“Employer Beware”: The Danger Lurking in California’s State Retail Cannabis Regulations

Man in truck driving with unlit marijuana joint between fingers of hand on wheel.
By ThinkStock - Driving while under the influence

Temporary licensing for adult-use and medical cannabis businesses is in full swing, and cannabis entrepreneurs have started opening up dispensaries up and down the state. The Emergency Regulations released on December 7, 2017, allow a dispensary to sell directly to consumers in-store, as well as via delivery. The current regulations subject owners to liability that they should be aware of before offering delivery services. (See 12 Cal Code Regs §5030; adopted 12/7/17). While employers in legalized states across the country must face a wide variety of labor and employment law issues, this article discusses one potential employer liability issue in particular, as well as possible solutions.

Strict Agency Liability: Employers are on the Hook for their Employees Actions

Section 5030 of the emergency regulations (12 Cal Code Regs §5030) states that cannabis employers can be held liable for any "act, omission, or failure of an agent, officer, representative, or other person acting for or employed by a licensee, within the scope of his or her employment or office.” This regulation carries a uniquely heavy punch for entrepreneurs entering the cannabis retail market when viewed in combination with the other regulations.

The Problem: Section(s) 5415 and 5419 of the Emergency Regulations

Most dispensary employees personally use cannabis. This is not an over-generalization, either. In order to become a "budtender" at many dispensaries, a potential hire must have extensive knowledge and experience with various cannabis strains to perform his or her job effectively. Cannabis knowledge and experience also expose an employer to liability, however. Enter Section 5415(a) and Section 5419 of the Emergency Regulations (12 Cal Code Regs §§5415, 5419) contained on pages 53 and 55 of the regulations:

Section 5415(a) states:

"All deliveries of cannabis goods shall be performed by a delivery employee of a retailer."

Section 5419 states:

"A retailer's delivery employees shall not consume cannabis goods while delivering cannabis goods to customers."

Ensuring employees do not actively consume cannabis while delivering product should be an employer concern, but the true problem lurking in these regulations runs deeper:

THC is fat soluble, and can stay in an employee's system for weeks.

What happens when an employee is pulled over for a traffic violation and smells like marijuana by virtue of driving a van full of product? Police officers commonly use the smell of cannabis as a basis to initiate investigations for driving under the influence. The employee will have to submit to a blood test if arrested for driving under the influence that will inevitably reveal THC in the system if the employee is a cannabis user. What if employees injure themselves or others while delivering product with THC in their systems? Even if these employees are not impaired within the meaning of the law, an employer can expect to be joined in the inevitable civil lawsuits filed by the injured parties. A lawsuit may prove more problematic than the average cause of action by virtue of the presence of THC in the driver’s system.

These hypotheticals are just the tip of the iceberg when it comes to the scenarios that could subject dispensary owners to liability.

Possible Solutions (or Lack Thereof)

The Bureau of Cannabis Control (BCC) intends to release a revised set of regulations at the end of the Spring in 2018, followed by 45-day public comment period(s). Watch for BCC announcements here. The only true solution under the current Emergency Regulations is to hire delivery employees who do not consume cannabis. Otherwise, stakeholders need to voice their concerns during public comment and advocate for the use of outside independent contractors to handle deliveries if the current delivery regulations are not revised by the BCC itself.

Police agencies across the country are far from perfecting marijuana impairment evaluations, so it would be a slippery slope for an employer to constantly monitor whether delivery employees are “impaired” and unfit to meet the essential functions of their jobs. If the current regulations are left unchanged, dispensary employers may want to reconsider the viability of starting a cannabis retail delivery service.


Ryan Kocot is the owner/operator of the Law Office of Ryan T. Kocot. His office is located in Sacramento, CA, but he practices all throughout Northern California.  His practice focuses on criminal defence, as well as ensuring that cannabis cultivators, manufacturers, distributors, and retailers stay in strict compliance with state and local law. 

Visit his websites, Sacramentomarijuanalaw.com  and Sacramentoduidefender.com


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