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How the Cannabis Industry Can Be a Leader

04/07/2020

As many have come to realize, cannabis is one of, if not the most challenging industries in which to operate a business. COVID-19 presents yet another challenge to the cannabis industry, but also an opportunity to show resilience in the face of crisis and be an example for the rest of the business community. 

Dispensaries, and several of the businesses that support them, have been designated "Critical Business" by the Colorado Department of Public Health ("CDPHE"). While this means the industry will be under a compliance microscope, it also creates an opportunity to lead by example and be a respite for the public in these uncertain times.

This post summarizes the Colorado MED's Emergency Rule Adoption in Response to COVID-19 and explains what cannabis companies must do to comply. This post also includes updates to Industry-Wide Bulletin 20-04 from the MED. As you'll see, the emergency rules are nothing to be concerned with and simply require a bit of creativity and extra planning. Please don't hesitate to reach out with any questions about compliance with these rules, or any other concerns you may have about your business during this time. 

Are you allowed to continue operations?
Under CDPHE's Public Health Order 20-24, dated March 22, 2020 (the "PHO"), issued pursuant to the Governor's Executive Order D 2020 013, Critical Businesses are exempted from the PHO and encouraged to remain open. Critical Businesses include:

  • Medical supplies and equipment manufacturers and providers, including durable medical equipment technicians and suppliers 
  • Food and plant cultivation, including farming crops…food processing and manufacturing…commodity sales, and any other work critical to the operation of any component of the food supply chain 
  • Manufacturers of:
    • Food processing, manufacturing agents, including all food and beverages 
    • Chemicals 
    • Medical equipment, components used in any medical device, supplies or instruments 
    • Agriculture/farms 
    • Any business that produces products critical or incidental to the processing, functioning, development, manufacture, packaging, or delivery of any of the categories of products above
  • Marijuana dispensaries 
  • Building cleaning and maintenance 
  • Warehouse/distribution and fulfillment, including freight distributors 
  • Storage for Critical Businesses 
  • Newspapers, Television, Radio, and other media services 
  • Financial institutions including bank and credit institutions, insurance, payroll, and accounting services, and services related to financial markets 
  • Construction

If you're unsure whether your business qualifies as a Critical Business, please don't hesitate to reach out.

Compliance with MED Emergency Regulations 
As we've come to expect, the rules promulgated by the MED raise a few questions. However, the underlying concepts are clear enough that we can make reasonable judgments as to implementation. 

Rule 3-345 (New) – Emergency Allowance for Online and Phone Ordering and Curbside Pick-Up 
Rule 3-345 is a temporary new rule implemented to help effect social distancing measures. Under the new rule, both Medical and Retail Marijuana stores (i) may accept orders, accept payment, and complete the sales transaction over the internet, and (ii) may offer curbside pick-up. "Curbside pick-up" means outside the Restricted Access Area, but on the Licensed Premises (which may be modified as provided in Rule 2-260(A)(1) discussed below). To clarify, the MED rules only allow consumers to pick-up pre-ordered products outside the licensed premises. If the consumer did not pay for the items when ordering, the only permitted payment methods for curbside pick-up are check, debit card, or credit card. Licensees may NOT accept orders or transact in cash outside the licensed premises and may not transact on public property such as public streets or sidewalks. Further requirements for curbside pick-up include:

  • Confirming (i) the purchaser's name and date of birth, (ii) the desired pick-up time, and (iii) for Medical Marijuana stores: (a) the patient's registration number, and (b) for patients under 18, the parent or guardian designated as the primary caregiver, and if applicable, the primary caregiver's registration number. 
  • Physically viewing and inspecting the purchaser's ID and, if applicable, registry card. 
  • Video recording of (i) purchaser (and purchaser's vehicle in the event of a curbside transfer), and (ii) Licensee verifying purchaser's ID and completion of the transaction through Transfer.
  • Ensuring that all online or phone transactions are entered into the Point of Sale and Inventory. 
  • Tracking Systems. Compliance with all local regulations.
  • Abide by all labeling requirements.
  • Permitted methods of payment include check, debit, or credit cards. Licensees may not conduct cash transactions outside the licensed premises.
  • Licensees must also provide clear instructions for how their curbside pick-up procedure works, including (1) instructions for online and telephone ordering and payment, (2) a description of the designated location for pick-up, (3) how the purchaser will be notified that their order is ready for pick-up and/or payment, and (4) any other information the purchaser needs in order to complete the transaction.

Since the initial publication of Rule 3-345, the MED has added additional social distancing requirements. These requirements are consistent with the recommendations we included in the original version of this article. Specifically, Regulated Marijuana Businesses must:

  • Comply with all guidance and directives issued by the CDPHE, including 6-feet of distance between individuals, covering coughs and sneezes with a sleeve or elbow, washing hands for at least 20 seconds as often as possible, and regularly cleaning high-touch surfaces.
  • Limit the number of people on a Licensed Premises (including employees) to allow for compliance with distancing requirements.
  • Limit the amount of time patrons can remain on the Licensed Premises.
  • Use additional portions of the Licensed Premises (including modifications if necessary) to provide additional space to facilitate social distancing.
  • Use websites or web apps to create virtual lines or waitlists.
  • Require or encourage advanced order, payment, and scheduling for order pick-up, and prohibit patients or consumers from arriving prior to receiving notification that their order is ready.

Licensees must also prevent lines from forming outside of their store. If preventing a line is not feasible, the licensee must assign staff to monitor and manage the line, limit the number of people congregating outside the store to the greatest extent possible, ensure that patients and consumers are at least six-feet apart at all times, and ensure patients and consumers are not blocking pedestrian traffic or the door of another building. To comply with this rule, Licensees must plan and prepare effectively to create an efficient and effective procedure.

Rule 1-105(B) – Executive Orders & Public Health Orders 
Under this temporary provision, all Licensees, their agents, and their employees shall comply with any applicable public health orders issued by the agencies of the State of Colorado, including the CDPHE. 

This offers little guidance since most, if not all, Licensees are considered Critical Businesses and may be exempt from public health orders. However, based on the MED Industry-Wide Bulletin 20-03, dated March 22, 2020, we are fairly certain that social distancing requirements and other health-safety related measures are to be implemented to the greatest extent possible while maintaining business operations. Consumers may order, purchase, and pick up on the licensed premises, as long the retail establishment implements Social Distancing Requirements pursuant to state and local orders. (See below for a list of recommendations to comply with health and safety measures while remaining open.)

Rule 2-225(C)(3) – Emergency Extension of Regulated Marijuana Business License and Owner License Renewal Deadline
On April 2, 2020, the MED issued additional emergency rules pursuant to the Governor's Executive Order D 2020 015. Rule 2-225(C)(3) provides a 30-day extension for business and owner licenses that expire between March 25, 2020, and April 24, 2020. Please note that this does NOT apply to Employee Licenses. Businesses and owners are still permitted to submit applications for renewal before their original deadline.

Rule 2-260(A)(1) – Emergency Exemption 
To effectuate social distancing measures, this temporary provision allows Regulated Marijuana Businesses to make temporary modifications to their Licensed Premises without prior approval from the MED. Prior approval is only waived if the temporary modifications effectuate social distancing measures, namely curbside pick-up. As mentioned above, creativity will be required to both stay open for business and comply with all emergency orders and regulations. You may need to use areas that were not originally part of the Licensed Premises to carry out transactions.

Rule 2-265(E.5) – Limited Gaming Support and Key Licensees 
Until the earlier of 120 days after March 20, 2020, or the rescission, withdrawal, or expiration of Executive Order 2020 003, individuals who hold an active license issued by the Colorado Limited Gaming Commission may work in Regulated Marijuana Businesses without application to or approval by the MED. In addition to complying with local jurisdiction rules, the individual must have been Colorado resident as of March 25, 2020, and maintain a Colorado residency for the duration of the time that individual works in a MED-regulated business. Gaming personnel must display their gaming ID badge while working and are prohibited from accessing the inventory tracking system account.

Before beginning work, the gaming licensee must provide the following information to the MED via electronic mail correspondence to dor_medoccupational_appts@state.co.us with the phrase "Gaming Licensee" in the subject line: (1) the individuals gaming license number, and (2) if known, the name, location, and license number of the regulated business where they will be employed. Similarly, Regulated Marijuana Business Licensees who intend to hire gaming personnel must notify the MED using the same email address and subject line of the Gaming License number of the individual(s) they will employ. The notification must be sent within ten days of the individual starting employment.

Rule 2-265(H)(1)(d)(i) – Emergency Suspension of Fingerprinting
The requirement for Owner Licensee to submit fingerprints at least once every two years is suspended for a period of 120 days following the effective date of this rule (March 20, 2020), or, if Executive Order D 2020 003 (Declaring a Disaster Emergency Due to the Presence of Coronavirus Disease 2019 in Colorado) is rescinded, withdrawn or expires prior to the end of the 120 period. 

Rule 3-605(B)(1)(a) – Emergency Accommodation for Transfers of Samples for Testing
For the same period set forth in Rule 2-265(H)(1)(d)(i) above, Licensees may use a property adjacent to transfer samples of Regulated Marijuana. Licensees may not provide pick-up and purchase services on any public property, such as a public street or sidewalk. In addition, licensees cannot provide pick-up services in a manner that obstructs vehicle or pedestrian traffic.

Recommendations
The following is a shortlist of recommendations to help you comply with the emergency regulations. Most of all, use common sense and do not try to bend the rules in a way that will draw attention to this industry. As we saw this past week in Denver, not everyone agrees that marijuana businesses are Essential Businesses (although the decision was quickly reversed). 

  • Ensure the health and safety of your employees first. DO NOT LET THEM WORK IF THEY SHOW ANY SIGNS OF ILLNESS. 
  • Consider providing additional security for curbside pick-up.
  • Document any temporary modification to your Licensed Premises and operate within the modifications you made.   
  • Create procedures to ensure everyone in the store, including customers and staff, are able to maintain a six-foot distance between themselves. 
  • Rules prohibiting the display of marijuana outside the Restricted Access Area (specifically MED Rules 5-115 and 6-110) are still in effect. This is especially important if there will be a curbside Transfer. 
  • Increase the number of times you clean and disinfect anything people touch. 
  • Ensure online or phone orders are scheduled in a way that will promote distancing and avoid crowds. 
  • Provide clear instructions for customers, both in-store and online, including a clear description of the designated location for pick-up.
  • Consider requiring online ordering to control the number of people on the premises at any time. 
  • Educate your employees on these regulations and your plans to implement them. 
  • Curbside pick-up does not literally require transactions to take place on the curb. Internal modifications to the facility may be more appropriate and provide for greater safety and compliance with distancing requirements. 
  • DO NOT LET ANYONE IN THE STORE WHO IS DISPLAYING SIGNS OF ILLNESS.

Final Words
It is no secret that the cannabis industry still has opposition from many segments of society. While many businesses have been forced to shut their doors due to COVID-19, Regulated Marijuana Businesses have been deemed essential and allowed to continue operations. This means that the industry will be highly scrutinized by those looking for an outlet to direct their frustration and fear. Fair or not, if cannabis stores are seen not following social distancing guidelines or taking advantage of the emergency rules, they will likely be treated more harshly and face even greater backlash.

But we see an alternative path during this time of crisis. We feel the industry can use the additional focus it will receive as an opportunity to display the progress it has made during its relatively short existence. Cannabis companies have been regulated to an extent companies in other industries can hardly imagine. The emergency rules issued in response to COVID-19 are a cakewalk compared to the steps Licensees have had to take just to get their business off the ground. Therefore, while other businesses are reeling to try to figure out how they will adapt to the new world we face, the cannabis industry can lead the way in these uncertain times and establish itself as a pillar of the post-COVID-19 world.

Finally, it is worth pointing out that several of these new rules would be fantastic permanent rules for the industry, and a successful trial run makes a strong argument to legislators and regulators. Among the others, online ordering and curbside pick-up should provide additional flexibility and access to the industry. These are rules that we want to maintain and improve upon in the future, so it behooves us to abide by these temporary regulations and ensure everything proceeds safely and seamlessly.

For questions about the above rules or any changes to business operations, please contact Dean Richardson or Ezra Kramer.

ABOUT THE AUTHOR

Ezra Kramer

Attorney

Dean Richardson

Co-Chair, Litigation Section