Will COVID-19 Put the Brakes on Cannabis Businesses…or Pump the Gas?

By Joshua Schneiderman, Elizabeth Wylie, Kevin Brown and Helen Goldstein

As the COVID-19 epidemic worsens, social distancing has given way to more restrictive stay-at-home (otherwise called shelter-in-place) orders issued first on a local level, but often later extended statewide. Although each of these stay-at-home orders is nuanced, at the core they require businesses and employees to work from home except for those businesses or employees deemed essential.  Even if deemed essential, that does not mean it’s “business-as-usual” for cannabis retailers. Operating in the unique environment of a public health emergency creates its own challenges that require sensitivity to public health concerns, occupational health and safety issues, and potential third-party liabilities, among others.

In general, many localities have, after consideration, amended or clarified their orders to designate medical marijuana dispensaries essential and thus allow them to remain open. This designation may flow upstream to distributors, manufacturers and cultivators who may, by association, be allowed to remain open as ancillary to an essential service. In California, Governor Newsom deemed cannabis retailers “Essential Critical Infrastructure Workers” under the healthcare designation, so they can all remain open because there’s no differentiation between “medical” and “recreational” cannabis companies. In other locations, some stay-at-home orders have generally required curbside/takeout or delivery purchases for recreational dispensaries and social distancing at medical dispensaries.

The layering of federal, state and local rules, and their evolution as this pandemic unfolds, has created confusion for many businesses, including cannabis retailers.  For example, the mayor of Denver issued a stay-at-home order that closed cannabis stores in the city. After panic buying ensued, the order was updated to allow for dispensaries to remain open while practicing “extreme social distancing.” A few days later, the governor updated the statewide order with yet another standard, allowing for the sale of medical marijuana in store, but limiting recreational marijuana to curbside delivery only. Similar confusion ensued in Los Angeles and the Bay Area following local stay-at-home orders.

Because these orders vary considerably on state, county and city levels, cannabis businesses may wish to consult counsel before taking any action or preparing for a possible stay-at-home order. If such an order is not already in effect, cannabis businesses may want to prepare for the operational implications of such an order. Arizona Governor Doug Ducey, for example, proactively set the parameters for “essential services” to give businesses a head start on this planning. Some potential scenarios for consideration may include that medical marijuana dispensaries may be deemed an essential service, whereas recreational marijuana may not. Where recreational marijuana is not deemed an essential service, curbside and home delivery may still be permitted, but may require additional licensing from state or local authorities. Planning now may help minimize disruption to operations, employees and customers.

Businesses that remain open during this public health emergency may want to consider taking measures to protect employees, customers and other visitors from infection. Such businesses may want to consider a COVID-19 preparedness plan that outlines basic protocols for the workplace, including workplace controls like sanitation and employee hygiene standards, identification of recordkeeping and reporting requirements, and adopting employee education and training procedures. Employers may also want to consider developing guidelines for responding to employee reports of symptoms and/or exposure and consider whether to require temperature checks and/or wellness certifications before employees report to work. Such measures can be developed in consultation with counsel, after performing a risk assessment based upon OSHA standards. Businesses with an Injury and Illness Prevention Program (which is required in California) may want to consider ensuring that it reflecting the hazards associated with COVID-19.

Facilities that operate under a medical marijuana license may be classified as a healthcare provider or clinic under state and local laws and may be subject to additional compliance and reporting requirements. 

Cannabis businesses that take anticipatory steps toward compliance with the rapidly evolving health and safety guidelines, and implement appropriate precautionary measures, may be able to minimize disruptions to operations and maximize opportunities in this complex business landscape.