In the midst of this fast-changing national emergency, Clark Howell is writing to check in. We hope you and your loved ones are safe and healthy.
 
Our law firm is open and fully operational.
 
We are working (remotely!) around the clock to help our clients respond to the sweeping impact of COVID-19 on California’s cannabis and hemp communities.

1. Determine if you can stay open.

The State of California Says Cannabis Businesses Are Essential

(But Local Jurisdictions Can Say Otherwise).
 
Yesterday, California Governor Gavin Newsom issued an Executive Order (“Statewide Stay at Home Order”), requiring all Californians to stay at home except as necessary to support certain “federal critical infrastructure sectors” or access necessities such as “food, prescriptions, and health care.” It immediately went into effect and will be evaluated in real time; there is no current expiration date.
 
The Governor’s office has clarified that cannabis retail is considered an essential function under the Healthcare / Public Health Sector.
 
Therefore cannabis retailers and the businesses that support them are considered essential and may remain open, while complying with the other directives of the Order to make the workplace safe and continue all social distancing measures necessary.
 
That said, the State does allow local jurisdictions to make more restrictive orders provided such orders are consistent with the Statewide Stay at Home Order.
 
This suggests local jurisdictions can place limits on cannabis businesses (i.e., only medicinal retail and supply chain) but cannot prevent all cannabis businesses from operating.
 
Check Your Local Order.
 
Check if your local jurisdiction has issued a “Shelter in Place,” “Stay at Home,” or equivalent order, and determine whether your local authority has categorized your business as “essential” or exempt as a “healthcare” provider. If so, you may continue to operate under such local rules. If not, then we advise you to speak with your local officials (we can help—see below).
 
Local cannabis authorities are also starting to release jurisdiction-specific guidance.
 
i. Current list of Cities and Jurisdictions where your cannabis business has been determined an “essential business” and may continue to operate, subject to social distancing rules include:
  1. City of San Francisco (Order) (3/20: Cannabis-specific rules and guidance)
  2. City of Los Angeles (Order) (exempted as “Healthcare Operations”)
  3. City of San Jose (article)
  4. County (and City) of Santa Cruz (County guidance)
 
 
ii. Current Counties and Jurisdictions where business with an M-designation only may remain open (check Order for specifics) include:
  1. Los Angeles County (Order)
  2. Santa Clara County (article)
  3. City of Pasadena (Order)
  4. City of Long Beach (Order)
 

2. Keep your employees and customers safe.

(a) We suggest reviewing these excellent COVID-19 Retail & Delivery Safety and Sanitation Protocols put together by the dedicated folks at Meadow.
 
(b) If you are a storefront retailer looking to switch to “curbside pickup,” seek permission from the BCC and your local jurisdiction. 
Please note that at the time of this mailing, the City of San Francisco does not allow curbside pickup.
 
Although cannabis regulatory authorities have not issued official statements on COVID-19, our contacts at the BCC have advised that retailers can email the BCC at bcc@dca.ca.gov for permission to offer “curbside pick-up” outside a dispensary.
 
Before offering such a service, we recommend securing the written consent of your local authority, too. We also strongly suggest crafting any “curbside pickup” program with employee health and safety in mind. (For example, handling cash payments outside of a controlled check-out environment may put your employees at risk.)

3. Understand your employer obligations.

Your employees may be fearful, ill, or facing other hardship. You may be anticipating layoffs or staff shortages. Various state and federal laws impact your legal obligations when making employment-related decisions in response to COVID-19—including the new federal Families First Coronavirus Response Act (“FFCRA”) signed into law on March 18, 2020.
 
Your obligations will change, however, if your local jurisdiction considers cannabis to be an “essential” or “exempt” business.
 
For a full report, please see the employment law summary BELOW, courtesy of our employment and tax expert friends at Santos Walding LLP. 

4. Mind your tax filings & be aware of extensions.

Don’t lose sight of your tax obligations.
 
If you have any doubt as to your federal or state tax responsibilities or deadlines, contact your trusted tax advisor or feel free to reach out to us to get connected with an expert familiar with cannabis tax laws.
 
  • The federal income tax filing deadline of April 15 has been extended to July 15, 2020.
 

5. Evaluate contractual obligations
(that “Force Majeure” clause in your contract).

Despite the potential ability of cannabis businesses to continue operating (see above), it is plausible that you or your business partners may not be able to honor a contractual commitment—for example, to make timely payments or deliveries—due to a COVID-19-related circumstance. 
 
Contracts typically account for what happens when failure to perform is caused by a “force majeure” event such as a national emergency, but the exact language of such clauses varies. If you anticipate that you or a business partner will fail to meet a contractual obligation due to COVID-19-related circumstances, review how your contract allocates risk and responsibility in the event of an emergency. 
 
Contact us for assistance interpreting your contracts and strategizing to minimize liability.

6. Other things to keep in mind.

We recommend checking in on your insurance policy and understanding what type of losses might be covered.
 
For those clients with pending local and/or state licenses and permits, expect delays. 
 
Upcoming permit hearings may be canceled, and application deadlines may be pushed. Plan accordingly with respect to cash flow management, and please reach out to us for assistance navigating any state or local permitting regime.
We stand with you in this stressful and unprecedented time. Continue to look for legal and regulatory updates from us as circumstances progress.  
 
Virtual hugs,
 
Clark Howell Team
 

This email is provided as informational only and does not constitute legal advice.

If you have any questions about compassionate use donations, please contact your attorney directly or call our main line at 877-257-2442.

COVID-19 EMPLOYER UPDATE
BY SANTOS WALDING LLP
 

For any questions on the information provided below, please contact attorneys Jaime Santos (jaime@santoswalding.com) or Matt Walding (matt@santoswalding.com).

PAID SICK LEAVE ACT

Employers with less than 500 employees*

Eligibility
Full time or Part time employees who have worked for the Company for at least 30 days who are:
 
Subject to federal, state, or local quarantine or isolation due to COVID-19 (not social distancing order but actual quarantine);
 
Advised by health care provider to self-quarantine due to concerns related to COVID-19 (self-imposed quarantine without medical advice does not qualify);
Experiencing symptoms of COVID-19 and seeking a medical diagnosis.
Caring for an individual (limited to a family member? Stay tuned) who is either subject to federal, state, or local quarantine or isolation due to COVID-19 or has been advised by health care provider to self-quarantine due to concerns related to COVID-19.
 
Caring for the employee’s child whose school has been closed or place of care is unavailable due to COVID-19 precautions; or
 
Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of Treasury and Labor. The precise meaning of this sixth reason will be clarified by the Secretary of Health and Human Services.
 
Benefit
Full-time employees receive 80 hours of paid sick leave;
Part-time employees receive the equivalent of the number of hours they worked, on average, during a two-week period (pro rata);
For qualifying reasons 1-3, eligible employees will receive paid sick leave at their regular rate, except that in no event shall the amount paid exceed $511 per day and $5,110 in total;
For qualifying reasons 4-6, eligible employees will receive sick leave at two-thirds of their regular rate, except that in no event shall the amount paid exceed $200 per day and $2,000 total;
These benefits are in addition to benefits already offered by the employer.
 
Use
All eligible employees may use paid sick time beginning on April 2
Employers with less than 50 employees may seek a waiver form these requirements if the Act would jeopardize a business’s viability. Stay tuned.
 
 
EMERGENCY EXPANSION OF FMLA TO PROVIDE BENEFITS TO EMPLOYEES WHOSE CHILD’S SCHOOL OR PLACE OF CARE HAS CLOSED – Employers with less than 500 employees*.
 
Eligibility
Full time or Part time employees who have worked for the Company for at least 30 days;
Qualifying Reason for Taking Expanded FMLA Leave:
 
An eligible employee may take up to 12 weeks of leave if they is unable to work (including telework) because the employee must care for their child who is under 18 years of age and whose school or place of care has closed due to the COVID-19 public health emergency.
 
Benefit
The initial 10 days of leave are unpaid, but the employee may elect to use his/her accrued paid sick leave and/or accrued vacation and/or Paid Sick Leave Act benefit during this otherwise unpaid period. After the initial 10-day period, an employee is entitled to receive from the employer two-thirds of his/her normal wages for the number of hours he/she would be regularly scheduled to work, up to a maximum of $200 per day and $10,000 in total. 
 
Use
All eligible employees may apply for expanded FMLA leave beginning on April 2. If the necessity for leave is foreseeable, the employee must provide the employer with “such notice of leave as is practicable.” (not practical in California because all schools are already closed)
 
Summary
Essentially, a full-time eligible employee unable to work due to the closure of a child’s school or place of care will be entitled to 80 hours (10 days) of Federal Paid Sick Leave and up to 12 weeks of job-protected Emergency FMLA leave, with the first 10 days paid as Federal Paid Sick Leave at their full rate, but not more than $200 per day and $2,000 in the aggregate per employee (although the employee can elect to use other sick pay, vacation, or PTO instead), and the remaining 74 days paid by the employer at two-thirds of their regular pay up to a maximum entitlement of $200 per day and $10,000 in the aggregate per employee, all for a total leave payout of no more than $12,000 in the aggregate per employee. 
 
 
For both provisions, employers will be provided refundable tax credits against their employer portion of Social Security taxes for 100% of the qualified sick leave and family leave wages paid in accordance with the Act.

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