Oregon Hashish: OLCC suggests decreasing some penalties for violations

A few months ago I wrote about the Oregon Liquor Control Commission’s (OLCC) new fix-it or ticket program, which focuses on education rather than penalties for certain rule violations. This week the Rules Advisory Committee (“RAC”) announced a package to reclassify marijuana violations that, if adopted, will reduce the alleged penalties for certain types of rule violations. (Full text of the proposed changes here). The RAC will hold a public meeting this Friday, February 12th. Details on virtual participation can be found on the OLCC website.

This rulemaking round addresses six areas, each of which is discussed below. As a backdrop, the OLCC sanctions schedule is broken down into tiers that range from the most severe license cancellation for Category I violations to fines and suspensions for Category II to IV violations. (See here.) For background information on what to do if the OLCC informs you or your marijuana company of a rule violation and possible sanctions, click here. Let’s look at the proposed changes.

Notice of arrest or conviction

OAR 845-025-1160 (2) requires a licensee or applicant to notify the OLCC in writing of any arrest, quotation in lieu of arrest, or conviction for an offense or criminal offense. The current rule is for the licensee to do so within 24 hours of the triggering event and for the failure to notify to be a Category I violation. So the alleged penalty is the cancellation of the license.

The proposed rule would give licensees 72 hours to notify the OLCC of a triggering event. And instead of a Category I violation for failure to notify in a timely manner, the new rule would make failure to notify OLCC of a conviction a Category II violation and failure to notify OLCC of arrest would become a Category III violation do. The proposed change does not include any information on “quoting instead of arrest”. The failure to notify is probably also a Category III violation.

This change makes sense from a practical point of view as in some cases it may be impossible to notify the OLCC within 24 hours. The downgrading from a Category I violation also makes sense in view of the extent of the damage that results from a timely failure to notify. Although the sanction is reduced, arrest or conviction on renewal can cause problems with the licensee even if the OLCC has been notified in a timely manner. Whether the arrest or conviction will do so depends on the type of arrest / conviction and the surrounding circumstances.

Required camera coverage and positioning

OAR 845-025-1440 requires licensees to have extensive camera coverage for licensed premises. The coverage area includes all areas that the OLCC believes pose a public safety risk, as well as any areas where marijuana needs to be stored, destroyed, or rendered unusable. Licensee must ensure that cameras capture “clear and specific” images of people and activities within 15 feet of entry or exit points, and of all locations within restricted access areas and locations where consumer sales take place.

A violation of these requirements is currently a Category II violation. However, the OLCC suggests changing this to Category III. This is a very welcome change as licensees often violated camera coverage requirements due to mistakes made by the security service provider. However, licensees should understand that violating certain parts of OAR 845-025-1440 will continue to be a Category I violation.

Video recording requirements for licensed entities

OAR 845-025-1450 provides licensees for 24-hour video recording. According to the current rule, a licensee must inform the OLCC “immediately” about device failures or system failures that last 30 minutes or more. The proposed rule is that licensees have 24 hours to do this.

The proposed rule also reduces the penalties for certain violations from Category I and II violations to Category III violations. The reductions from Category II to Category III include the requirement that a licensee must keep backup records off-site for at least 30 days.

Again, this is a welcome change as many violations are the result of errors by security service providers or unexpected power outages. However, licensees should not view the reduction in penalties as an allowance to lightly treat record keeping requirements. While the OLCC can be lenient for a single, isolated breach, I do not understand that the OLCC will accept repeated breaches that may or may not be easily attributed to a security service provider.

Harvest notification

OAR 845-025-2090 requires growers to submit a harvest notice prior to harvesting any usable marijuana. The current rule states that failure to submit a harvest notice constitutes a Category III violation, “for each day the violation occurs”. The proposed rule would eliminate the cited language

The change is significant in that under the current rule, a licensee may be accused of multiple violations if they have not submitted a harvest notice for a particular crop. For example, suppose a licensee harvests on August 1st, but won’t file notice until August 15th. This may be 15 separate Category III violations instead of a single violation. I have read the proposed rule to be a single Category III violation.

Processing for cardholders

OAR 845-025-3305 regulates marijuana processors who work with OMMP cardholders. The current rule provides that the OLCC may “cancel or suspend” the processor’s registration under the rule for a violation of any of the provisions. The OLCC suggests making an OAR 845-025-3305 violation a Category III violation. The impact of this proposed change is likely to be minimal, as the medical marijuana market has largely given way to the recreational market. However, it at least provides clarity for processors that operate according to this rule.

Allowing hemp in a licensed building unless the rules allow it

The last change concerns hemp. OAR 845-025-8520 (11) (e) states that a licensee may not allow hemp or hemp items in the licensed premises unless the rules permit otherwise. (Getting a license for hemp in an OLCC licensed building is usually a straightforward task.) Violation is a Category I offense. The proposed change would maintain a “willful” violation of the rule at the Category I level , however, make an “unintentional” violation a Category III crime. The reasons for this change are obscure. Perhaps it reflects the ubiquity of “hemp items” (e.g., CBD products) owned by licensees.

The interesting shift is the separation between “willful” and “unintentional” violations. For years, the OLCC has had strict liability regarding the rules – meaning that the OLCC didn’t care whether a licensee (or his employee) intentionally broke a rule or simply made a careless mistake.

Licensees and lawyers like us, who represent many licensees in administrative proceedings, expressly reject strict liability. From our point of view, strict liability is too burdensome and too often leads to penalties that do not match the crime. Let’s hope that the trend to differentiate between “willful” and “unintentional” violations continues as the OLCC continues to revise the rules for marijuana licensees.

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