avoid immediate danger to the public health, safety, or welfare.” An example of an emergency order would be if contaminated cannabis product was being sold that posed a risk to the consumer.
Administrative Hearings & Appeals
A cannabis business license holder is entitled to an administrative hearing to address the issues involved. These must be requested within 15 days of receiving the citation, but if your business was closed under an Emergency Decision and Order, the deadline is reduced to three days, and your hearing will occur within five business days. Hearings will resemble an informal conference where you or your legal representative can present your case. There will also be an opportunity to address any underlying issues through an administrative proceeding. After the informal conference, the Bureau may affirm, modify, or dismiss the citation, including any fines levied or orders of abatement issued.
Licensees can also appeal any decision to the Cannabis Controls Appeal Panel or request a judicial review of emergency orders without exhausting their standard administrative remedies.
If the Bureau of Cannabis Control is threatening your business, contact an attorney at McElfresh Law. We are familiar with the BCC’s licensing requirements and enforcement procedures. Let us work through any issues impacting your business, and build you a strong cannabis business license defense.
California Department of Food and Agriculture Disciplinary Process
The California Department of Food and Agriculture (CDFA) handles the licenses related to cannabis cultivation businesses in the state. According to the CDFA guidelines, “cultivation means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis.”
CDFA Inspection Requirements
All licensees and applicants shall be subject to inspection, investigation, or audit of their licensed premises and records by the Department to determine compliance with applicable laws and regulations. These may be carried out by the California Department of Fish and Wildlife and the State Water Resources Control Board, and shall be conducted at any time, or as otherwise agreed to by the Department and the licensee or its agents, employees, or representatives. Prior notice of inspection, investigation, or examination is not required.
CDFA Enforcement Actions
When the CDFA finds violations, the alleged activity will be classified into one of three categories to determine the appropriate fine or sanction. Repeat violations may result in an escalation of violation class.
- Minor – Violations that are not likely to have an adverse effect on public safety or environmental health. Examples include failure to display a license, failure to notify the department of a criminal conviction, a civil judgment, or local permit revocation within 48 hours, failure to move cannabis to a secured area, failure to comply with packaging and labeling standards, failure to use certified weighing devices. Penalties generally include fines between $100 – $500.
- Moderate– Violations that undermine enforcement of any state law, are likely to cause public or environmental harm, or a repeat minor violation within a two-year period. Violations include sharing a processing, packaging area among licenses on the same premises, failure to dispose of waste properly, using light deprivation at an outdoor site, failure to provide state-required samples, and failure to correct mistakes in the track-and-trace system. Fines range from $501 to $1,000.
- Serious – Violations which preclude or significantly interfere with state law, or those that cause false, misleading, or deceptive business practices, potential for significant public or environmental harm, or for a repeated moderate violation within two years. Serious violations might include doing business with an unlicensed person, operating without a license, using unapproved water sources, exceeding permitted canopy, transferring cannabis without using a distributor, failure to properly move flowering plants, and failure to comply with pesticide restrictions. All serious violations are subject to license suspension or revocation in addition to fines ranging between $1,001 and $5,000.
Informal Administrative Hearings
A license holder may appeal a violation by submitting a written request for an informal hearing to the Department of Food and Agriculture. The request shall be received within 30 calendar days from the date the Notice of Violation was received. The request shall include:
- The respondent’s name, mailing address, and daytime phone number;
- The license number issued by the department;
- Copy of the Notice of Violation; and
- A clear and concise statement for the basis of the appeal.
If you fail to submit a timely request for hearing, the Notice of Violation is not appealable, and the department may proceed without a hearing.
The informal hearing is overseen by a hearing officer, who will make a final determination based on a preponderance of the evidence. The hearing officer’s decision must be in writing, issued with 30 days after the hearing, and include a statement regarding the legal basis of the decision. The department may take any one of, or combination of, the following on any of the licensee’s cultivation licenses:
- Suspension for a specified period;
- Issuance of a probationary license with terms and conditions
- Order an administrative hold of cannabis products.
If you disagree with the rendered decision, a licensee can also appeal to the Cannabis Controls Appeal Panel.
Formal Administrative Hearings
The CDFA also has a formal hearing process to address:
- Initial application denials;
- Denial of a license renewal;
- Revocation of a license; and
- License suspension exceeding 30 days.
If your license is facing a CDFA enforcement action for an alleged violation, attorney Jessica McElfresh knows how to raise an effective California cannabis business license defense. Contact McElfresh Law to discuss your situation and how we can help.
Discipline for Cannabis Manufactures – California Department of Public Health
The California Department of Public Health’s (CDPH) Manufactured Cannabis Safety Branch (MCSB) is charged with licensing and regulating commercial cannabis activity in the state. The MCSB’s mission is to ensure commercial cannabis manufacturers operate safely, in sanitary facilities, and follow good manufacturing practices to produce cannabis products, free of contaminants, meet product guidelines, and are appropriately packaged per California Department of Public Health guidelines.
Cannabis Manufacturing Site Inspections
The CDPH and its inspectors or agents may conduct an on-site inspection before issuing a new or renewal license. Additionally, inspectors shall have access at reasonable times to the manufacturing premises, any area in which the licensee is conducting manufacturing activities, storage areas, records, production processes, labeling and packaging processes, and conveyances used in the manufacture, storage or transportation of cannabis products so that it may determine compliance.
CDPH Violations and Notice to Comply
Just like the BCC, the CDPH may issue a notice to comply to a licensee for violations observed during an inspection. The notice shall be in writing and describe the nature and facts of each violation, including a reference to the statute or regulation violated. The notice must also specify a reasonable timeframe to comply or correct the violations. Failure to correct the violations in the notice to comply may result in disciplinary action or enforcement.
CDPH Discipline and Enforcement
The CDPH follows a similar disciplinary and hearing process to the Bureau of Cannabis Control. When violations have a reasonable probability of causing serious adverse health consequences or death to workers or the public, the CDPH may issue emergency decisions that may include:
- The temporary suspension of a license;
- An order to segregate or isolate specified cannabis products;
- An order prohibiting the movement of cannabis products from the premises or the receipt of cannabis or cannabis products at the premises;
- An order to cease some or all manufacturing operations at the premises;
- An order prohibiting the sale of specified cannabis products; or
- An order for the recall of cannabis products.
Upon receipt of the notice detailing the specific action, the licensee may request a hearing to address the violation. You may present evidence and comments on the issues, and following the hearing, the decision and order shall either be affirmed, modified, or set aside as determined by the CDPH.
If your cannabis manufacturing license is in jeopardy from the California Department of Public Health, McElfresh Law knows what it takes to deal with alleged violations, so you can ensure compliance and continue operating.
A Cannabis Business Defense Attorney Can Help
As the California cannabis market begins to stabilize, license holders will need to deal with new and complex bureaucracies where mistakes and oversights can strip you of your ability to do business. In this ever-changing climate, you need legal representation that keeps up with the changes and knows how the administrative processes operate, regardless of which category your cannabis business fits into.
At McElfresh Law, we apply decades of legal experience and a passion for assisting marijuana entrepreneurs in navigating this new market. We know the local and state regulations that impact cannabis businesses and how to avoid complications. From initially setting up you business and securing local authorization, to applying for your license and remaining compliant, we are here to protect your California cannabis business license.
As a highly skilled attorney, Jessica McElfresh will help you deal with alleged violations, mitigate any discipline imposed, and provide the stability you need to grow your business.
Call McElfresh Law Today
Don’t be intimidated by a notice to comply or the prospect of an administrative hearing. Let us review the situation and help you develop the best California cannabis business license defense possible.
Free consultation for criminal defense cases only. Cannabis business consultation requires a fee.