HIGH TIMES FOR CANNABIS

COMPLIANCE

David F. Axelrod
Shumaker, Loop & Kendrick, LLP
Source: National Families in Action, Atlanta, GA
AGENDA
• A little history
• Reminder of the milieu
• Information that may inform establishment of
company policies
• A few suggestions for what companies can and do
to protect themselves
• No “chicken little” – put plan for the worst and hope
for the best
EVERYTHING CHANGES – BUT
EVERYTHING STAYS THE SAME
• According to H.L. Mencken, no known examples of the use of the word
“marijuana” until 1894
o May come from Aztec word “mallihuan,” meaning “prisoner”
• Often referred to as the “devil’s weed” by early supporters of prohibition
• Spanish word “marijhuana” was adopted to reinforce the connection
between the Devil’s Weed and Mexican immigrants, who allegedly first
introduced it to American society
o Being anti-marijuana was to be anti-immigrant
• Early 1970s, Nixon Administration policy standardized the spelling as
“marijuana”
EVERYTHING CHANGES ….
• First piece of legislation prohibiting marijuana:
Marihuana Tax Act of 1937
o Senate hearing testimony indicated its purpose
was to “raise revenue by imposing occupational
and transfer taxes upon dealings in marijuana
and to discourage the widespread use of the
drug by smokers and drug addicts”
• 1937 cost of a marijuana cigarette: $0.25 (same
testimony)
CURRENT LANDSCAPE

Source: USA Today

CURRENT LANDSCAPE (cont’d)
NEXT 11 STATES MOST LIKELY TO
LEGALIZE
Based on data from Marijuana Policy Project, analysis of
criminal penalties and statistical information and polling data:
• Massachusetts • Connecticut
• Nevada • Maryland
• California • Rhode Island
• New York • Maine
• Vermont • Delaware
• Minnesota
Source: USA Today and 24/7 Wall St.
POSSESSION OF MARIJUANA IS
STILL ILLEGAL
• Illegal under the Controlled Substances Act, 21 U.S.C. §811, et seq.
• Schedule I – highly addictive and no legitimate medical value (heroin,
LSD, Ecstasy)
• U.S. Supreme Court has upheld prosecution even of medicinal
marijuana users – Gonzalez v. Raich, 545 U.S. 1 (2005)
• 6th Cir. held in Casias v. Wal-Mart Stores, Inc., 695 F.3d 428 (2012) held
that
o Private employees are not protected from discipline based on use of
medical marijuana
o Employers not required to accommodate use of medical marijuana in
the workplace
WHY IS THE CRIMINAL JUSTICE
ASPECT RELEVANT TO EMPLOYERS?
• Permissive policies could be revoked
• Probably impossible to return to prohibition
(30 states + D.C.)
• Important to understand the federal setting in which state-
sanctioned marijuana is occurring - the federal government
is not on board
• Headaches in individual cases
• Conflict between federal and state approaches creates
compliance challenges
 PENALTIES
Offense Penalty Incarceration Max. Fine
POSSESSION
Any amount – 1st offense Misdemeanor 1 year $1000
Any amount – 2nd offense Misdemeanor 15 days - 1 year $2500
Any amount – subsequent offense Misdemeanor or 90 days - 3 years $5000
felony
SALE
Less than 50 kg Felony 5 years $250,000
500 – 99 kg Felony 20 years $1,000,000
1000 – 999 kg Felony 5 - 40 years $500,000
1000 kg or more Felony 10 years – life $1,000,000
To a minor within 1000 feet of a school or other specified area – double penalty
CULTIVATION
Less than 50 plants Felony 5 years $250,000
50 – 99 plants Felony 20 years $1,000,000
100 – 999 plants Felony 5 – 40 years $500,000
1000 plants or more Felony 10 years – life $1,000,000
PARAPHERNALIA
Sale of paraphernalia Felony 3 years N/A
CIVIL FORFEITURE
• “In rem” proceeding
• All conveyances, including aircraft, vehicles, or vessels,
which are used, or are intended for use, to transport, or in
any manner to facilitate the transportation, sale, receipt,
possession, or concealment of property
• All real property … which is used, or intended to be used,
in any manner or part, to commit, or to facilitate the
commission of, a violation of this subchapter punishable
by more than one year’s imprisonment.

21 U.S.C. §§ 881(a)(4) and (7)

DOJ “ABSTINENCE” Policy
• August 29, 2013 “Cole Memorandum”
• Makes clear that “marijuana remains an illegal drug under the
Controlled Substances Act and that federal prosecutors will continue
to aggressively enforce this statute”
• Identifies eight federal enforcement priorities; marijuana-related
activities that do not implicate will be left to the states
• “This memorandum is not intended to, does not, and may not be
relied upon to create any rights, substantive or procedural,
enforceable at law by any party in any matter civil or criminal”
• “[N]othing herein precludes investigation or prosecution, even in the
absence of any one of the [enforcement priorities], in particular
circumstances where investigation and prosecution otherwise serves
an important federal interest”
FINCEN (TREASURY) MARIJUANA
GUIDELINES FOR BANKS
• Intended to give banks confidence they won’t be punished for
providing services to “legitimate” marijuana businesses in “marijuana
legal” states
• Focus on DOJ’s eight federal enforcement priorities
• No immunity from prosecution or civil penalties, but directs
prosecutors and regulators to give priority to cases where banks fail
to adhere to the guidelines
• Requires “due diligence” by financial institutions in monitoring
marijuana customers
o Including reviewing applications for state licenses and
understanding their “normal and expected activity”
FINCEN (TREASURY) MARIJUANA
GUIDELINES FOR BANKS (CON’T)
• Establish different kinds of suspicious activity
reports (SARs), depending on whether bank
believes a marijuana business is running afoul of
DOJ’s priorities or violating state laws
• Banking industry has been quick to say new
guidelines insufficient protection
• Bank acceptance and processing of marijuana
proceeds remains the exception rather than the rule
SHOULD YOU ACCOMMODATE THE USE OF
“LEGAL” RECREATIONAL OR MEDICAL
MARIJUANA?
Implications for both productivity and safety
• How long employees who use marijuana off-hours are impaired is
unresolved
• Typically experience a “high” that lasts about two hours
• Behavioral and physiological effects generally return to baseline three to
five hours after use begins
• Some memory impairments, such as ability to filter irrelevant information
and the speed with which people process information, can last up to 24
hours after use
• Employees who test positive for marijuana have 55 more industrial
accidents, 85% more injuries and absenteeism rates 75% higher than those
who test negative on a pre-employment exam
AIRLINE PILOT FLYING SIMULATION
STUDY
• Nine active pilots given one “social dose” marijuana
cigarette (20 mg of THC)
• Placed in flying simulator just before smoking and
then at intervals after
• Seven of the nine showed impaired performance
24 hours after smoking
• Only one was aware of actually being impaired
HOW DOES MARIJUANA AFFECT
DRIVING
• A recent review of 20 years of marijuana research
shows that driving after smoking marijuana doubles
the risk of having car crash
• Nationally, as of 2014, second most cited drug after
alcohol in car crashes
• Marijuana-related crashes increased by 100% in
Colorado between 2007 and 2012
IMPLICATIONS OF HIGHER THC
LEVELS
• Most research has been done with marijuana with
low THC levels (2% - 5%)
• Average THC levels in today’s marijuana range
from 12% - 15%
• A study using marijuana at 13% THC levels found
executive and motor functioning seriously impaired
for many hours after smoking
MARIJUANA ALTERNATIVES
• In the 1980s, FDA approved two medicines
made of synthetic THC for treating
chemotherapy-related nausea and AIDS
wasting
• Cannabinoids extracted from marijuana and
purified are currently in clinical trials in the US
• Such medicines appropriate and legal for
inclusion in employers’ formularies
IMPLICATIONS FOR FUTURE
WORKFORCE
• Data in medical marijuana states suggests that more adolescents use
the drug than counterparts in nonmedical marijuana states
• For those who start using marijuana before age 16, risk of addiction is 1
in 6 – almost double the addition risk (1 in 11) to those who start later in
life
• 4.4% of individuals who start smoking marijuana after age 21 become
addicted within the first two years of use versus 17.4% of 13 year olds
• Compared to those who don’t, adolescents who smoke marijuana every
weekend over a two-year period are nearly 6 times more likely to drop
out of school, more than 3 times less likely to enter college and more
than 4 times less likely to earn a college degree
MULTISTATE COMPANIES
• Employers should have a standardized drug testing
policy regardless of differing state laws
• Complicated where state laws differ on employee
protections
• Potential scenario: one employee of multi-state
business would be allowed to work while holding a
medical marijuana card while another employee of
the same business in a different state would not be
allowed to do so
DRUG-FREE WORKPLACE ACT OF
1988 (DFWA)
• Requires all federal grantees to agree to provide drug-free workplaces as a
condition of receiving a federal contract of more than $100,000 or a federal grant
of any value
• Requires employers to establish and publish policies which include actions that
will be taken against employees who violate the policy, and provide workplace
education about the dangers of drug use and available counseling and
employee assistance programs does not specifically require drug testing
• Employers are not required to fire employees who test positive
• What happens when only part of the workplace is drug-free and is located in a
marijuana-friendly state?
• So new that no one really knows
• Probably requires multiple policies constructed for multiple scenarios in each
state
NEW MARIJUANA PRODUCTS
• Nearly half of consumers in legalization states consume marijuana by
eating rather than smoking
• Vape pens look like e-cigarettes but contain capsules of concentrated
marijuana oils and leave no marijuana smell
• Doppelgangers of children’s toys
o Gummy bears
o Ring “Pots”
• Tootsie rolls
• Brownies
• Cookies
• Difficult if not impossible for employers to tell when employees use
marijuana on the job
WHAT CAN EMPLOYERS DO
• Recognize that state-sanctioned marijuana presents
different compliance challenges than alcohol
o Criminal aspect
o Medical aspect
• Somewhere between prescription and illegal drugs
• Keep abreast of the changing landscape
o Numerous internet resources, such as
themarijuanareport.org
 A news aggregator website that links browsers to daily
news coverage of the marijuana issue
WHAT CAN EMPLOYERS DO? (CONT’D)
• Become aware of safety risks associated with
marijuana use
• Develop strategies to control and minimize risks
• Be flexible; if necessary, revise your drug-free
workplace policy to adapt to changing
circumstances
• Train your managers
• Educate your employees, including about changes
in your policies
WHAT CAN EMPLOYERS DO?
(CONT’D)
• Consider periodic employee compliance certifications
• Background checks or other steps to vet prospective
employees for non-compliance
• Consider steps to audit and monitor compliance, such as
periodic checks on employee self-reporting criminal charges
• Consult local counsel before taking action if an employee
violates your policy, to ensure you’re on solid ground under
the law of the jurisdiction