October 18, 2021

Volume XI, Number 291

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October 18, 2021

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City of Los Angeles Approves Cannabis Ordinances

On November 16, 2017, the Los Angeles City Council released two draft ordinances adding Article 4 to Chapter X of the Los Angeles Municipal Code to regulate cannabis in the City of Los Angeles. These revised ordinances were read at a Rules Committee hearing on Monday, November 20, 2017, and approved as amended by a full Council vote. Notably, the ordinances provide guidelines for procurement of licenses at the City level in furtherance of State law requiring city approval to obtain a California license. 

LICENSING PROCESS

The ordinances provide a general timeline that is still being defined. It instructs that once the City of Los Angeles Department of Cannabis Regulation (DCR) deems an application complete, it will be communicated to the applicant, who will have 10 days to mail notice of the application as specified. During this time, the application also is referred for a pre-licensing inspection. Within 60 days following the pre-licensing inspection, the DCR will either deny the application or make a recommendation to the Cannabis Regulation Commission (Commission) to issue the license. The Commission then schedules a public hearing during which it will review the written and oral record and make a determination of whether the license will be issued. If a license is denied at any point in the process, an applicant has 15 days from the date of the mailing of the decision to file a written appeal with the DCR. Late appeals will be denied as untimely.

During the first 60 days that the DCR begins accepting license applications, only Proposition M Priority Processing Applications shall be accepted. This includes retailer, delivery and on-site cultivation applications consistent with Proposition D. 

Application Requirements

Commercial Cannabis Activity applications generally will need to be filed online with all required fees. Once an application is deemed complete by DCR, a pre-licensing inspection and payment of any outstanding taxes must be completed before further processing. 

All applications must include:

  • Name of the applicant/owner applying for the license 

  • Type of license sought, including whether the proposed activity will involve medical and/or adult use

  • Date applicant began operations

  • License types that the applicant holds, listed along with license numbers and date of issuance from any state or local licensing authority

  • Prior license denials, indicating whether the applicant has been denied the right to conduct Commercial Cannabis Activity by any cannabis licensing authority

  • Business Premises, including the physical address, telephone number, and Council District,

Neighborhood Council, and Police Department Area of the proposed Business Premises 

  • Diagram of Business Premises in a detailed format required by the DCR and to scale; plus compliance with all applicable provisions of Los Angeles Municipal Code (e.g., parking, City Planning Commission policies)

  • Map with addresses requiring notice, specifically a radius map listing all addresses for parties subject to the LAMC § 104.05 Notice requirements, from a DCR-specified vendor

  • Business information, including email address and website, if applicable, for the applicant’s business, and the applicant’s address of record, contact information for the applicant’s designated primary contact person and the designated agent for service of process

  • Applicant’s business organizational structure, including business formation documents and materials filed with the State of California

  • Fictitious business names listed along with Business Premises addresses for all of the applicant’s operations

  • Financial Information as required by the State of California

  • Property information, including evidence that the location meets all City land use and sensitive use requirements and that the applicant has the legal right to occupy and use the BusinessPremises. (If applicant is not the landowner, must provide a form landowner’s affidavit and a copy of the lease, if applicable; if applicant is the landowner, a copy of the title or deed shall be provided.)

  • Staffing plan and organization chart outlining the positions and responsibilities of each employee, including a diversity and employee safety plan

  • Identification of an employee assigned to be the official neighborhood liaison for the Business Premises with a phone number and email address to receive and address complaints 24 hours a day

  • Valid seller’s permit issued by the California State Board of Equalization or Department of Tax and Fee Administration, as required by the state (Applicants may provide evidence of current application if a seller’s permit has not yet been received.)

  • Description of applicant’s limited access practices regarding individual access to limited-access areas of theBusiness Premises;

  • Security plan for LAPD approval, including a description of the video surveillance system; security alarm system; fire-proof safe, if applicable; and description of how access points to business will be secured

  • Description of how applicant will meet operational requirements, including, in detail, the State of California and DCR’s track-and-trace, inventory, returns, product destruction, waste management, environmental sustainability and records retention, and how the applicant intends to meet all the respective operational requirements as described

  • Proposed Community Benefits Agreement consistent with requirements to be determined by the DCR

  • Certified Uniform Program Agency (CUPA) permit, if applicable under state law, issued by the Los Angeles Fire Department prominently displayed on premises before issuance of a license 

  • Attestations that no owner is a licensed alcohol or tobacco retailer

  • Proof of a bond and/or insurance, including product liability insurance, within 15 days of receipt of a license. 

The DCR imposes additional license application requirements specific to Cultivation, Manufacturing and Testing Commercial Cannabis Activities:

Cultivation (Types 1A, 1B, 2A, 2B, 3A, 3B, 4, 5A)

  • Water source information as required by the State of California

  • An energy efficiency plan, including all power source information as required by the State

  • “Agricultural Employer” attestation

  • Evidence of Notice to Fire Department Bureau of Fire Prevention and Public Safety Manufacturing (Types 6 & 7)

  • Detailed description of manufacturing activity to be conducted, including the type of activity and description of extraction and infusion methods and types of products

  • Evidence of Notice to Fire Department Bureau of Fire Prevention and Public Safety

Testing (Type 8)

  • Proof of ISO accreditation or proof that the applicant is in the process of applying, in addition to laboratory-employee qualifications as required by the State

Pre-Licensing Inspections

Once the DCR determines that an application is complete, it will be referred for a pre-licensing inspection of the business premises during business hours. Existing medical marijuana dispensaries (EMMD) that are in compliance with all Proposition D restrictions and were registered with the City Clerk by November 13, 2007, are exempt. All pre-license inspection requirements must be satisfied before the application can be processed further. 

Inspectors may assess the accuracy of the premises diagram, security plan and fire safety plan, if applicable, and take fingerprints and confirm compliance with applicable building and fire code requirements. If the business premises’ electrical and/or water systems fail to meet Code standards, an applicant shall upgrade them to ensure compliance with Building and Fire Code standards. An inspection also may consist of auditing records; ensuring compliance for shipments, labeling and manufacturing equipment,; and investigating suspected violations. 

Once licensed, the Business Premises remains subject to routine inspections and must be inspected annually during the license renewal process. Prior notice of any inspection is not required and all inspection costs are charged to the applicant. 

Notice Requirements

Mailed notice of the application is required within 10 days of the DCR’s determination that an application is complete, and again at least 45 days before any Cannabis Regulation Commission public hearing, providing the date of the hearing and information detailing how to provide the DCR with information about the application. Notice must be posted in a conspicuous place on the business premises and made to:

  • Owner(s) of the Business Premises;

  • Owners and occupants of all property within 500 feet of the property line on which the Business Premises is located, unless said property is under the same ownership as the Business Premises, then to all owners of property adjoining that ownership

  • The closest neighborhood council

  • The closest business improvement district

  • The City council office within which the Business Premises is located. 

Issuance of a License and Appeals

Within 60 days of the date the pre-licensing inspection is complete, the DCR either will deny the license or make a recommendation to the Commission to issue a license. In the case of a non-retail applicant with Business Premises of less than 30,000 square feet, the DCR can approve the issuance of a license without a hearing. Upon receipt of a recommendation, the Commission will hold a public hearing and consider written information and oral testimony before making its determination. Critically, the Commission must not approve a license for an applicant with business premises in an area of undue concentration or not in compliance with California Environmental Quality Act guidelines, unless mitigation measures can be imposed. 

Any decision to approve or deny an application by a City cannabis licensing authority is final and effective upon the close of a 15-day appeal period if not timely appealed by either the applicant or any other person aggrieved by the decision. The 15-day period commences from the date of the decision’s mailing and must be submitted in writing via a master application provided by the DCR, setting forth the specific basis upon which the appellant claims there was an error or abuse of discretion. Notice of the appeal is required, and inaction by the appellate body within the time period allowed is deemed a denial of the appeal.

Operational Requirements

The draft ordinances further outline the City of Los Angeles’s operational requirements to which cannabis businesses must adhere. Violations may be enforced within five years of discovery of the violation and range from minor to serious. Minor violations each warrant assessment of an administrative fine equal to

50 percent of the current cannabis application fee. Moderate violations are fined 150 percent of the

current application fee and serious violations, an amount equal to 300 percent of the current cannabis application fee. All licensees must comply with the following: 

Appearance of Business Premises

  • License Display. City and state licenses, BTRC, operating conditions and emergency contact information shall be prominently displayed on the premises. Assigned neighborhood liaison phone number and email address shall also be prominently posted. 

  • Graffiti. Graffiti on site shall be removed or painted over within 24 hours of its occurrence. 

  • Outdoor Lighting. Shall be shielded so that it cannot be seen by persons on adjacent properties except for those light sources visible from an adjoining public sidewalk or alley.

  • Adequate Illumination. All exterior portions of Business Premises shall be lit so that faces and clothing are discernible.

  • Rooftop Equipment. All rooftop equipment must be screened from view of the public.

  • Security Bars. Exterior mounted devices are prohibited, including barbed wire. 

Inspection

  • Unrestricted DCR Access. DCR agents requesting admission for compliance determination shall be given unrestricted access during regular business hours.

  • Books and Financial Records. DCR or the City Office of Finance may make an examination of the books or records of any licensee, as deemed necessary. Retention of these records may be contracted out to a third-party but a contract does not relieve licensee of responsibilities.

Notice to DCR Required

  • Business Premises & License Transfer. Prior DCR written approval is required before a Business Premises location may be changed or a license may be transferred or assigned.

  • Subletting Premises. No portion of the Business Premises identified in the license may be sublet without prior DCR written approval.

  • Legal Action Against Licensee. Written notice must be transmitted to the DCR within 48 hours of a licensee’s criminal conviction, rendering of a civil penalty or judgment against the licensee, or revocation of a state license, permit or other authorization. 

  • Notice to LAPD. Licensee must notify DCR and LAPD within 24 hours of discovery of a significant inventory discrepancy, suspicion of criminal activity pertaining to business, loss or unauthorized alteration of records or any other breach of security.

Premises Activities 

  • Special Events/Parties. Not allowed at the Business Premises, even if a permit has been issued by a local agency. 

  • Consumption on Premises. Not allowed, nor is the consumption or sale of alcohol and tobacco on Business Premises.

  • Proper Ventilation. Air must be filtered to neutralize cannabis odors so that they cannot be detected by a person with a normal sense of smell at the exterior of the premises or on any adjoining property.

  • Loitering, etc. Licensees shall properly manage the premises to ensure no loitering and that all property areas, including adjacent areas under licensee control, are maintained in an attractive condition free from obstruction or debris. Both inside and outside the business premises shall be posted a sign reading “No Loitering, Public Drinking, or Public Smoking/Consumption of Cannabis.”

  • Physician Recommendations. May not be issued on any Business Premises for medical cannabis use.

Records Retention

    Seven-Year Storage. Required for financial records, personnel records, training records − including contracts with other licensees − permits and other government authorizations to conduct cannabis business activities, and all activities and transactions involving financial implications. 

Security

  • Security Personnel. Security personnel hired or contracted for by the licensee shall not be employees of the licensee and shall comply with the requirements of the City and State.

  • Locks. Commercial-grade, nonresidential door locks must be on all limited-access areas and points of entry and exit to the Business Premises.

  • Alarm System. An alarm system shall be maintained and monitored, and be such that a response is immediate. Licensees must apply for and maintain an Alarm System Permit and make available all information related to the system to the DCR or LAPD upon request.

ID Badge. All employees and agents must wear a laminated ID badge, including the licensee’s business information and a photo of the employee’s face not less than 2” x 2”.

Limited-Access Area. All non-employees or contractors must be escorted by a licensee’s agent when in limited-access areas of the premises. Individuals who enter the limited-access areas must be at least 21 years of age and a log shall be maintained of all non-employee authorized individuals who enter the area, accessible by the DCR upon request.

Surveillance System

  • Complete Digital Surveillance System. Business Premises must have a complete digital video surveillance system in accordance with the licensee’s approved security plan with minimum camera resolution of 1280 x 1024 pixels, capable of being accessed through the internet, with immobile cameras placed to allow surveillance of activity occurring within 20 feet of all points of entry, and with adequate lighting to allow for clear identification of all individuals.

  • Surveillance Areas. Areas that shall be recorded include areas where employees work with cannabis, where it is destroyed, limited-access areas, security rooms, areas storing surveillancesystem storage devices, and indoor and outdoor entrances and exits to the Business Premises.

  • Retailer Point-of-Sale Areas. Retailers also must record point of sale locations and displays that allow for recording of facial features of all persons. They must be kept for a minimum of 30 days, clearly and accurately display the time and date, record continuously 24 hours/day, and remain subject to inspection by the DCR.

Testing  

  • Testing & Labeling. 120 days after City licensure, or on April 1, 2018, whichever is sooner, a licensee must have cannabis goods tested and follow City and State labeling provisions.

Track and Trace

  • Financial Transactions. Licensees must use track-and-trace and point-of-sale terminals capable of recording and monitoring business activities, inventories, transportation and sales transactions, and generating reports on demand. Equipment must be fully integrated and maintain data about businesses from which goods are received, type and amount of goods, who holds title, and unique identifiers. 

  • Electronic Equipment. Equipment may include RFI devices, bar code identifiers, scanning equipment, cash registers, desktop computers, mobile devices and cloud-based technologies.  Data Storage. Must incorporate all aspects of revenue transactions, including transactional history, receipts, inventory levels and point of sales data, including wholesale and retail. 

Medical versus Non-Medical Cannabis. Data must allow for DCR or agents to distinguish activities of medical cannabis from non-medical cannabis. 

  • Retailers. Information to be tracked includes sale of goods information such as date of sale, type purchased, quality of goods and related sale prices.

  • Distributors. Must disclose when using its own distributor license to transport cannabis goods to a retailer and enter the transport event into the track-and-trace system database; information includes the distributor state license number, amount of goods transported, vehicle information and date of transport. 

  • CA State Unique Identifiers. DCR will use the State’s track-and-trace system for unique identifiers tobe used by all licensees at all times.

Waste

  • Trash Pick-Up. All trash-related activities shall be limited to 7:00 a.m. – 6:00 p.m. on Monday through Friday, and 10:00 a.m. – 4:00 p.m. on Saturday. No deliveries or trash pick-up permitted on Sundays. 

  • Waste Receptacles. Shall be kept secure and accessible only to authorized personnel. 

In addition to the above, retail, delivery, cultivation, manufacturing (type 2) and testing commercial cannabis activities have additional operational requirements with which they must comply. These are summarized below.

Retailer-Specific Operating Requirements

  • Access to Premises. Only individuals 21 or older with a bona fide business reason may enter the Business Premises with the exception of a medical cannabis patient over the age of 18 or accompanied by a parent or guardian.

  • Medical Cannabis Patients. Licensees shall only grant access to the area to purchase medical cannabis goods after an individual has been identified as a medical cannabis patient. 

  • Hours of Operation. Sales may only occur from 6:00 a.m. – 9:00 p.m. Pacific time. All patrons must exit the premises by 9:15 p.m.

  • Storage of Goods. When closed for retail business, cannabis goods shall be stored in a locked safe or vault on the Business Premises and only accessible by authorized employees.

  • Returns. Licensees may accept returns that they previously sold at the same Business Premises.

  • Returned goods may not be resold and must be destroyed.

  • No Free Samples.

  • Limits on Sale. Cannabis goods shall not be sold unless they were delivered directly to the retailer and have not exceeded their expiration date, are pre-packaged in their final sale form, and not to exceed the daily allowable limit. 

  • Storage. Cannabis goods must be stored in a building designed to permit control of the temperature, humidity and environmental contaminants; not exposed to direct sunlight; and segregated from other facilities on the premises.

  • Exit Packaging. Customers shall not leave the premises with goods unless they are in a statecompliant exit package.

  • Employee Training. Within the first three months of establishment, all retailer employees shall enroll in the DCR and LAPD standardized cannabis retailer training program. New hires must complete the training within two months of their date of hire, and a refresher course will be required for all employees every 24 months. 

  • Electronic Age Verification. Electronic age verification technology shall be installed at each point-of-sale location and must be used before each sale. 

  • One Door. Only one door shall be used for patron access. Two doors may be used, however, to allow for separation of medical and adult use sales. Exterior doors must be solid, kept closed at all times and equipped with an automatic locking device on the inside.

  • Windows. All front-facing windows shall be at least 50 percent transparent and provide a clear and unobstructed view. No window sales, such as drive-through or walk-up windows, are permitted.

  • Entertainment. No entertainment other than ambient music is allowed, including adult entertainment and alcohol or tobacco sales, or coin-operated games and similar.

  • Outdoor Speakers. No outdoor speakers, address or paging systems are permitted on the exterior portions of the Business Premises. 

  • On-Site Fire-Proof Safe. Shall be maintained on site. 

Delivery-Specific Operating Requirements

  • Delivery Employees. Delivery employees must be at least 21 years old and only authorized employees may be in a delivery vehicle during delivery. Couriers and independent contractors are allowed if permitted by the State. No delivery employees shall consume cannabis goods while delivering.

  • Delivery Location. Deliveries shall be made in person to a physical address within the boundaries of the City, unless authorized in each respective jurisdiction.

  • Electronic Age Verification. Device shall be used to determine the age of any individual purchasing cannabis goods for delivery.

  • What Constitutes Delivery. The process of delivery begins when the employee leaves the business premises with the cannabis goods and ends when that employee returns to the Business Premises after delivering the cannabis goods.

  • GPS. All delivery vehicles must be outfitted with a GPS device that remains active at all times so that the licensee can track the vehicle’s location. Cannabis goods must not be visible in the vehicle to the public and not left alone, unless the vehicle is equipped with an alarm. 

  • $3,000 Worth of Goods. While making a delivery, employees shall not carry cannabis goods in excess of $3,000, determined by the retail price of the goods.

  • No Deviation. From the delivery path, except for fuel, necessary rest or due to road conditions.

  • Vehicle Inspections. On the first day of each month and upon request, licensees shall provide the DCR and LAPD with motor vehicle information.

Cultivation-Specific Operating Requirements

  • Cultivation Plan. The cultivation plan shall meet all State requirements, including hazardous waste management under CUPA.

  • Transfer of Products. Licensees may receive immature plants or seeds from nurseries per State regulations.

  • Returns. Returns shall not be accepted after possession has been transferred.

  • Destruction. Plant material scheduled for destruction must be kept in a designated holding area and managed in accordance with State requirements.

  • Pests. Cannabis shall be kept commercially clean in respect to established pests of general distribution. 

  • Labeling. Packages and labeling must meet the State’s requirements.

  • Immature Plant Propagation. Propagating immature plants for distribution requires the licensee to obtain a Type 4 license.

  • Other. Licensees shall comply with State requirements with regard to processing their cannabis, environmental protection measures, electrical power use and fire safety plans.

Manufacture-Specific Operating Requirements

  • Extraction. Shall only be conducted using State-approved methods.

  • Employee Training. Within the first three months of establishment, all manufacturer employees shall enroll in the DCR and LAPD standardized cannabis training program. New hires must complete the training within two  months of their date of hiring and a refresher course will be required for all employees every 24 months;

  • Written Procedures. Must be established and implemented with respect to sanitation, disease control, cleanliness, contamination prevention, hazards, inventory and quality control; ensuring all product complaints are handled in compliance with the State; and included in the Cannabis Waste Management Plan for recalling products determined to be misbranded or adulterated.

  • Statutory Requirements. Must meet all facility suitability standards and be equipped with adequate sanitary accommodations, meet all manufacturer requirements, not exceed the appropriate level of contaminants, and ensure product is labeled and packaged in final form for retail sale per State requirements. 

Testing-Specific Operating Requirements

  • Compliance with State Regulations. All laboratory licensees must meet the requirements of the State of California unless additionally specified by the City.

  • Audits. An internal audit must be completed at least once per year or according to the ISO accrediting body’s requirements, whichever is more frequent. 

  • Access to Cannabis Areas. Access to areas in the lab where cannabis is present shall be controlled by limiting access to certain personnel to execute their specific job duties, implementing an access-control-card system at access points, using a security alarm system, and maintaining a detailed visitor arrival and departure log.

  • Storage. Cannabis shall be stored in a room or cabinet secured with a commercial-grade lock; secured areas must be locked at all times.

  • Data Storage. All raw unprocessed instrument output data files must be stored on some electronic format to be accessed and audited by the DCR upon request; all other data must likewise be stored and password-protected.

  • DCR Notification. Within 24 hours or discovery, the DCR must be notified of a loss of 5% or more of unpackaged inventory, a loss of at least one unit of packaged cannabis batch samples, or diversion, theft, or other criminal activity pertaining to the operation of the laboratory.

  • No Other License Ownership. No owner or employee may be employed by or have any ownership or financial interest in any other category of commercial cannabis activity.

© 2021 Wilson ElserNational Law Review, Volume VII, Number 332
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About this Author

Ian Stewart Litigation Attorney Wilson Elser Law Firm
Partner

Ian Stewart has defended complex litigation in state and federal courts for 25 years with a focus on product liability, complex general casualty, cannabis law, data privacy and cybersecurity, and intellectual property litigation. Ian is deputy regional managing partner of the firm’s Los Angeles office and a member of the Information Governance Leadership Committee.

As co-chair of the firm’s national Cannabis & Hemp Law Practice, Ian leads a national multidisciplinary team of lawyers who serve all aspects of the cannabis and hemp industries, as well as financial institutions and...

213.330.8830
Dean Rocco, Employment Attorney, Wilson Elser Law FIrm
Partner

Dean Rocco is co-chair of Wilson Elser’s national Employment & Labor practice. He represents employers of all types and sizes across the country as well as executives and members of management. He advises clients on issues such as managing employees with disabilities and medical leave rights, building sound personnel policies and complying with workplace regulations. Dean maintains a significant practice defending employers from lawsuits alleging workplace harassment, denials of disability or medical leave rights, unlawful termination of employment, and wage and hour...

213.330.8922
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