Due to the cannabis industry's developing nature, licensed California cannabis operators may find themselves in violation of constantly-changing rules and standards implemented by cannabis regulators, namely, the California Bureau of Cannabis Control, the California Department of Food and Agriculture, and the California Department of Public Health (collectively, the “Licensing Agencies”). From citations and fines to more injurious license suspensions or revocations, operators are constantly vulnerable to license violation allegations by the Licensing Agencies.
Getting your license suspended or revoked can severely disrupt company operations and cause major issues with meeting your business obligations. For example: a suspended testing lab cannot test cannabis products, resulting in major delays and their customers flocking elsewhere; a suspended retail license means a substantial loss in revenue; and a licensed cultivator on suspension may have to destroy their entire unsold product.
What can you do in case of an enforcement action against your license?
Thankfully, California's Business and Professions Code (“BPC”) and the California Code of Regulations (“CCR”) detail some of the procedures that the Licensing Agencies must follow when accusing licensed cannabis operators of violations in regulatory enforcement actions.
The below is a brief summary of a licensee's rights and the process involved in an administrative enforcement action brought by the Licensing Agencies.
Licensing Agencies's Disciplinary Authority
BPC section 26012 clarifies that the Licensing Agencies are responsible for the creation, issuance, denial, suspension, and revocation of commercial cannabis activity licenses in California. BPC section 26013 grants the Licensing Agencies the authority to prescribe rules and regulations in the CCR. BPC section 26030 et seq. lists the broad grounds upon which the Licensing Agencies may initiate an enforcement or disciplinary action against a cannabis operation, including:
- Failure to comply with any operating procedure submitted to a licensing authority;
- Failure to comply with any license conditions; and
- Failure to maintain safe conditions for inspection.
Penalties can include fines, being placed on probation, orders of abatement, and/or having the license suspended or revoked.
Initiating Enforcement Proceedings - Notice to Comply
Except for special circumstances detailed below in “Discipline Without Notice or Hearing,” the Licensing Agencies may discipline cannabis operators only after proper notice and hearing have been provided. What constitutes proper notice and hearing?
Minor enforcement actions usually begin with a Notice to Comply, which the Licensing Agencies may issue to a licensee for violation(s) discovered during an investigation or observed during an inspection over the previous 15 days.
Non-minor enforcement actions usually commence with the Licensing Agencies issuing a citation for the purported violation(s). Pursuant to CCR section 5802(a), the Licensing Agencies may issue citations containing orders of abatement and/or fines against a licensee. Moreover, CCR section 5802(c) specifies that each citation must be in writing, served personally or by certified mail, and inform the licensee that they may request an informal conference, or contest the citation. Failure to pay a fine within 30 calendar days of the date of assessment, unless the citation is being contested, may result in further action being taken by the Licensing Agencies.
What can you do if you get a citation?
A licensee may choose to contest the violation(s). Within 30 days of service of the citation, the licensee must submit a written request to the Licensing Agencies for an administrative hearing in accordance with California Government Code (“GC”) section 11500 et seq. If the licensee fails to submit a written request, the right to a hearing is waived and the citation would be deemed a final order of the Licensing Agencies.
A cited licensee may also, within 15 days after service of the citation, submit a written request for an informal conference with the Licensing Agencies, an important phase in potentially resolving the citation because at its conclusion the Licensing Agencies may affirm, modify, or dismiss the citation.
Suspensions, Revocations & Administrative Hearings
The Licensing Agencies may suspend or revoke a license1 by filing an “accusation” recommending disciplinary action against a licensee, in which an administrative law judge presides over the hearings.
The licensee has 15 days from receipt of service of the accusation to file a response, either by posing various objections, presenting defenses, and/or admitting accusations.
If a hearing on an accusation against a licensee results in a finding that the licensee is subject to disciplinary action, the Licensing Agencies may then order the license suspended or revoked.
Appeals and Judicial Review
The Cannabis Control Appeals Panel (“CCAP”) is responsible for handling appeals of disciplinary actions against licensees. Ultimately, the panel must enter an order either affirming or reversing the decision of the Licensing Agencies.
Both the licensee and the Licensing Agencies may appeal a CCAP decision to the Supreme Court of California or to the appropriate court of appeal.
Discipline Without Notice or Hearing
The Licensing Agencies have the authority to suspend or revoke a cannabis license if it appears from the Licensing Agencies' supporting documents that serious injury would result to the public before the matter could be heard on notice. In these circumstances, the Licensing Agencies must provide the licensee with a hearing within 20 days after issuance of the order to suspend or revoke.
The Licensing Agencies are also authorized to issue emergency decisions and orders for “temporary, interim relief” to prevent or avoid immediate danger to the public health, safety, or welfare. “Temporary, interim relief” may include the Licensing Agencies issuing a temporary suspension or ordering that certain cannabis goods not be sold.
If you are put in a position where you must defend your license against an alleged violation by local or state Licensing Agencies, please contact one of our experts to evaluate your case and help today.
1 It is important to clarify that, based on their reading of BPC section 26050.2, the Licensing Agencies may take the position that they are not required to give notice or administrative hearings to provisional license holders (as opposed to annual licence holders). As of the date of this article, however, such an interpretation has not been supported by a court of law and could be challenged on Due Process grounds.