The Production and Sales of Cannabis in Virginia

This article provides a high-level overview of the new legal landscape in Virginia related to the production and sale of cannabis and the opportunities out there for entrepreneurs.

For perspective, the Virginia General Assembly has only approved four (4) companies to legally process pharmaceutical cannabis for medical use, with one additional permit authorized, but unissued. The cultivation of hemp is currently allowed under a regulated process. And as of July 1, 2021, personal consumption and home cultivation of marijuana have been decriminalized to a large extent on the state level here in Virginia. Notably, the use, sale, and possession of cannabis over 0.3% THC in the United States remain illegal under federal law, despite laws in many states permitting it under various circumstances.

While all of this represents progress, in the overall push for legalization, we are still years away from state legalization of the production and sale of retail cannabis. For those interested in participating in this budding industry, keep in mind that you will need a license issued by the Cannabis Control Authority, which many anticipate will be much more challenging to obtain than an alcohol license.

The specific requirements for those license applications will not be disclosed publicly until July 1, 2022, with the first applications expected to be accepted July 2023 and retail sales expected to finally become legal in 2024. So while two years may seem like a long way away, if you are interested in being competitive in the license application process, you need to start positioning yourself now.

The state is likely to issue less than 1,000 licenses, which will be split between certain levels of the cannabis industry. It is anticipated that there will be 450 licenses available for cultivators, 60 for product manufacturers, 25 for wholesalers, and 400 for retailers. The application process is expected to favor applicants who demonstrate social equity, public health, and public safety priorities.

While this certainly provides some reason for optimism for those hoping to play a part in the industry, it’s important to remember that the regulatory framework and path towards legalization does not become effective until the future General Assembly and Governor approve the legislation in 2022. That said, if you are serious about getting a permit and being on the front end of the marijuana industry boom in Virginia, it’s important to surround yourself with professionals that can make your vision a reality. One of the old rules of thumb for aspiring entrepreneurs is to surround yourself with a decent lawyer and a good accountant.

VFN is one of the most highly regarded law firms here in Northern Virginia, with seasoned and well-connected attorneys who can help you establish your position in this state’s cannabis industry. Our services will be invaluable to clients, who will need to

1. Establish a legal entity and presence here in the Commonwealth to become a qualified applicant;
2. Obtain financing through investor relationships and/or financial institutions to secure required capital to be considered for licensure;
3. Purchase the real estate and secure proper zoning and approvals required for your business
4. Create solid commercial sale/purchase contracts to ensure payment and minimize risk exposure; and
5. Establish employment procedures to ensure your business runs smoothly.

I have already been advising clients on how to prepare themselves for the permit application process for the past few years, which has been an exciting and engaging experience for me. I am excited to see what the future holds in this new industry and to be working with clients on the front lines. If you need me or want more information, please feel free to give me a call at 703.479.3181, reach out to me by email at TBlaser@VFNLaw.com, or visit my attorney page at https://www.vfnlaw.com/portfolio/tyler-j-blaser/.

Threat to Broadband Expansion

In Grano v. Rappahannock Electric Cooperative, Judge Moon of the Federal District Court made preliminary rulings about a new Virginia law that allows electric utilities to put broadband cables in existing electrical easements.

The facts are these: A new state law in 2020 granted electric utilities like Rappahannock Electric Cooperative the power to install broadband cables in existing electric line easements, regardless of what the easement deed says. The same law limited the kind of compensation that property owners can receive if that happened. Rappahannock proposed to buy the right to install broadband on the property of John and Cynthia Grano, but couldn’t agree on terms with them. Rappahannock never installed any broadband on the Granos’ property but asserted that it could if it wished.

Judge Moon’s opinion found that the Granos’ claims said many of the right things to move forward in Federal court. For example, Judge Moon decided that the Granos had properly alleged they suffered actual harm when the new law took effect in 2020 and that the new law did not provide an adequate remedy for any harm that they suffered. There is little analysis in the opinion about why the new law – which allows property owners to file a claim for trespass – is inadequate, but the opinion points to the fact that the new law limits the amount of money that property owners can get if they win their case. (Lots of other laws limit the amount of money courts can award for different kinds of cases; Virginia has caps on medical malpractice claims and punitive damages, for instance).

Ultimately, Judge Moon ruled that two of the Granos’ three claims had to be dismissed because Rappahannock did not take any action to exercise its rights under the new law. One peculiar feature of Judge Moon’s ruling is that it says that the third claim should have been dismissed as well, but Judge Moon did not dismiss that claim. The third claim was for unconstitutional impairment of contracts, and footnote 8 points out that such a claim cannot be brought under the federal statute that the Granos used as a basis for their suit. Rappahannock asked the court to dismiss the third claim, but for a different reason.

The case continues to move forward. The Virginia Attorney General has filed notice of his intent to intervene as a party in order to defend the law.

Please contact Martin Crim, mcrim@vfnlaw.com or 703-618-3205 should you have any questions or need assistance. 

What constitutes relief for the legal or lawful use of cannabis oil?

The new law statute talks explicitly about what happens when somebody needs to have medical cannabis oil. One thing they must do, is they have to possess an unexpired written certification from a practitioner (which could be a doctor or a nurse practitioner.) Someone who’s usually allowed to write prescriptions. They must be registered with the board of pharmacy, and it’s not just any doctor. Anybody who is writing certifications for cannabis oil must be registered with the board of pharmacy.

In addition, once they have their written certification, the patient must register with the board of pharmacy. What they do now with their written certification is they go to a registered medical cannabis pharmaceutical processor, distributor, or dispensary. In the Commonwealth of Virginia, there are only five that have the authorization, and they’ve been spread out throughout the Commonwealth to have it around all the various parts of the state. Prince William County has one dispensary that has been approved, and that is located here in Manassas. It’s called Beyond Hello.

What if you’re an employer and believe the lawful use of cannabis oil impairs the employee’s work?

The new law talks about: What if the employee who needs the medical cannabis oil brings that oil with them to work; what are the employer’s rights under that circumstance? The law is very clear that employers with employees who are lawfully using cannabis oil still retain the ability to take adverse employment actions. That means you can discipline them, fire them, talk with them about the issues for any work impairment caused by using the cannabis oil.

Suppose the employee comes to work and is not performing their work and believes it’s associated with the use of cannabis oil. In that case, the employer can, in fact, discipline them or take adverse action, up to and including termination, based on the facts and the evidence you have at the time. Employers can also prohibit the possession of cannabis oil during work hours.

Even if the employee has a written certification, the employer can say that we do not want cannabis oil on our work premises, even though you have it lawfully.

What if you are a federal contractor or depend on federal funding? How does that impact you now with the new Virginia law and lawful use of cannabis oil?

Again, Virginia law has addressed this. It specifically says that for those who are federal contractors or subcontractors with employees who are using cannabis oil lawfully, they are not required to commit any act that would cause the employer to be in violation of any federal law or result in the loss of federal contract or federal funding. So, again, you do not have to do anything that would jeopardize your status as a federal contractor or subcontractor.

What if you are an employer in the defense industrial-based sector, which talks about the military department of defense, or you’re dealing with them as a federal contractor or subcontractor?

What can you do regarding this new Virginia law? The statute specifically says that defense industrial-based sector employers or prospective employers (meaning that you’re looking at hiring somebody, but you’re still in that sector) are not required to hire or retain any applicant or employee who tests positive for THC in excess of 50 milligrams for the urine test, 10 milligrams for the hair test. So, you do have some rights to limit your exposure. The reason for this is that you don’t want someone who may be impaired while on the job.

An employer to make sure they still have a safe work environment. If you have concerned somebody who may be under the influence of lawful cannabis oil, you probably should seek counsel to address how to handle this matter lawfully. You’ve got to balance the competing laws.

What can employers do in the application process?

As an aside, I will say that the EEOC says if you are an employer with 15 or more employees, you are covered by the federal law Title VII of the civil rights act of 1964. There are provisions that talk about the protection of employees and make sure that if you’re going to do a background check, it doesn’t violate or create an implicit bias. There is guidance, and if you want to look upon the EEOC, it talks about criminal history checks. There is a perception, and I think supported by evidence, that those who are Hispanic or African American, particularly males, were disproportionately impacted by the laws. Suppose you are doing background checks and don’t have a reasonable basis for saying there’s a reason to exclude someone with that criminal background. In that case, it may result in potential exposure to liability for that.

Where we are right now is the issue of doing background checks related to the new law in Virginia?

It specifically says employers and educational institutions are prohibited from requiring an applicant to disclose information related to any arrest, criminal charge, or conviction for any decriminalized possession of marijuana. So, what this is doing is it is resulting in an employer saying, listen, I’m just not going to even ask for background if there’s any marijuana charges or charges related to marijuana? I think people are wrestling with that right now. What do they want to do as part of their process going forward?

Some employers are saying, listen; I don’t know that I really care whether they used marijuana when they were in college or whether they used marijuana ten years ago. Do they care maybe if they used marijuana last week? Well, maybe some do, maybe some don’t. There are businesses that you know have a philosophy that says I don’t care what you do on your personal time. In Virginia right now, no law addresses that. Some states do have laws that address limitations on employer’s rights to limit people’s personal time. What they do on their personal time, in Virginia, there is no law on it, but what they’re suggesting here is that you can’t require an applicant to disclose that information if it’s an arrest, criminal charge, or conviction for any decriminalized possession of marijuana.

Please contact Kristina Keech Spitler, kspitler@vfnlaw.com or 703-618-3205 should you have any questions or need assistance