On November 19, the World Law Group held a webinar on vaping and the legal issues related to the current controversy in the U.S., and anticipated developments in Europe.

Listen to Josh Ashby and Pilar French’s insight on the legal issues regarding:

    • Legal distinctions between tobacco and cannabis with respect to vaping;
    • How different U.S. states are handling the vaping controversy;
    • How is products liability insurance being affected;
    • Risk mitigation for cannabis and tobacco companies; and
    • Other related issues

Join the World Law Group for an upcoming webinar on vaping and the legal issues related to the current controversy in the U.S. and anticipated developments in Europe—all WLG members, lawyers and clients are welcome to join us on November 19, 2019, from 8 – 9 a.m. PST,.

The webinar will focus on legal issues, including:

  • Vaporizing and what it is;
  • What we know about vaporizing health implications for tobacco and cannabis;
  • Differences between tobacco and cannabis with respect to vaping;
  • How different U.S. states are banning vaping;
  • What we have seen in insurance policies;
  • Risk mitigation for cannabis and tobacco companies; and
  • Other issues such as the impact on valuation of cannabis companies

Lane Powell will be represented by attorneys Josh Ashby and Pilar French as key speakers in the online event.

Register today!

On October 11, the Oregon Liquor Control Commission (“OLCC”) filed emergency rules banning the sale of flavored vaping products in Oregon for the six-month period beginning on October 15, 2019. The rules follow an October 4 executive order from Governor Kate Brown, which directed the agencies to adopt emergency rules banning the sale of “all flavored vaping products.” The Oregon Health authority has filed similar rules covering nicotine vaping products. Oregon’s ban closely follows a similar ban in Washington this week. New York and Michigan have also moved to ban flavored vaping products, and Massachusetts banned all vaping products last month.

The emergency rules add OAR 845-025-2805 to the Oregon Administrative Rules covering cannabis. Beginning on October 15, 2019, the OLCC will prohibit processors from making, and retailers from selling, cannabinoid vaping products that contains a “flavor” or a “non-marijuana terpene.” “Flavor” is defined as any “artificial or naturally-occurring substance that contains a taste or smell, other than the taste or smell of cannabis, that is distinguishable by an ordinary consumer either prior to or during the inhalation of the product, including, but not limited to, any taste or smell relating to chocolate, cocoa, menthol, mint, wintergreen, vanilla, honey, nut, fruit, any candy, dessert, alcoholic or non-alcoholic beverage, herb, spice or concept flavor.” “Non-marijuana terpene” means “a terpene or terpenoid derived from a source other than marijuana.”

Violations of OAR 845-025-2805 are Category I violations, which can be grounds for immediate suspension or cancellation of a license. The OLCC indicated in a press conference that they may do a soft rollout of sanctions against violators, including warning letters or fine, but this is not reflected in the rule text.

How the agencies will enforce this ban is unclear – terpenes that occur naturally in marijuana are also found in other botanicals. The use of non-marijuana terpenes, which are cheaper and do not require an OLCC license to produce, is common in the industry. Determining the source of a particular terpene in a vaping product presents an acute challenge for state labs that are already struggling to tell the difference between marijuana and hemp.

The OLCC will consider any “public statement or claim, whether express or implied, made or disseminated by the licensee or licensees responsible for the manufacture of a cannabinoid vapor product, or by any person authorized or permitted by the manufacturer to make or disseminate public statements concerning such products, that a product has or produces a taste or smell other than a taste or smell of cannabis” (emphasis added) to be presumptive evidence of the use of a flavor or non-marijuana terpene. Note that the underlined text in the preceding sentence likely include employees and contractors hired to do social media or other advertising. Licensees need to keep a close watch on advertising on a go-forward basis, and should also be diligent about scrubbing past posts or ads that make such claims.

The emergency rules do contemplate a process whereby the OLCC can approve requests by processors to add non-marijuana terpenes to vapor products, “so long as every component of the terpene compound is naturally found in cannabis.” The rules mandate that the OLCC will establish form and manner to submit such requests on or before November 15, 2019. The language indicates that a licensee, rather than an unlicensed manufacturer of non-marijuana terpenes, must drive the approval of a particular additive. It is not clear from the rule whether the approval of a particular additive would be limited to its use by the licensee for which it was approved, or if approval for use would allow any licensee to then use the approved additive.

The OLCC has posted a compliance bulletin that answers some of the practical questions around the implementation of the ban. Lane Powell’s cannabis team is closely monitoring this situation as it develops. Please contact us with questions about how the ban affects Oregon businesses.

The Washington State Legislature’s 2020 regular session is proceeding, and we will be covering new bills as they develop. You can see Part 1 here.

Some Important Updates

SB 6393, the companion bill to HB 2361 that we discussed last week, passed out of the Senate Committee on Labor & Commerce by a 5-4 vote—split along party lines with Democrats in the majority—and has been referred to the Senate Ways & Means Committee. These bills would require all licensed cannabis businesses to implement certain labor requirements for their employees, which could include providing a living wage, offering benefits, or establishing an agreement with a union (there are other business practices that would count as well). Since Democrats control both the House and the Senate, there is a good chance that this bill will pass, but it still has a long way to go.

HB 1974Establishing the Washington cannabis commission

HB 1974 would create an agricultural commodity commission known as the Washington Cannabis Commission. Commissions are public entities overseen by the Washington Department of Agriculture, and they exist to promote the general welfare of specific agricultural commodities in the state, particularly with the sale and distribution of the respective commodity. The Wine Commission and Apple Commission are both examples of current commissions. Commissions levy an assessment upon all affected producers and use the funds collected to promote the industry, often with marketing and research. This assessment cannot exceed three percent under state law.

HB 1131 – Allowing residential marijuana agriculture

Prefiled alongside SB 5155 in the Senate, HB 1131 would allow persons 21 and over to grow up to six marijuana plants in their homes. The plants and their products made from those plants would be required to have the owner’s clearly labeled contact information, and they could only be used for noncommercial purposes. Landlords would be allowed to prohibit renters from growing marijuana on their premises.

The aforementioned bill is known as “homegrow” within the industry, and similar bills have been introduced nearly every year since 2015. This year is the first year that such a bill has been before the powerful Appropriations Committee, meaning this may be the year that homegrow advances to a legislative vote. Of the 11 states that have legalized marijuana for adult use, Washington is the only state that does not allow the personal cultivation of marijuana for nonmedical purposes. Current law does allow medical patients to grow marijuana, but they must register with the Department of Health.

HB 2826 – Clarifying the authority of the liquor and cannabis board to regulate marijuana vapor products

This bill comes in the wake of last year’s vaping crisis, some of which we covered here and here. The bill would codify the emergency rule enacted late last year defining “characterizing flavor” and provide the Washington State Liquor and Cannabis Board (“WSLCB”) with broader rulemaking authority concerning marijuana vapor products. The WSLCB would be empowered to regulate devices “used in conjunction with a marijuana vapor product” and additives in marijuana products. However, its authority would have to be in conjunction with the Department of Health.

HB 2826 is an important bill because it will provide the WSLCB with broader authority to regulate marijuana products, both their ingredients and how they are made. The issue of what defined a “characterizing flavor” late last year affected the industry significantly, as many producers and processors add terpenes and other compounds to marijuana products. Furthermore, the House Appropriations Committee passed the bill unanimously and has been referred to the House Rules Committee for a second reading. If it passes that committee, there is a good chance that it will be heard on the house floor.

UPDATE: Please see this post for an important update to this issue.

The Washington Department of Health (“DOH”) held a public meeting on October 9 where they discussed Governor Jay Inslee’s recent executive order requesting that the DOH adopt emergency rules banning flavored vapor products, including flavored cannabis vapor products, and voted to adopt an emergency rule banning the products. The new rules use a defined term for “characteristic flavor,” which is used to distinguish permissible vapor products from impermissible ones. These rules will significantly affect the cannabis industry, but it is important to note that the rule does not amount to an outright ban of all cannabis vapor products.

In the Wake of an Outbreak

This flurry of government activity comes in the wake of an outbreak of illnesses and deaths across the United States related to vaporizing, and numerous other states have issued bans of their own. DOH’s stated reason for adopting the emergency rules is concern for public health and protecting youth:

The State Board of Health’s Health Impact Review of HB 1932 found strong evidence that prohibiting the sale of flavored vapor products will likely decrease initiation and use of vapor products among adolescents and young adults. Reducing the initiation and use of vapor products by youth and young adults will reduce the exposure of our most vulnerable population to the current outbreak of severe lung disease associated with the use of vapor products.

The cause of the outbreak has yet to be determined. While reducing youth use of vapor products is a legitimate goal, the ban is questionable if the recent illnesses are in fact found to be a result of substances other than flavoring, or the ban does not reduce overall consumption rates. The DOH emergency rules cite the 2018 Washington State Healthy Youth Survey which showed an increase in teen use of tobacco vapor products. However, that same survey showed that use of cannabis overall did not increase post-legalization, and in some instances actually decreased.

“Characterizing Flavor” Defined

The DOH emergency rules defines flavored vapor product as “any vapor product that imparts a characterizing flavor,” which in turn is defined as:

‘Characterizing flavor’ means a distinguishable taste or aroma, or both, other than the taste or aroma of tobacco or marijuana or a taste or aroma derived from compounds or derivatives such as terpenes or terpenoids derived directly and solely from marijuana, as defined in RCW 69.50.101(y), or hemp plants that have been grown and tested as required by state law, imparted by a vapor product. Characterizing flavors include, but are not limited to, tastes or aromas relating to any fruit, chocolate, vanilla, honey, candy, cocoa, dessert, alcoholic beverage, menthol, mint, wintergreen, herb, or spice. A vapor product does not have a characterizing flavor solely because of the use of additives or flavorings or the provision of ingredient information. It is the presence of a distinguishable taste or aroma, or both, that constitutes a characterizing flavor.

It is important to recognize that “characterizing flavor” does not include the natural taste or aroma of cannabis or hemp, or of terpenes or terpenoids derived from cannabis hemp. Thus, cannabis vapor products containing taste or aroma profiles derived from cannabis or hemp should be permissible. It is noteworthy that this ban only pertains to those compounds with a “distinguishable taste or aroma,” so compounds that do not have such qualities likely could still be added after this rule.

Terpenes: Derived from Where? The Rule’s Ambiguity

Though it is not obvious, cannabis producers regularly add terpenes to their products to enhance the natural flavors and aromas of the plant. Some of these terpenes are derived from cannabis, some from hemp, and some from other sources.

For the uninitiated, terpenes are organic compounds produced in many different plants (even some insects) that often emit a strong odor. Limonene, for example, is a terpene that is naturally produced by cannabis and is found in popular strains for its citrus flavor (see: Lemon Haze). But it’s also naturally produced by lemons and oranges, and you can often find it in your lemon-scented essential oils or dish soap.

Some may interpret the rule’s definition carving out a taste or aroma derived from marijuana or hemp to mean that tastes or aromas from other sources and added to a vape product result in a prohibited flavored vape product. However, it can—and arguably should–also be interpreted that key to the definition of “characterizing flavor” is that it is a distinguishable taste or aroma other than tobacco or marijuana, implying that non-marijuana/hemp derived compounds that provide the taste or aroma of marijuana could be allowable. Further, it could be argued that the carve-out for tastes and aromas from marijuana or hemp permits tastes and aromas other than tobacco or cannabis.

The last two sentences in the definition of “characterizing flavor” support the interpretation that vape products may include non-marijuana and hemp additives. Those sentences provide that a vapor product does not have a characterizing flavor “solely because of the use of additives or flavorings or the provision of ingredient information. It is the presence of a distinguishable taste or aroma, or both, that constitutes a characterizing flavor.” This supports a position that additives or flavorings may be added provided they do not otherwise result in a characterizing flavor.

Some cannabis stores have already stopped selling any vapor products that include any non-marijuana/hemp-derived compounds. We anticipate further guidance on these issues. The key takeaways from the current rules are as follows:

  • Marijuana/hemp-derived compounds are allowable, regardless of what taste or aroma they result in;
  • Non-marijuana/hemp-derived compounds that provide the taste or aroma of cannabis could be allowable, though the rule isn’t explicitly clear; and
  • Non-marijuana/hemp-derived compounds that result in a non-cannabis taste or aroma (such as a fruit, chocolate, honey, etc.) are likely not allowable.

The WSLCB Responds

Hours after the DOH vote on October 9, the Washington State Liquor and Cannabis Board (“WSLCB”) emailed stakeholders notifying that, effective midnight, flavored vapor products could no longer be sold to retail stores by processors or to the general public. The WSLCB also (1) required retail stores to prominently post this warning sign in their stores, (2) reminded licensees of packaging and labeling rules, (3) required licensees to disclose to the WSLCB all compounds used in the production and processing of vapor products, and (4) required licensee to cooperate with the ongoing epidemiological investigation.

Cannabis producers and processors will be grappling with these new rules, and can expect more follow-up regulations from the WSLCB. It remains unclear how these rules will be enforced, and what the penalties for non-compliance will be. Regardless, companies would be well advised to be aware of the new rules.

Marijuana Perception and Legalization

 Once upon a time, Americans viewed marijuana as a dangerous drug leading to serious addiction and crime. According to the 1936 cult classic movie Reefer Madness, “women cry for it and men die for it.” Over time, the perception that marijuana is a dangerous gateway drug has changed dramatically, notwithstanding Attorney General Jeff Session’s views to the contrary. According to a Pew Research Center survey conducted in October 2017, 61 percent (about six-in-ten) of Americans believe marijuana should be legalized. According to that same survey, 56 percent of Baby Boomers (those 54 to 72 years of age) support marijuana legalization. This same group will soon be populating senior housing and care communities. In fact, in Oregon, the majority of the medical marijuana users are between 60 to 64 years of age.

The legalization trend is also on the rise. As of January 2018, recreational and medical marijuana is legal in eight states — Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington — plus the District of Columbia, and 22 states have legalized medical marijuana.[1]

Marijuana and Senior Care and Housing

Marijuana use in senior housing, such as assisted living communities and nursing homes, poses unique challenges. First, allowing marijuana use in facilities and communities could subject owners and operators to serious enforcement remedies under the Controlled Substances Act (CSA), which classifies marijuana as a Schedule 1 Drug (the same classification as substances like heroin and LSD). Second, nursing homes and assisted living communities also face complex risk-management issues when they allow marijuana use. Some of which we discuss below.

Nursing homes are particularly at risk as they are regulated by both federal and state law.  Because marijuana remains illegal under federal law, nursing homes that permit marijuana use and storage on its premises could be exposed to significant enforcement actions. Under CSA, anyone who knowingly possesses marijuana, leases, rents or controls a place where marijuana is used can be subject to criminal prosecution, forfeiture of assets, such as vehicles, real property and leasehold interests. Furthermore, if the nursing home accepts Medicare, it must comply with certain federal requirements necessary to continue its participation under Medicare. One of those requirements is compliance with federal law. By permitting marijuana use, a nursing facility risks losing its Medicare certification — often its primary source of reimbursement. Consequently, most nursing home operators do not permit any marijuana use on its premises.

While assisted living communities are also subject to CSA, many in Oregon, Washington, Colorado, California and other states where marijuana is legal, do permit the use of medical or recreational marijuana. Often these communities view the use of marijuana as a resident-right issue, and some states, such as California and Colorado actually provide state regulatory guidance on use of marijuana in communities.

Risk Management Issues

If an assisted living community is planning to or already does allow marijuana use, it should be wary of the following issues.

Storage and AdministrationUnder state regulations, assisted living communities are required to store and administer medications to residents, or if self-administered, must confirm that residents can safely store and consume medications. Medical marijuana comes in various forms and there is no standardized dosing. Communities should at minimum, evaluate a resident’s ability to consume/ingest marijuana and ensure others cannot access the marijuana by providing locked storage units.

Primary Caregivers. Some medical marijuana laws (such as those in Oregon and Washington) permit a medical marijuana patient to designate a primary caregiver who can possess and store marijuana on behalf of the patient. A primary caregiver can be owners and staff members of an assisted living community.  Due to the risk of theft, loss and possible enforcement action, we recommend communities have clear written policies for both staff and residents that no assisted living community employee shall serve as a primary caregiver.

Care Planning. Developing and regularly updating an individualized resident care plan is at the heart of assisted living. Because marijuana may affect judgment, interfere with medications, lead to loss of balance/coordination, increase appetite or have other side effects, a community must have robust protocols to assess marijuana use in residents. Failure to do so could lead to significant regulatory citations and even malpractice liability.

 Usage Areas. Most laws legalizing marijuana ban use in public places, including hallways, community areas or visible locations. Clean-air laws also ban smoking or vaping inside public buildings or places of employment. A community should either develop policies limiting where a resident can use marijuana or, to help avoid potential liability, simply ban smoking or vaping of marijuana.

Mobility Devices. Mobility devices can pose difficult challenges on their own, adding marijuana impairment exacerbates that challenge. At a minimum, communities should require residents who use mobility devices to inform the communities if the residents plan to consume marijuana.  The community should assess interventions to reduce the risk of harm to the residents and others. These may include removing electric scooters or wheelchairs until such residents are no longer impaired.  

Best Practices

 Some best practices include:

  • Inform residents at or before admission about your marijuana policies. Surprises are not good in this industry;
  • Assess a resident before use of marijuana to establish a baseline. Care planning is key to minimizing your risk. Consider whether you need a negotiated risk agreement;
  • If a medical marijuana patient, obtain proof of registry card;
  • Inform your staff and residents that you do not permit staff to act as designated caregivers;
  • Do not permit your staff to administer or store useable marijuana, unless required by state law;
  • Do not permit residents to store marijuana plants at your community; and
  • If you allow marijuana, provide state informational brochures about safe and legal marijuana use.

Regardless of whether your community or facility permits marijuana use, it should have robust written policies and procedures addressing the use and storage of marijuana and take into account the risk management issues discussed above. For more information, including additional best practices, please do not hesitate to contact us.

Postscript: Gabi Sanchez provides additional thoughts on the topic in Senior Housing News’ April 19 post titled “Senior Living Providers Can No Longer Blow Off Pot Policies.”

[1]Marijuana Legalization by the Numbers,” CNN (January 4, 2018)