Cannabis Businesses Must Comply or Face High Fines
Commercial cannabis in the state of California has a peculiar proposition hanging over it’s shoulder. In 1986, the voters of California passed proposition 65, also known as the Safe Water and Toxic Enforcement Act. This act requires businesses to prevent certain chemicals from entering California waters and to label products or work environments warning consumers and employees about these chemicals.
There are over 800 listed chemicals known to cause cancer or reproductive defects. Every year, California’s Office of Environmental Health Hazard Assessments (OEHHA) committee update the list and public policies according to new science and evidence of harm.
Prop 65 is meant to be a consumer-driven public policy that allows the consumer to make informed purchases. However, the required warning labels do not specify the chemical in the product or the amount, making an informed choice almost impossible.
“Marijuana smoke” is a listed chemical that has been determined by the Reproductive and Cancer Hazard Assessment Branch of the OEHHA to cause cancer. This is why cannabis businesses in California have paid so much attention to Prop 65. Current regulations, which went into effect August 2018, minimized the burden on cannabis retailers.
They will not be responsible for providing the required warning labels unless: (i) the retailer is responsible for introducing a listed chemical into a product; (ii) the retailer agrees to take on this responsibility; (iii) the retailer is selling the product under a brand or trademark that is owned or licensed by the retailer or an affiliated agency; (iv) the retailer obscured or did not conspicuously display warning labels or signage that were provided; or (v) the retailer has actual knowledge of potential consumer exposure that would require a warning, and there is no manufacturer, producer, packager, importer, supplier, or distributor of the product who is a “person in the course of doing business” and has designated an agent for service of process in California or has a place of business in California.
Commercial cannabis businesses must ask themselves if their product will produce or contain cannabis smoke, beta-Myrcene, myclobutanil, carbaryl or any other chemical listed HERE. Myrcene is a terpene common in many strains of cannabis. Myclobutanil is a fungicide commonly found in compounds like Eagle 20. Carbaryl is a synthetic pesticide commonly used to eradicate fleas, ticks, spiders, aphids, and fire ants.
Proposition 65 allows the California Attorney General to sue companies who violate the rules, but also allows private citizens the right to bring suit under easily satisfied conditions. If you package cannabis flower, you must add a proper Prop 65 label. If you manufacture cannabis concentrate using myrcene or myclobutanil, you will also need a proper label. If you are a retailer who allows onsite consumption, you must have a proper warning where the reasonable consumer would be able to read it clearly.
Niche lawyers who collect nearly 90% of the money awarded represent most of the Prop 65 cases private citizens bring. Usually, cases involving Prop 65 are settled out of court, but many court judgements have shown a clear pattern suggesting California law does not tolerate violations. Make no mistake about it, cannabis businesses are being targeted, and the payouts have been huge. Sonoma Patients Group, a dispensary in northern California, recently settled their case for $40,000.
For a private citizen’s Prop 65 case to move forward, the Attorney General of California or another law enforcement agency must be notified. 60 days after the notice, if no California law enforcement agency files an official suit, the private citizen may bring suit. Sometimes a business may get off easy, paying $500 to fix the problem. Businesses may also choose to challenge the suit under the premise that product didn’t contain a toxic amount of the substance in question. However, the state of California has not formally listed the levels of human toxicity for any of the listed substances. Proving in court that the product is safe under Prop 65 may cost more than owning up to it and settling.
Nothing in Prop 65 limits what a private business may post about their opinion on the matter. Cannabis businesses will have to treat Prop 65 seriously if they wish to stay in business. I highly advise getting a lawyer immediately upon notice of a potential or actual Prop 65 suit. Better yet, consult with a knowledgeable attorney before starting business, and make sure to clearly satisfy these legal requirements. With punishing fines for each violation, up to $2500 per item sold, this investment will pay off in droves.