March 23, 2020: Los Angeles
In much of California, cannabis businesses are allowed to continue on with their normal operations, despite Governor Newsom’s order to residents last week (https://covid19.ca.gov/img/Executive-Order-N-33-20.pdf) to stay home due to the Coronavirus. Only businesses deemed “essential” are allowed to stay open, and notably, cannabis businesses have been included in this category by state and local officials. When the Governor issued his state-wide “stay at home” order, his office made clear that cannabis retailers were not on the list of nonessential businesses required to close. In addition to cannabis, essential businesses allowed to stay open in the state include banks, grocery stores, gas stations, and pharmacies. Local jurisdictions are allowed to place more restrictive rules on cannabis businesses than the state, and to order closures for local health reasons. Many local governments, however, have followed the lead of the Governor and made clear that cannabis businesses are “essential” and thus allowed to stay open.
On March 19, Los Angeles Mayor Eric Garcetti issued a “Safer at Home” emergency order, ordering the closure of non-essential businesses and all citizens to stay inside their residences except for taking care of certain essential needs. (https://www.lamayor.org/mayor-garcetti-angelenos-are-‘safer-home-new-emergency-order-stops-non-essential-activities-outside). Under the Mayor’s order, cannabis businesses are deemed “essential” and allowed to stay open. The Mayor’s order stated:
2. Subject only to the exceptions outlined in this Paragraph and Paragraph 5 below, all businesses within the City of Los Angeles are ordered to cease operations that require in-person attendance by workers at a workplace :
(vii) Essential Activities Exempt. Certain business operations and activities are exempt from the provisions of this Order, on the grounds that they provide services that are recognized to be critical to the health and well-being of the City.
These include: (a) All healthcare operations, including hospitals, clinics, dentists, pharmacies, pharmaceutical and biotechnology companies, medical and scientific research, laboratories, healthcare suppliers, home healthcare services providers, veterinary care providers, mental and behavioral health providers, substance use providers, physical therapists and chiropractors, cannabis dispensaries, or any related and/or ancillary healthcare services, manufacturers and suppliers. Healthcare operations does not include fitness and exercise gyms and similar facilities.
In an Update published on its web site, the LA Department of Cannabis Regulation confirmed that, pursuant to the Mayor’s order, all cannabis businesses with Temporary Approval (not just retailers) will be authorized to stay open. (https://cannabis.lacity.org/blog/dcr-news-bulletin-covid-19-updates)
San Francisco was initially confused about cannabis businesses, saying dispensaries had to shut down pursuant to its “shelter in place” order. Later, however, its Department of Public Health tweeted that dispensaries could continue to operate, because “Cannabis is an essential medicine for many San Francisco residents.” (https://twitter.com/SF_DPH/status/1240057523954016256). Many other local jurisdictions in California, including San Jose and Sacramento, have issued similar notices that commercial cannabis activity will continue to be allowed.
Following the lead of Governor Newsom and local jurisdictions, the California State Public Health Officer designated a “list of ‘Essential Critical Infrastructure Workers’ to help state, local, tribal, and industry partners as they work to protect communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security.” (https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf.). The cannabis industry was included in the “Food and Agriculture” sector in the list of essential workers, described as “Workers supporting cannabis retail” and “a complex web of growers, processors, suppliers, transporters, distributors, and consumers.”
All three state agencies that regulate commercial cannabis activity in California also recently issued statements that all types of commercial cannabis activity (storefront retail, delivery, distribution, manufacturing, cultivation, and testing) will continue to be allowed, pursuant to the Governor’s order (so long as the license holders also continue to have local approval).
Meanwhile, cannabis sales have been booming in California as residents have retreated to their homes, with a mix of boredom and panic over dire news reports about the Coronavirus. This creates a great opportunity for cannabis businesses to not just survive but to thrive as one of the few industries allowed to operate, and to provide medical and psychological relief to citizens across the state affected by the Coronavirus. As the cannabis industry ramps up to serve citizens across the state, now is also a great opportunity for investors to seek to acquire a cannabis business. Many operators are currently strapped for cash but are sitting on valuable businesses and would welcome business partners who are seeking to buy them out or partner with them to build a successful operation in a now-booming sector of the economy.
Cannabis businesses that are struggling can now also seek economic relief under various local and state programs offered due to the Coronavirus, which can help cover mortgage payments and payroll expenses during these difficult times. Attorneys active in the cannabis field can help struggling business owners identify and access financial help from these government programs, and advise on how to buy or sell equity in cannabis businesses.
Author: Raza Lawrence
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