State of the State: Washington Regulators Turning a New Leaf (Part 2)

31 Jan State of the State: Washington Regulators Turning a New Leaf (Part 2)

In Part 1  of this two-part series we discussed the Washington State Liquor and Cannabis Board’s (“LCB”) new rules stemming from SB 5318, which passed last year and forced the LCB to transition from an enforcement-first policy to a compliance-first policy when handling violations. We covered how the LCB will handle Notices of Correction (“NOC”) and Administrative Violation Notice (“AVN”). Today we’ll look at the LCB’s revamped structure for penalties.

The new section at issue is WAC 314-55-509 (“Penalty Structure”).  This replaces WAC 314-55-515, the previous penalties section, and establishes the categories outlined below. I’ll summarize each category and offer some analysis as needed.

Category I.  Violations of a severity that would make a license eligible for cancellation on the first offence.

These violations include purchasing or selling marijuana outside of the licensed marketplace, failing to follow a suspension restriction while a license is suspended, transporting or storing marijuana to or from an unlicensed source, diverting products outside of Washington, allowing a person to become a true party of interest (“TPI”) or receiving funds from a person who would not qualify to hold a marijuana based on affiliation with criminal enterprises or criminal history. These violations are all pretty straightforward.

Category II. Violations that create a direct or immediate threat to public health, safety, or both.

These penalties do not allow the LCB to cancel a license on a first offense but do threaten public safety. Penalties include: selling to minors, engaging in criminal or disorderly conduct, operating an unapproved CO2 or hydrocarbon extraction system, intentional use of unauthorized pesticides, soil amendments, fertilizers, or other crop production aids, adulterated usable marijuana, transportation of marijuana without a manifest, obstruction, failure to use and maintain traceability, pickup, unload, or delivery at an unauthorized location. Some of these penalties can end in license cancellation even without four offenses. This is likely to face scrutiny under SB 5138.

Category III. Violations that create a potential threat to public health, safety, or both.

Unlike the previous two sections, all of these penalties do not result in license cancellation at the first offense. These violations include transporting marijuana while the driver does not hold a valid driver’s license, exceeding the maximum serving requirements for a marijuana-infused product, exceeding transaction limits, failure to follow and maintain food processing safety requirements, failure to maintain required surveillance system, retail sale of unauthorized marijuana-infused products, TPI violations, Financier violations, obstruction, failure to furnish records, failure to use or maintain traceability, and noncompliance with marijuana processor extraction requirements.

Category IV. Significant regulatory violations.

These violations include failure to keep records, marijuana being given away or sold below cost of acquisition, use of an unauthorized money transmitter for retail sales, misuse or unauthorized use of license, selling or purchasing marijuana on credit, engaging in nonretail conditional sales or prohibited sales, unapproved operating or floor plan, failure to maintain insurance, unauthorized sale by a processor to a retailer, packaging and labeling violations, and unauthorized storage or transportation of marijuana.

Category V. Procedural and operational violations.

These violations include operating outside of the approved hours of service (8:00 AM-12:00 AM), general advertising violations, engaging in conditional sales, failing to display identification badge, failure to post requires signage, unauthorized change of business name, transporting marijuana in an unauthorized vehicle, exceeding delivery timeframe, failure to maintain standard scale requirements, unauthorized driver or passenger in transport vehicle, load exceeding maximum delivery amount, violations relating to the return of marijuana at retail, failure to use or maintain traceability,  true party of interest or financier violations. Again, it’s hard to overstate the significance of the inclusion of true party of interest and financier violations here as in the past these offenses would carry a recommended penalty of license cancellation.

Category VI. Statutory violations.

These violations include allowing a minor to frequent a retail store or licensed premises, employee under legal age, opening or consuming marijuana at a retail premises, and retail outlet selling unauthorized product. Unlike the other sections, Category VI does not provide for escalating penalties. Each violation carries a $1,000 fine. This leads me to infer that these penalties do not increase over time.

Stay tuned for more coverage of Washington marijuana as we continue to track the LCB’s moves in implementing SB 5318. Also, don’t forget to check Cannabis Observer, a great resource for documentation of each and every LCB meeting.