We are in Year 4 of Proposition 64 implementation. The licensing authorities are moving away from taps on the shoulder (i.e., education and warnings) to slaps on the wrist (i.e., fines and citations). They expect operators to be strictly and fully compliant with all laws and regulations. Whether you’ve transitioned to an annual license or you’re still working through CEQA under a provisional, ask yourself if your compliance program is in tip-top shape for a comprehensive inspection.

For some operators, a light spring cleaning and tidying are in order. For many, it’s time to finally get SOPs, an internal audit schedule, and records in place. In this bulletin, we tell you about the vulnerability of provisional licenses, license revocations, and inspections.

No Due Date for Provisionals

A provisional license is less secure than an annual license. Why? Provisional licensees have no due process rights if an agency uses its sole discretion to revoke their license. There is no right to appeal. 
 
83% of California cannabis licenses are provisional. (Approximately 8,300).
 
Keep reading to find out some of the reasons a provisional license can be revoked. 

Enforcement & Revocations

You may have heard that a testing lab had its license revoked, filed a lawsuit against the BCC, and won back its license with a settlement agreement that included a $45,000 fine. (Don’t let this happen to you!)
 
102 licenses (about 1% of all licenses) were revoked as of May 3. 
 
  • The breakdown by licensing authority:
  • 56 are CalCannabis provisional licenses. 
  • 5 are MCSB provisional licenses. 
  • 41 are BCC licenses (2 annual, 39 provisional).
 
  • License types have the highest number of revoked licenses? Distributor (15) and Small Mixed-Light Tier 1 Cultivation (15).

What types of violations could lead to license revocation?

  • Engaging in commercial cannabis activity with an unlicensed person. 
  • Using a water source that was not identified or permitted on the application.
  • Failing to provide required notice to the state authorities when the premises has been inactive, abandoned, or closed for 30 consecutive calendar days.
  • Failing to pay fines within 30 calendar days. 
  • Manufacturing an adulterated cannabis product.
  • If you hold a provisional license, there are many other reasons – big and small – that the licensing authorities could decide to revoke a license.  

What other consequences might an operator face?

  • You may have to pay investigation and enforcement costs.
  • For 15 days, you must post a 2-foot “NOTICE OF REVOCATION” sign on your premises.
  • If you apply for any new license in California during the subsequent 3 years, the revocation and reasons must be disclosed in the application. 

Are you ready for an inspection? As we mentioned above, the agencies are moving away from a policy of education and warnings to fines and citations. One opportunity for the licensing authorities to learn about compliance violations is during the inspection process. We recommend that you organize and prepare to avoid incurring fines and enforcement actions. Contact us for help. In the meantime, take note of these common issues that come up during inspections:

  • Not having all pesticides that are on-site listed on your Pest Management Plan. Any new pesticides must be disclosed to CDFA via Science Amendment within 10 days.
  • Not having all inventory correctly tagged in METRC.
  • Not having up-to-date SOPs.
  • Not having a weighmaster license.
We’ve also attached a few example inspection checklists to give you an idea of what a comprehensive inspection might look like. 
 
Click below to download:

Tips

  • Do a mock inspection with your staff. Take a look at the attached inspection checklists for ideas.
 
  • Make an internal audit schedule. For at least the first audit, give yourself the gift of hiring an expert to run a full compliance analysis. Plan quarterly audits thereafter. 
 
  • Check your record-keeping against the regulatory requirements. If your business operated before METRC was fully online, there’s a good chance your records are incomplete and/or need to be organized. 
 
  • Make sure the state has complete and current application information (premises diagram, pest management plan, primary contact, etc.)
 
  • Look at your SOPs. Do they cover all the written procedures requirements in regulation? Your license type determines which SOPs are required. We’re here to help. 
 
  • Don’t have written procedures? Move those up on your priority list. 
 
  • Convert to an Annual license ASAP to gain due process rights. 

UPCOMING EVENTS

California NORML Legal Seminar – June 1 & 2, 2021

Join Partner Ariel Clark and CalNORML for a panel discussion on Equity Grows Up–the Increasing Political Presence of the Social Equity Movement in California Cannabis.
 
Members of the cannabis industry and the general public are welcome, and can purchase tickets (without CLE credits) for individual sessions for $25 each or full days for $75.

If you have any questions about how the above or would like to discuss how it could impact your business, please contact your attorney directly or call our main line at 877-257-2442.

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