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Economic Outlook

Springfield Regional Chamber to Host Marijuana Professionals, Officials

There’s still a lot of confusion surrounding the cannabis industry.

Despite the fact that medical marijuana was legalized in Massachusetts in 2012, and recreational marijuana in 2016, the business community is juggling countless regulations and laws, whether looking to get into the cannabis industry themselves or just dealing with this new economy in general.

On Tuesday, Jan. 28, many of these questions will be answered.

From 12:30 to 5 p.m. at the Springfield Sheraton, the Springfield Regional Chamber will host “The Buzz About Cannabis: Marijuana in the Marketplace and the Workplace,” a collection of business, legal, and medical marijuana professionals, distributors, and entrepreneurs, as well as state cannabis officials, who will give attendees all the information they need to know about cannabis.

Nancy Creed describes retail cannabis sales as just one spur on the wheel of an industry that has pushed its way to the forefront over the last several years, and the president of the Springfield Regional Chamber is making plans to prepare business folks for this rising economic driver.

“The cannabis industry is clearly a, no pun intended, budding industry,” Creed said. “When you look at the revenue associated with it and the taxes, it really is the next economic engine of its time.”

It was a meeting with Cannabis Control Commissioner Kay Doyle that inspired Creed to begin researching this topic.

Nancy Creed describes retail cannabis sales as just one spur on the wheel of an industry that has pushed its way to the forefront over the last several years

“This, to me, was kind of a no-brainer,” Creed said. “We need to make sure that we are at the front of the industry and we are helping businesses either get into the industry or, on the flip side, deal with this new economy.”

The conference itself features an opening keynote from Doyle, breakout sessions focused on topics like “Business Structure and Banking in the Cannabis Industry” and “Cannabis in the Workplace,” and a closing keynote by Beth Waterfall, founder of Elevate Northeast, titled “Cannabis: What’s Next?”

Budding Goals

Chamber leaders thought carefully about what their goals were for the cannabis conference — the first time a chamber in the region has hosted an event of its kind.

Creed said this first conference will take a general focus, building a solid foundation on the basics of the industry — and leaving room for a potential focus on hemp, CBD, or other spokes on the wheel, as she calls them, next year.

The main goal of the conference is to educate attendees on what cannabis is, what they need to know when getting into the industry, and how it affects the economy.

“It’s a place for business people to come and get educated,” she noted. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy and be able to shine a light on it, so people see it as the future of our region.”

In order to accomplish this, she knew they needed to bring in several experts and professionals from different parts of the industry — including someone from the commission, Doyle, to talk about the landscape of the industry and the regulations entrepreneurs need to grapple with.

Next, Creed wanted to ensure the conference featured someone who could help businesses figure out what they needed to know about not only getting into the industry, but also what type of business they would be classified as.

Perhaps most importantly, they needed an expert in the banking industry. Because marijuana is still federally illegal, almost no bank will deal with marijuana businesses — although that could eventually change. Tina Sbrega, CEO of GFA Credit Union, will accompany Scott Foster, partner at Bulkley Richardson, to talk about banking and business structure.

“I want to make sure that businesses understand that, so they are successful when they start out, and aren’t just starting out not thinking through all of the things you need to think through to be a successful business,” Creed said.

She added that this conference is not just for people looking to get into the business, but also for people who just need to understand how it works.

Joanne Berwald, vice president of HR at Mestek; Erica Flores, attorney at Skoler Abbott; and Pam Thornton, director of Strategic HR Services at the Employers Assoc. of the NorthEast, will lead a breakout session about recruitment, retention, and employment law.

“There are a lot of complex laws that come into play,” Creed said. “We wanted to make sure, for the rest of the business world that isn’t interested in getting into the cannabis industry, that we had information about what is it like for the other folks working and hiring in a cannabis world.”

For the final breakout session, Creed explained that she wanted to bring in a panel comprised of a marijuana grower, a user, and a distributor, but did not have the internal resources to find people who fit the description. That’s when she reached out to Michael Kusek, cannabis journalist and publisher of Different Leaf magazine. He crafted a team — Noni Goldman, Leslie Laurie, Ezra Parzybok, Karima Rizk, and Payton Shubrick — to talk about their individual niches and how they navigate the cannabis industry in different ways.

Sowing Seeds

Overall, Creed hopes to help as many people as possible navigate a still new and quickly growing industry.

Because it is the first event of its kind, she is unsure just how many people will register, but believes that, once people learn more about the event, they will see the benefits of attending.

“I really don’t know how much the business community is going to understand the conference and embrace the conference,” she said. “Our hope is that they will, but it’s new.”

What she does know is that the cannabis industry is evolving at a rapid rate, and keeping up with the high demand is a must for the chamber.

“It’s a place for business people to come and get educated,” she said. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy, and be able to shine a light on it so people see it as the future of our region — because it’s here.”

Kayla Ebner can be reached at [email protected]

Law

Cannabis, Marijuana, and Hemp

By Chris St. Martin and Sarah Morgan

Late last month, the U.S. Department of Agriculture published regulations on domestic hemp production. However, there remains significant confusion surrounding the legality of cannabis, marijuana, and hemp.

Chris St. Martin

Sarah Morgan

This confusion comes from state and federal governments’ shifting approaches to regulating these industries. It is even more difficult to understand the legal framework surrounding retail sales, which include hemp and CBD products, as well as marijuana products sold by state-licensed dispensaries. In this article, we hope to provide some clarity regarding what the laws say about cannabis and how they are being enforced.

What Is Cannabis?

Cannabis is a plant genus, or family, composed of three species: Cannabis sativa, Cannabis indica, and Cannabis ruderalis. The species have physical variations between them that allow them to grow in different environments, flower at different periods during the growth cycle, and contain different chemical properties (see discussion on cannabinoids below) that produce different sensations when ingested.

Strains (think, ‘flavors’) produced from the Cannabis sativa species tend to incite feelings of euphoria, boost energy and creativity, and lead to a more head-focused high. Cannabis indica, alternatively, primarily affects the body, and is often helpful in reducing muscle aches and pains and inducing sleep. For these reasons, strains cultivated from indica plants tend to be more useful for medicinal purposes.

“THC, or tetrahydrocannabinol, is the cannabinoid responsible primarily for producing the psychoactive effect, or the ‘high,’ commonly associated with ingesting cannabis.”

Cannabis ruderalis is somewhat between sativa and indica, and has lower yields, but can often be cross-bred with other species to create medicinal strains. The stems of this species can also be used to make clothing and textiles.

The flowering buds of the cannabis plant produce a resin that contains cannabinoids, which are unique chemical compounds found only in cannabis and interact with different receptors in the user’s central nervous system to produce the effects described above.

The ratio of the cannabinoids in a particular strain depends on the genetics of the plant from which it is derived — in other words, how the plant has been bred by selectively combining sativa and indica plants to emphasize particular cannabinoids over others and create a unique strain with individualized characteristics.

More than 100 cannabinoids have been identified, most notably THC and CBD.

THC, or tetrahydrocannabinol, is the cannabinoid responsible primarily for producing the psychoactive effect, or the ‘high,’ commonly associated with ingesting cannabis. Although THC is most notable for its psychoactive properties, it has also been purported to have medical benefits on the user and can be used to treat a variety of conditions, including seizures, inflammation, pain, nausea, depression, and anxiety.

CBD, or cannabidiol, has anti-anxiety effects on the user and is utilized primarily for its purported medicinal benefits. It does not produce psychoactive effects (in fact, it may lessen the psychoactive effects of THC), and, for this reason, although CBD and THC have similar medicinal benefits, some people may choose to ingest only CBD to avoid feeling the ‘high’ brought about by THC.

CBD can be extracted from the resin of the cannabis plant and can be processed into essential oils, tinctures, and other non-smokable forms. CBD can even be added to body-care products and applied topically.

Marijuana or Hemp?

The term ‘marijuana’ is generally used to identify cannabis that is cultivated for its intoxicating effect on a user. Marijuana was made effectively illegal under federal law with the passage of the Marijuana Tax Act of 1937.

The Legislature later classified, and criminalized, marijuana as a Schedule 1 narcotic under the Controlled Substance Act of 1970, during the nascent ‘war on drugs’ declared by President Nixon. Classification as Schedule 1 — alongside heroin, LSD, and ecstasy — means that marijuana is deemed to have no currently accepted medical use and a high potential of abuse.

Public sentiment has recently begun to reject this classification of marijuana and the total federal prohibition. Although, at this writing, marijuana remains illegal at the federal level, 11 states, including Massachusetts, and the District of Columbia, have passed laws legalizing marijuana for recreational use, and 23 others have legalized the use of medical marijuana. Since 2016 in Massachusetts, individuals age 21 or older may possess up to an ounce or more on their person and up to 10 ounces in their homes without violating Massachusetts law.

The Cannabis Control Commission (CCC), the agency tasked with regulating the state’s marijuana industry, provides further information regarding the Massachusetts law on its website.

Cannabis that is selectively bred for non-intoxicating properties is considered ‘hemp.’ Industrial hemp is one of the oldest cultivated crops in the world and is useful in formulating textiles, rope, paper, plastics, insulation, oil, and body-care products. Because of this selective breeding, hemp plants contain only trace amounts of THC, but their CBD levels are unchanged.

“State and federal legal developments have created a confusing CBD marketplace. Stores everywhere are selling CBD products intended for human consumption and making health claims about such products. However, both types of sales are illegal, according to state and federal agencies.”

Hemp is cultivated to enhance its distinctively versatile qualities, such as longer, more fibrous stalks and shorter leaves, rather than for the leaves and flower buds for which marijuana plants are cultivated. Because of this, hemp cannot be consumed as an intoxicant. Nevertheless, the Controlled Substances Act did not distinguish between marijuana and hemp (since both are technically cannabis) in classifying marijuana as a Schedule I substance; therefore, hemp was swept up in the heyday of the war on drugs and made illegal.

Changing Legal Framework

Under the Farm Bill of 2018, the U.S. Congress, for the first time, legalized the production and sale of hemp at the federal level, eliminating its status as a Schedule I narcotic. The Farm Bill and regulations define hemp as cannabis containing not more than 0.3% THC. Cannabis plants containing any quantity of THC above that amount are classified as marijuana, and remain illegal under federal law. In late October, the USDA published interim regulations on hemp production, which means they are subject to change after a public comment period but were effective immediately.

These regulations also set forth licensing requirements, procedures for testing THC levels and disposal of non-compliant plants, and rules governing other aspects of the industry.

The FDA has taken a more cautious approach, citing concerns about whether CBD is safe to consume in food and supplements. In an April 2019 statement, the agency sought to clarify its position on hemp products. The statement indicated that enforcement resources are directed toward illegal sales of CBD products that claim to prevent, diagnose, treat, or cure serious diseases, such as cancer.

However, it also stated that it is unlawful to introduce CBD-containing food into interstate commerce or to market CBD products as dietary supplements.

This means that effectively all CBD food products, including those derived from legally grown hemp, are unlawful, according to the FDA. The only hemp products that can be legally added to foods are hulled hemp seed, hemp-seed protein powder, and hemp-seed oil, because the seed of the hemp plant contains neither CBD nor THC.

The FDA has undertaken to develop CBD regulations, but despite repeated urging from the USDA and members of Congress, the former FDA commissioner indicated that that the rule-making process around CBD food products would be more complex than conventional products and could take years.

Massachusetts legalized hemp production as a component of the same 2016 law that legalized recreational cannabis. However, after the change of law at the federal level, both the state Department of Agricultural Resources and Department of Public Health issued policy statements on the same day imposing strict rules on hemp products. These two statements echo the FDA’s prohibitions on adding CBD to food products and making health claims about CBD.

What Can We Buy and Sell?

These state and federal legal developments have created a confusing CBD marketplace. Stores everywhere are selling CBD products intended for human consumption and making health claims about such products. However, both types of sales are illegal, according to state and federal agencies. Consumers, retailers, growers, and other stakeholders are looking for information about what is legal, what is not, and why there is so much ambiguity.

CBD derived from marijuana remains illegal under federal law. However, the U.S. attorney in Massachusetts has indicated he will not direct his office’s resources to federally prosecute cannabis companies that are permitted under state law, a move that has allowed the cannabis industry in Massachusetts to flourish. Under this state’s regulatory regime, marijuana products containing CBD, as well as THC, can be bought and sold at cannabis dispensaries that are licensed by the CCC.

Retailers in Massachusetts sell cannabis flower, edibles, concentrates, and other forms of marijuana containing both THC and CBD. CCC regulations do not classify edible marijuana products as food, allowing dispensaries to sell CBD-infused edibles without contravening the state Department of Public Health’s policy.

In contrast, despite the federal and state legality of producing hemp, some of the most popular hemp-derived CBD products — food and supplements — cannot be sold under either state or federal law. Nevertheless, the CBD industry may avoid total extinction, since CBD can be added to topical lotions and other cosmetics without defying the laws.

Non-food CBD products, however, represent a small percentage of the potential uses of CBD, and the loss of a valuable opportunity for introducing additional, more profitable products containing CBD into the marketplace adds further demand for the FDA to promulgate its promised CBD rules. Furthermore, hemp can be legally sold for rope, clothing, building material, and other non-ingestible uses, but hemp farmers have stated that Massachusetts currently lacks the manufacturing infrastructure necessary to process the plant for these purposes.

Chris St. Martin and Sarah Morgan are both litigation associates at Bulkley Richardson; (413) 781-2820.

Features

High Stakes

NETA’s Leslie Laurie (left), regional director for Western Mass. and director of patient services, and Angela Cheek, dispensary manager.

NETA’s Leslie Laurie (left), regional director for Western Mass. and director of patient services, and Angela Cheek, dispensary manager.

It’s been an eventful six years since voters first approved marijuana sales to treat medical conditions back in 2012. From that vote sprang New England Treatment Access (NETA) three years ago, and last month, the dispensary became one of just two stores in Massachusetts selling cannabis products for adult recreational use as well. NETA’s co-founder says the company has proven itself to be a good neighbor and an economic driver — and promises to be even more so in what is certainly a bold new era for marijuana in the Bay State.

When Kevin Fisher came to Massachusetts to help launch a medical-marijuana dispensary, he was already a veteran of the industry in Colorado, with plenty of passion to boot.

Fisher’s family, like so many others, has been struck by cancer, he said, and the idea — first as owner of Rocky Mountain Remedies in Colorado and then, starting in 2015, as co-founder of New England Treatment Access (NETA) — was always to draw in people with chronic and even terminal illness who may consider cannabis a viable therapy.

By the time NETA opened its doors in Northampton and Brookline, the anecdotal evidence for the drug’s effectiveness had been well-established elsewhere, he noted.

“We knew patients were using these therapies for a broad range of conditions,” Fisher told BusinessWest, before praising the law crafted after voters approved legalized medical marijuana in 2012.

“In Massachusetts, they got it right. Instead of legislators playing physician, the law granted physicians the freedom to make recommendations as they saw fit. It was important to maintain the sanctity of that patient-physician relationship. And we wanted to make sure we would provide quality products for patients to meet that broad range of conversations with physicians.”

Now, another law has significantly altered NETA’s business model. On Nov. 20, the company’s Northampton site, as well as Cultivate Holdings, LLC in Leicester, became the first facilities in the Northeast to sell marijuana to the public for adult recreational use.

“We call the individuals who interact with customers our ‘customer service associates.’ We require vigorous training before they’re out on their own, interacting with customers.”

At a press event after the state’s Cannabis Control Commission gave the go-ahead, Amanda Rositano, NETA’s director of operational compliance, said the shop is “beyond thrilled to be a part of this historic moment when NETA Northampton finally gets to open its doors to adults over 21 to provide safe, legal, and regulated cannabis to the people of Massachusetts.”

It’s certainly a welcome shift for many in the Valley, but it comes with challenges — concerning consumer safety, public perceptions, even traffic on Conz Street, which backed up significantly at certain times in the days following Nov. 20. But Fisher said NETA has long been preparing to meet them.

Hannah Rosenbaum, one of NETA’s patient service associates

Hannah Rosenbaum, one of NETA’s patient service associates, with some of the ‘flower’ available for purchase.

Early on, for example, the organization brought in Leslie Laurie, former head of Tapestry Health and a long-time expert in public health in Western Mass., as its regional director. “She had expertise we could benefit from, a perspective on patients’ needs in Western Mass.,” Fisher said.

The founders also assumed — correctly, as it turned out — that the progressive culture in Northampton would prove welcoming to a dispensary that first sold cannabis products to a patients with prescriptions, and, now, to any adult with an ID.

“We felt [Northampton] was the place to go, and the process was pretty smooth,” he added. “I’m thankful for Leslie; she brought a credibility to our organization and the relationships we built with government and law enforcement. And we’ve only continued to build those relationships during the adult-use licensing, because they could appreciate the solid community partners we have been.”

Opening a medical-marijuana dispensary in Brookline, however, was a “whole different beast,” Fisher noted. “There were about 100 meetings required — some open to the media and the public, many with public officials … just meeting after meeting, a lot of hand-holding and reassurance. It was a very rigorous process.”

Despite that tougher road than the Northampton one, NETA felt affirmed when its license with Brookline came up for renewal after the first year. “The town said we didn’t even need to show up for the hearing; it was guaranteed. It made us feel like we had operated in the way we had promised.”

By contrast, Northampton was always a smoother fit, and is currently the only NETA site approved for recreational sales, as the licensing process continues in Brookline.

“A significant portion of the population embraces cannabis use,” Fisher said of the Paradise City, adding that NETA has never taken that goodwill for granted. “We did recognize the traffic and public-safety issues, and the fact that those needed to be carefully managed in a collaborative way.”

Time will tell if issues arise, of course, but for now, Fisher is pleased with the business — customers are still waiting in line most days — and NETA’s continued growth as what he calls a true community partner.

The Ayes Have It

In 2016, four years after the similar vote on medical marijuana, Massachusetts residents voted to legalize recreational sales to adults age 21 years and older. If they present a government-issued ID (such as a driver’s license, ID card, or passport) for verification, customers may purchase up to 1 ounce of ‘flower’ or 5 grams of concentrate. Certain potency restrictions, including a 5 mg serving-size limit for ‘edibles,’ apply to non-medical products.

“A significant portion of the population embraces cannabis use. We did recognize the traffic and public-safety issues, and the fact that those needed to be carefully managed in a collaborative way.”

However, Fisher was quick to note that, with the introduction of recreational sales, NETA’s medical-marijuana patients will remain the shop’s priority. Patients with prescriptions have their own lines, and at least 35% of each day’s inventory is reserved for patients. In short, the customer experience has not changed for people seeking to fill scripts.

As for those waiting in line for recreational sales, Fisher said it typically takes 20 to 30 minutes to get through, but technology is available to shorten the wait NETA uses a reserve-ahead app to view the daily menu, reserve an order online, and have it ready for pickup at a certain time later that day. In addition, for people looking to gauge the wait at any given time, NETA offers continuous live wait-time updates on its website.

It has also doubled customer service staff and remodeled the stores to offer nearly twice as many service stations.

Also ramped up are efforts to educate customers about cannabis products — a key factor, considering that many users are likely to be inexperienced.

“We call the individuals who interact with customers our ‘patient service associates,’” Fisher said, noting that he prefers that over the flip industry term ‘budtenders.’ “We require vigorous training before they’re out on their own, interacting with customers.”

That training — about two months worth — includes everything from understanding the core components of cannabis products to encouraging new users to ‘start low and go slow.’

“That’s a message we drive home again and again to our PSAs and our customers. There will always be more cannabis. So find out what works for you and what doesn’t, and start easy so you don’t have negative outcomes.”

In addition to the ‘low and slow’ guidance, NETA’s consumer-education materials emphasize elements like a ‘what product is right for me’ guide; advice against driving or using heavy machinery under the influence, public consumption, and traveling across state lines; a potency and tolerance tutorial, safe storage; and recognizing substance-abuse signs and identifying resources for additional help.

Recognizing that some of the opposition to legalized marijuana came from individuals concerned about products getting into children’s hands, all NETA product packaging is child-resistant and labeled with revised warnings and clear information to ensure that people can identify edible products as marijuana-infused and not safe for children.

In addition to training staff to emphasize responsible consumption when interacting with consumers, NETA has retained a full-time training coordinator to continuously develop and manage retail-staff training.

Understanding dosage levels is is important, Fisher said, as are reminders that the effects differ between smoking marijuana and ingesting edibles. In the latter case, “you could see a delayed onset, so don’t eat that whole bag if you don’t feel it’s working. That sounds like simple advice, but it’s a big deal for us.”

As it is for the Cannabis Control Commission, which encourages prospective customers to know the law and consume responsibly.

“This signal to open retail marijuana establishments marks a major milestone for voters who approved legal, adult-use cannabis in our state,” Chairman Steven Hoffman said last month. “To get  here, licensees underwent thorough background checks, passed multiple inspections, and had their products tested, all to ensure public health and safety as this new industry gets  up and running. As patrons look forward to visiting Massachusetts stores, we hope they will do their part by first familiarizing themselves with the law and understanding what is required of responsible consumers.”

Growing Concerns

Beyond Northampton and Brookline, Fisher said, NETA’s cultivation facility in Franklin — which has nearly doubled its capacity in anticipation of adult use — continues to invest heavily in research and is developing a pipeline of products designed to improve customers’ experiences and address specific medical conditions and symptoms.

And, make no mistake, even though adults can buy cannabis products without a doctor’s prescription, he added, it still makes sense to receive and renew certification as a patient — not just because of the lessened wait to be served, but because patients also avoid the 20% tax on adult-use sales, and can access a yearly voucher program to help offset the cost of being certified.

He’s also excited about the potential in Massachusetts, considering the scientific and medical resources available locally, to continue researching the benefits of marijuana from a medical perspective. “Clearly, we’re going to get more research; we have some of the brightest minds in the world of healthcare here in Western Mass.”

NETA’s products for sale include not just smokeable flower, but marijuana-infused capsules, lozenges, lotions, chocolate, and much more.

NETA’s products for sale include not just smokeable flower, but marijuana-infused capsules, lozenges, lotions, chocolate, and much more.

Overall, Fisher is a believer in the benefits of this industry, in terms of healthcare, quality of life, and economic benefits, like taxes paid and workers hired. The company employs close to 600 people, more than 100 in Western Mass. alone.

“Billions of dollars are spent yearly in this country [on marijuana], so by regulating it, there’s economic impact that can be realized, taxes to be paid, safety measures put in place … you’re not in someone’s car in an alley.”

And for adults who have no particular health condition but simply want to partake as an escape from life’s stresses, well, he believes there are far worse alternatives for that.

“That’s not to encourage broader consumption of cannabis, but let’s normalize it so parents can talk to their kids about it,” he told BusinessWest. “In Colorado, where it’s a mature industry, the youth rates have gone down. It’s just less cool for kids. There’s more open dialogue. Parents are having more discussions about it.”

And, he was quick to add, that guy selling pot on the corner, in states where it remains illegal, doesn’t check an ID like a responsible dispensary does.

“We’re bringing it from the darkness into the light and realizing a lot of positive outcomes,” he said. “On balance, this is a good thing.”

Joseph Bednar can be reached at [email protected]

Law

Hazy Picture

Just as the business and legal communities in Massachusetts were learning to deal with medical marijuana, voters kicked the door wide open in 2016 by legalizing the drug for recreational use, too. That created a tangle of issues to work out, from how to handle employees that use the drug outside work to launching a cannabis business in the face of federal law that calls the practice illegal. Some of those issues have been sorted out, but others still hang in the air, like so much smoke.

When it comes to the relationship between employers and medical marijuana, few names are as important as Cristina Barbuto.

She’s the woman who filed suit against her employer, Advantage Sales and Marketing, three years ago after being fired — after her first day on the job — for using marijuana outside of work. She was required to take a drug test, and told the employer before the test that she would fail, because she used marijuana at home to help manage her Crohn’s disease.

A supervisor said that wouldn’t be a problem, but Barbuto was dismissed from the job the next day when the drug test came back positive for marijuana. The reason? While medical marijuana was legal in Massachusetts at the time, it was still illegal under federal law.

Her complaint eventually made its way to the state Supreme Judicial Court, which affirmed her right to use medical marijuana outside work on the grounds that forbidding her — as long as she wasn’t impaired on the job — constituted disability discrimination.

“If somebody qualifies as a disabled person and they’re seeking an accommodation, the employer has an obligation to engage in a process with that person and provide a reasonable accommodation that allows them to do their job, unless they can show the accommodation would cause them an undue hardship,” said Pat Rapinchuk, a partner with Robinson Donovan in Springfield. She noted that a subsequent suit by a man denied access to a homeless shelter for his medical-marijuana use came down on the plaintiff’s side as well, on the same grounds as the Barbuto suit.

“But then comes the recreational piece,” she said. “And that’s completely different.”

Indeed, with recreational use of marijuana having been legal in Massachusetts for a much shorter time, case law has not established similar rights for such users, she noted.

“Right now, I would say the recreational marijuana user does not have the protections a medical user does,” Rapinchuk said. “You start with just the basic premise of no substances in the workplace — no alcohol, no drugs. That part’s easy. But what if I used it last week on my own time and my employer drug tests for whatever reason, and I test positive, and I don’t have a medical reason for it? Can the employer either decline to hire me or even terminate me? And I think the short answer right now is ‘yes.’”

In one case that has garnered some media attention, Bernadette Coughlin, a food service supervisor for Sodexo, was fired after being injured in a fall at work. The company required a drug test following an injury, and she tested positive for marijuana, which she admitted she used recreationally at home a few days before. She was fired, and is fighting the termination in court — but might have an uphill battle, Rapinchuk said, because she doesn’t have the disability claim that Barbuto did.

From left, Bulkley Richardson attorneys Scott Foster, Sarah Willey, Mary Jo Kennedy, Ryan Barry, and Kathy Bernardo take part in a recent cannabis panel.

From left, Bulkley Richardson attorneys Scott Foster, Sarah Willey, Mary Jo Kennedy, Ryan Barry, and Kathy Bernardo take part in a recent cannabis panel.

“You’d have to find another route to challenge that,” she added, noting that one possibility is challenging the drug test itself as an invasion of privacy. “Some courts have found such a test to be invasive, and a violation of an employee’s privacy. If they found out otherwise, like through social media, that might pass muster.”

If all this sounds amorphous, it is, Rapinchuk said, and is a field of employment law that is definitely evolving. Drug tests can detect THC, the psychoactive agent in marijuana, for days, even weeks after someone smokes or ingests it, and no tests exist to gauge whether the user is currently impaired. That leaves employers with plenty of hard questions about how they want to handle this new frontier.

Growing Concerns

But that’s not the only area of the law currently evolving in the face of legalized marijuana.

Perhaps the most significant wrinkle in marijuana law, Scott Foster says, is that it’s legal in the state but illegal federally. That drives many of the odd situations people find themselves in when they start a marijuana business, and it’s why Bulkley Richardson, where Foster works as a partner, recently launched a dedicated cannabis practice.

As one example, a marijuana business cannot use most banks.

“It’s considered to be money laundering on a federal level to run marijuana money through the banking system,” he explained. “You can’t use an ATM, you can’t use a credit card, and you can’t take the proceeds from the sale of marijuana and deposit it at a bank if they know it’s marijuana funds.”

There are two exceptions: Centurion Bank and Gardner Federal Credit Union. “We literally have marijuana clients driving $50,000 to $100,000 in cash to Boston in armored cars to deposit it at [Centurion],” Foster said, adding that the bank’s fees for the service are astronomical. “The bank is basically taking a business risk. I don’t know if it’s a good risk or bad risk, but no other big banks are taking the chance because the penalties would be devastating to them. Centurion is willing to take the chance.”

Meanwhile, people buying real estate as part of a new business typically finance 60% to 80% of the cost, he noted, but banks can’t lend for this purpose any more than they can take deposits.

“So what you end up with is a lot of very wealthy people playing in this space because you can’t finance it. You’ve got millions and millions of dollars being poured into these ventures that are growing, and nobody hears about it because it’s all private financing. That’s another area where it looks like a normal business until you ask, ‘where’s the money coming from?’”

Then there’s intellectual-property law. Most new businesses federally register their trademarks, but that’s not available for any branding involving marijuana products. “You can come up with this great brand name, this great logo, and you can’t protect it federally,” Foster said. “So now we’re going back to the state system, which does exist in Massachusetts. There is a way to protect trademarks at the state level that, until the marijuana business, nobody had done for 100 years.”

As he and Kathy Bernardo, another Bulkley partner on the cannabis team, spoke with BusinessWest, it became clear why the new practice group includes lawyers that specialize in myriad disciplines.

The disconnect between state and federal law shows up in taxation as well. Foster brought up a quirky section of the tax code that came about after the IRS went after a cocaine dealer in the Midwest for tax evasion, so the dealer filed a tax return that wrote off expenses like security and armored cars. The IRS balked, but a tax court sided with the man.

Pat Rapinchuk says some employers might avoid drug testing for marijuana

Pat Rapinchuk says some employers might avoid drug testing for marijuana as not to rule out some strong potential employees.

“Congress later added section 280E to the tax code, which essentially says if your business is in the growing, manufacture, or distribution of a federally controlled substance, you’re not allowed to take normal business deductions,” Foster explained, and then broke down an example of how that may affect a cannabis-related enterprise.

Say a business makes $100,000 and, after spending $40,000 on product, $20,000 on employees, and $10,000 on rent, claims a profit of $30,000. The owner then pays taxes on that figure; if he owes, say, 40%, he makes a profit of $18,000. But if he’s not allowed to write off expenses, suddenly he’s paying 40% on a much larger chunk of that $100,000 — and taking home much less in profit.

“The effective tax rate is two to three times the size of a normal business. And even though it’s against the law federally, you still have to pay taxes,” Foster noted. “It’s another trap for the unwary.”

Joint Enterprises

From a real-estate point a view, issues like zoning laws, special permitting laws, and host-agreement laws also come into play, Bernardo said.

“Municipalities have held the cards because they have to either accept a marijuana zoning district, or they have the ability to shelve it until we actually get the regulations out for recreational use, but that’s coming to an end, so now they have to decide whether or not they’re going to allow this in town or not.”

That depends largely on how the vote went in that particular community when the ballot question legalizing recreational pot in Massachusetts passed last November. In many Western Mass. communities where the vote was in favor, town officials have been busy putting together zoning bylaws for a marijuana district.

Kathy Bernardo

Kathy Bernardo

“Municipalities have held the cards because they have to either accept a marijuana zoning district, or they have the ability to shelve it until we actually get the regulations out for recreational use, but that’s coming to an end, so now they have to decide whether or not they’re going to allow this in town or not.”

“The people of town agreed that’s going to be there, and they’ve discussed how and where,” she explained. “A lot of towns put a moratorium on it — which was fine, they were allowed to do that, but they were only allowed to do it for a year, and now they have to come to a determination whether or not they’re actually going to have that zoning district in their municipality. But that is all steered by what the vote was in their town.”

If the town’s voters favored legalizing recreational marijuana, Foster added, it puts them in a different approval process locally than if voters were against it as a group.

“If they were against it, the city council or select board has no authority unless and until they do another ballot initiative, another referendum at the town level, to approve it,” he explained. “I don’t think anybody’s really looking, from a business point of view, to go into those towns. It’s just too much of a hurdle.”

Once permitting and zoning procedures are established, business owners have to work with the town on compliance issues, Bernardo said, “and there are a lot of intricacies that you don’t usually have with a lot of other businesses. With this, it’s completely different.”

Bulkley Richardson’s cannabis group has represented outfits ranging from farmers looking to cultivate the plant to people looking to profit on the retail end, she noted, and the cultivation aspect is one that has flown under the radar, yet is important to this region.

“A lot of the things you see in the news are about the pot shops,” Foster said. “What’s not getting picked up as much is the fact that, in order to sell something, you have to first grow it, and it’s a lot cheaper to grow things in Western Mass. than it is in Eastern Mass., in terms of the cost of the land.”

The next step is the extraction and production process, he went on, and that’s an entirely different type of business with its own nuances. “It’s not just selling the leaves, it’s extracting the THC and then putting it in something — oil, an edible, a cream, or something else. Then those products are sold. So you’ve got farming, you’ve got manufacturing, and you’ve got retail. And the farming and the manufacturing are actually happening more around here.”

Foster said his firm launched the cannabis practice because the attorneys were already working with clients in the area on these various enterprises.

“We tell people, ‘here are the ways that a marijuana business is 90% exactly like any other business, and here is the 10% where it’s just wacky different, and these are the things you have to think about.’ But it’s still real estate. It’s raising money. It’s hiring people. It’s all the regular laws which you otherwise have to comply with.”

What is certain, Bernardo added, is that marijuana is now a fast-growing (no pun intended) part of the Massachusetts landscape, and that’s not going to change any time soon.

“It’s here,” she said, “and we have to learn how to deal with it rationally, because people are getting into these businesses, and there are so many balls up in the air when they get a business running.”

Smoke Signals

But while those cannabis-related businesses continue to pop up, employers at … well, pretty much every other type of company must grapple with their employees’ use of the drug outside the workplace.

“There are no tests to determine if someone is impaired by marijuana. There’s no sanctioned way to measure the amount of THC in someone’s system,” Foster said, adding that one reason is that federal grants — here’s that separation of state and federal law again — are not available to research these tests.

“You have a whole system that works on the alcohol side that makes sense — the tests are developed, and the laws are passed that go to those tests,” he said. “None of that exists yet on the marijuana side. The research is happening, but it’s happening with private money, which means it’s subject to more influence and bias.”

Bernardo said a lot of companies that used to test for marijuana are deciding not to do so going forward, due to the uncertainty. “They’ve just eliminated it completely, unless you’re a driver or it’s a safety issue. They don’t even want to deal with it.”

That makes sense in a job market with historically low unemployment, Rapinchuk said, when aggressively testing for THC might make it tougher to compete for talent.

“Employers are trying to hire a good workforce, and they’re going to be ruling out an awful lot of potential employees if they’re going to take that position, so it is possible some employers will decide not to test for that,” she told BusinessWest.

No matter what their stance, she added, it’s probably wise for employers to review their drug-testing policy to make sure it’s clear and consistent, and doesn’t need to be modified in light of the change in the law.

Medical marijuana remains an easier field to navigate than recreational use, she stressed, citing as a recent example a young man who had a medical marijuana card and applied for a position at a local company.

“They told him, ‘we drug test everybody, not just health or safety positions,’ and he disclosed his use to the employer through the testing agency and brought his card. Sure enough, he tested positive, and there was questioning — how often he used it, who’s his doctor, what’s the prescription — but once all those questions were answered, they hired him. So they followed the advice of the Barbuto court in that case.”

Whether dealing with marijuana use by employees or actually launching a cannabis business, Foster said, this is definitely new territory for lawyers, thanks to that gaping disconnect between state and federal law.

“As a licensed group, one of our rules is that can’t help your clients commit a crime,” he said. While the Massachusetts Ethics Commission passed a ruling that allows lawyers in the Bay State to engage in such activity because it’s permitted on a state level, he added, “you still have to tell clients they’re engaging in something that is illegal at a federal level. The nuances are deep and subtle.”

“And can cause a lot of trouble,” Bernardo quickly added.

Joseph Bednar can be reached at [email protected]

Employment

Talking Pot

By Erica E. Flores, Esq.

It took almost two years, but Massachusetts regulators have finally started to issue licenses to businesses looking to grow, manufacture, distribute, and sell recreational marijuana products in the Commonwealth.

The first license went to a cultivation facility in Milford back in June; since then, the Cannabis Control Commission has issued licenses to six other businesses, including provisional licenses for retail locations in Northampton and Easthampton.

Erica E. Flores, Esq.

Erica E. Flores, Esq.

Despite this progress, however, retailers cannot open their doors just yet — retail marijuana products must be tested for various contaminants before they can be sold, and the commission has yet to issue a license to a testing facility. But with the licensing process finally picking up steam, and public pressure on the commission to allow the voter-approved industry to take root, Western Massachusetts employers may be wondering how these changes will affect their workplace and what they can or should be doing to prepare.

Here’s what you need to know now:

Marijuana in the breakroom?

The recreational marijuana law specifically provides that it “shall not require an employer to permit or accommodate conduct otherwise allowed by [the law] in the workplace,” and further, that it “shall not affect the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees.”

This means that employers who pre-screen job applicants for marijuana, have drug-free workplace policies that prohibit employees from working under the influence of drugs or alcohol, and who conduct other lawful drug tests of employees may continue their current practices, and need not accommodate an employee’s use of marijuana for recreational purposes, even when they are off duty.

That being said, the availability of marijuana products for sale at retail locations (and, eventually, at so-called “cannabis cafes”) will likely drive an increase in marijuana use by adults across the state. This means that employers may see a rise in positive drug-test results by applicants and those who are subject to random testing. Employers may also see an uptick in employees arriving to work impaired and/or using marijuana products on the job.

To combat these potential problems, employers who have drug-free workplace policies might consider issuing reminder notices to employees making clear that their policies apply to marijuana just like they do to alcohol, which is also legal.

Employers may also want to adopt a reasonable-suspicion drug-testing program, if they do not have one already, and train their managers and human resources professionals about how to recognize the signs and symptoms of marijuana impairment and how to properly document their observations. Such evidence, in combination with a positive test result, can help an employer prove that its reasons for disciplining or terminating an employee were legitimate should the employee challenge that decision in a legal forum, particularly given the fact that currently available drug-testing methods do not measure current impairment; they can only detect that the drug is in an employee’s system.

Drug-testing Considerations

Employers may also want to reconsider the scope of their pre-employment drug-testing programs. Such tests are legal in Massachusetts, but a 2016 decision out of the Mass. Superior Court suggests that employers who screen applicants for non-safety-sensitive positions run the risk of being sued for an invasion of privacy. Accordingly, employers can reduce their risk of a privacy claim (and possible liability) by eliminating marijuana from the testing panel for non-safety-sensitive positions or even doing away with drug screens for such positions altogether.

“… employers who have drug-free workplace policies might consider issuing reminder notices to employees making clear that their policies apply to marijuana just like they do to alcohol, which is also legal.”

Finally, employers should be prepared to address requests by prospective and current employees to tolerate the use of marijuana as a reasonable accommodation for a disability. Last year, the Supreme Judicial Court ruled that Massachusetts employers have a legal obligation to accommodate a disabled employee’s off-site, off-duty use of medical marijuana, pursuant to a valid prescription, unless there is an “equally effective alternative” or the employer can demonstrate that the accommodation would be unduly burdensome.

The decision relied, in part, on the language of the medical marijuana law, which guarantees to registered users the continued benefit of all “rights and privileges.” But many disabled employees may choose to bypass the medical marijuana registration process when they are able to obtain the drug at a recreational shop, potentially at a lower cost, while avoiding the cost, time and potential stigma associated with becoming a registered medicinal user. Must these employees also be accommodated?

Technically, the SJC’s decision applies only to employees who have registered as part of the medical marijuana program. Additionally, both the legislature and the Cannabis Control Commission may seek to keep it that way. To be sure, it may not be such a good idea for doctors and other healthcare providers to be able to recommend marijuana as a treatment for a medical condition without going through the process that would enable them to actually prescribe the drug.

Further, it may be bad public policy to encourage disabled persons to self-medicate by using marijuana products that are designed for recreational use as medication. On the other hand, if an employee can demonstrate a disabling condition and the absence of an equally effective alternative to marijuana, allowing employers to deny the accommodation just because the employee obtained the drug at a recreational shop seems somewhat arbitrary.

Bottom Line

These competing considerations are not likely to be resolved all at once, and certainly not right away. So employees who do not want to risk becoming the test case should give some thought to the pros and cons of accommodating such employees and devise a strategy that makes the most sense for their unique business.

When in doubt, employers should consider retaining employment counsel to help them navigate these difficult and ever-changing legal issues.

Erica E. Flores is an attorney at the firm Skoler, Abbott & Presser, P.C.; (413) 737-4753 or [email protected]