New York State Office of Cannabis Management Issues Guidance for Adult-Use Retail Dispensaries

Client Alert

 

On Friday, October 28, 2022, the New York State Office of Cannabis Management (OCM) released its first Guidance for Adult-Use Retail Dispensaries (Guidance). The purpose of the Guidance is to help Conditional Adult-Use Retail Dispensary (CAURD) licensees plan for operating their dispensaries before regulations are formally adopted. The Guidance also articulates the OCM’s interpretation of the regulations and laws currently in place as well as the regulations that will be promulgated in the future.

The Guidance addresses more than thirty-five topics, ranging from compliance matters such as recordkeeping and employee training requirements, to dispensary logistics such as hours of operation and staffing requirements. The Guidance has far-ranging implications that will affect dispensary operations and the consumer experience when New York’s first retail locations open, predicted to happen in early 2023.

Prince Lobel’s Cannabis Team has reviewed the Guidance and prepared a list of twenty Frequently Asked Questions that licensees and consumers will have regarding the OCM’s Guidance for Adult-Use Retail Dispensaries:

 

1.  Are there limitations on dispensary hours of operation?

Yes. Municipalities may pass local laws and regulations governing the time, place, and manner, including the hours of operation, for adult-use retail dispensaries, provided that the municipality does not restrict dispensary operations to less than seventy hours per week.

A dispensary cannot operate between the hours of 12:00 AM and 8:00 AM unless it is given express written permission by the municipality, or the municipality passes a local ordinance authorizing dispensaries to operate during such hours.

A dispensary may allow customers to place orders and accept payment for such orders outside of the dispensary’s hours of operation (e.g., through an online website/app). However, it cannot provide cannabis products, in the store or by delivery, until the dispensary’s hours of operation begin.

 

2.  Can dispensaries deliver cannabis products to customers?

Yes. In addition to the services offered inside of the brick-and-motor store, dispensaries may deliver their own products to customers.

A licensee may only use ground transport (not drone delivery), including, but not limited to, cars, vans, bikes, scooters, and foot, to deliver cannabis products. A Licensee must own or lease any motorized or unmotorized vehicle that it uses to transport cannabis products. Further, the licensee must provide an OCM-compliant invoice to the customer upon completing the delivery.

No more than twenty-five employees (or the full-time equivalent thereof) may provide delivery services for the licensee per week.

 

3.  Can dispensaries operate drive-thru windows or pick-up lanes?

Yes. While all retail dispensaries must be located within a brick-and-motor store that allows customer entry, licensees may operate a drive-thru service window and/or a drive-thru pre-order pick-up lane. Customers may be permitted to enter a drive-thru service window or drive-thru pick-up lane in any form of transportation, including on foot, provided that the licensee ensures customer safety in all drive-thru areas.

Moreover, dispensaries can establish express lanes inside the store for customers who place pre-orders for pick-up.

 

4.  Are dispensaries allowed to display cannabis product samples?

Yes. Dispensaries may display cannabis product samples and make these samples available to customers for inspection, including to smell or otherwise inspect them.

Cannabis product samples may be displayed in a case or kept elsewhere on the premises, but must be kept in a secure, locked place when they are not being inspected by customers (e.g., locked behind a counter or other barrier). Cannabis product display samples must be handled in a sanitary and secure manner at all times.

Dispensaries may use product displays or other branded elements to advertise cannabis products within secured displays, even if these elements are provided by another licensee. However, such product displays or other branded elements must comply with all restrictions on marketing and advertising.

Further, licensees must ensure that no cannabis products are displayed in an area that is visible from outside the store. They must also ensure that no advertisement other than permitted outdoor signage can be seen from a school ground, childcare center, playground, public, or library.

 

5.  Can dispensaries give away or offer discounts on cannabis products?

No. Dispensaries cannot give away, including through donation, any cannabis products. Moreover, dispensaries cannot advertise giveaways, discounts, price reductions, points-based rewards systems, or customer loyalty programs, including but not limited to, by using the terms “gift”, “sale,” “free,” “price drop,” or “discount” on a menu, in any communications to customers, or elsewhere.

However, this does not prohibit dispensaries from changing the price of cannabis products or otherwise “discounting” products through methods such as “bundling” or “bulk pricing.”

 

6.  Can dispensaries sell non-cannabis accessories or merchandise?

Yes. In addition to being able to sell any authorized cannabis product obtained from a licensed distributor, dispensaries may sell cannabinoid hemp (CBD) products, if licensed to do so, as well as cannabis paraphernalia, stationery, gifts, and other minor incidentals. These products may depict cannabis or otherwise reference cannabis, provided that they do not reference a specific cannabis product or brand.

Dispensaries also may sell branded merchandise and apparel, including jewelry and accessories, in adult sizes only, containing the licensee’s own brand. A dispensary cannot sell apparel or merchandise, including jewelry or other accessories, that reference a specific cannabis product brand other than the licensee’s own brand.

 

7.  Are dispensaries required to provide customers with exit bags?

No. An exit package is not required. However, if a dispensary does provide an exit package, it may only contain the licensee’s brand name and logo. Any other text or symbols, such as selling messages, mottos, and other brand markers, are not allowed on the exit package.

A customer may provide their own exit package, such as a reusable bag or backpack.

 

8.  Are there limitations on exterior signage?

Yes. A dispensary cannot display more than two signs outside of the store. Note that this may include signs that are indoors, depending on the nature of the premises (e.g., if the dedicated entrance to the dispensary is within an indoor mall, then signs outside of the store, but within the mall, would count towards this limit, even though the signs would not be outdoors).

Exterior signage may only, at most, include text that is the licensee’s (1) business or trade name; (2) location and contact information; and (3) business type (i.e., “Adult-use Cannabis Dispensary” or similar phrase, but cannot be the licensee’s selling message or motto). Exterior signage cannot include a licensee’s logo, symbol, branded colors or any images, including, but not limited to, depicting cannabis/cannabis products or the imagery or action of smoking/vaping. Exterior signs also cannot include mottos, selling messages, or any other non-essential text.

Exterior signs must be on the same parcel as the store and affixed to a building or permanent structure (e.g., signpost). Exterior signage cannot be larger than necessary to reasonably display the information on the sign to individuals within or near the licensed premises and cannot be illuminated by neon lights.

Note that interior window signage that is visible from outside of the dispensary may be subject to the content and character restrictions of exterior signage, as well as any additional future restrictions that the OCM may impose.

 

9.  Are there any interior signage requirements?

Yes. Dispensaries must post inside the store, in a manner that is plainly visible to all customers, the following information: (1) the licensee’s retail dispensary license; (2) hours of operation; and (3) notification that (i) “Consuming cannabis is not allowed on this premises.”; (ii) “Cannabis can impair concentration, coordination and judgment. Do not operate a vehicle or machinery under the influence of cannabis.”; (iii) “Using cannabis, in any form, while you are pregnant or chest/breastfeeding passes THC to your baby and may be harmful to your baby. There is no known safe amount of cannabis use during pregnancy or while chest/breastfeeding.”; and (iv) “Adult-use cannabis products are for use only by persons 21 years and older. KEEP OUT OF REACH OF CHILDREN AND PETS.

 

10.  Are there limitations on branding?

Yes. Dispensaries cannot appeal to individuals under twenty-one years of age in their marketing or advertising, including their branding.

Brand/Branding refers to the name, entity name, or d/b/a name, registered trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other identifiable marker that identifies one adult-use cannabis licensee or adult-use cannabis licensee’s products as distinct from those products of other adult-use cannabis licensees and is used in, among other things, any packaging, labeling, marketing, or advertising. Branding cannot use images, fonts, colors, or messages that are attractive to individuals under twenty-one years of age.

Attractive to individuals under twenty-one years of age means any labeling, packaging, advertising, and marketing that make use of, including, but not limited to: (i) cartoons; (ii) bubble-type or other cartoon-like font; (iii) bright colors that are “neon” in appearance; (iv) similarities to products or words that refer to products that are commonly associated with or marketed in a manner so as to be attractive to individuals under twenty-one years of age, including, but not limited to, any imitation of food, candy, soda, drinks, cookies, or cereal, in labeling, packaging, advertising, or marketing (with the exception of cultivar or licensee names, entity name, or doing business as (dba) name; this does not preclude retail dispensaries from offering permissible forms of cannabis products with compliant packaging); (v) terms “candy” or “candies” or variants of such, in spelling like “kandy” or “kandeez” (with the exception of cultivar names or licensee names, entity name, or dba name); (vi) symbols, images, characters, public figures, phrases, toys, or games that are commonly used to market products to individuals under twenty-one years of age; and (vii) images of individuals who could reasonably appear to be under twenty-one years of age. More information on Packaging, Labeling, Marketing, and Advertising Guidance can be found here.

Further, a licensee cannot represent its business as producing/selling “organic” or “craft” product until the OCM authorizes definitions of those terms.

 

11.  Are dispensaries allowed to make health claims?

No. A dispensary, its employees, and all individuals or entities with a direct or indirect interest in the licensee cannot create the impression that the dispensary, or any adult-use cannabis products sold by the dispensary, will cure or prevent specific illnesses or diseases, treat any specific symptoms, or otherwise provide specific medical advice to customers.

While dispensary employees may provide general information to customers about the effects of cannabis consumption on the human body or make specific recommendations about safer storage or consumption of cannabis products, employees cannot give specific medical advice to customers based on factors unique to that individual’s health. Medical advice should be referred to customer’s health care practitioners.

Further, licensees cannot misrepresent their business as a medical cannabis dispensary. Adult-use dispensaries cannot use words in its branding such as drug, drug store, medicine, apothecary, doctor, or pharmacy, including any similar terms like “pharma-,” or “medi-”. This prohibition is applicable to medical cannabis dispensaries authorized to sell adult-use cannabis, with the exception for branding that appears solely on medical cannabis products at such premises and is only intended to be seen by patients in patient-only areas of the premises.

If a medical cannabis patient happens to present their patient certification to an adult-use dispensary employee and the dosing recommendation is “Per Pharmacist’s Consultation,” then the employee must notify the patient that they are not a pharmacist before they can make any recommendations/suggestions to the patient.

 

12.  Can dispensaries purchase cannabis products on credit?

Yes. Dispensaries may purchase cannabis products on credit from licensed distributors, provided that all agreements to purchase cannabis on credit are reported to the OCM with the terms of payment and credit. The OCM may invalidate agreements that it deems commercially unreasonable or where it suspects discriminatory pricing practices.

Licensees that purchase cannabis products on credit must complete payment for the purchase within 90 days. Distributors must report any delinquent licensees to the OCM, which will maintain a list of delinquent licensees. Distributors are prohibited from selling cannabis products on credit to any licensee on the OCM’s delinquent payment list.

 

13.  Can dispensaries receive discounts on cannabis products from cultivators, processors, or distributors?

In most cases, no. The Cannabis Law prohibits a licensee authorized to cultivate, process, or distribute cannabis from giving anything of value to a dispensary to induce it to buy products. Generally, the OCM presumes that anything a cultivator, processor, or distributor gives to a retail licensee is meant to induce the dispensary to buy product, including, but not limited to: (1) gifts; (2) discounts, except not in excess of one per centum for payment on or before ten days from date of shipment of such cannabis; (3) customer loyalty programs; (4) loans of money; (5) premiums; (6) rebates; (7) free product of any kind, except as permitted in regulations or guidance; (8) treats or services; or (9) property.

 

14.  Can a licensee select the location of its dispensary?

In some cases, yes. Certain retail dispensary licensees may be permitted to select the location of the licensed premises or relocate the location of the licensed premises, provided that the location of the licensed premises is approved by the OCM as part of the dispensary’s site plan and complies with any local zoning ordinances.

 

15.  Are there setback requirements for dispensary locations?

Yes. A dispensary cannot be on the same road and within five hundred feet of school grounds or on the same road or avenue and within two hundred feet of a place of worship.

The school grounds setback is to be measured along a straight line from the nearest point of the school grounds to the center of the nearest entrance of the proposed dispensary entrance. The measurement for the place of worship setback requirement is to be along a straight line from the nearest entrance to the building used for the place of worship to the center of the nearest proposed dispensary entrance.

Only entrances that are regularly used to give ingress to patrons of the establishment will be used to determine setback requirement measurements. “Entrance” does not mean a door which has no exterior hardware, which is used solely as an emergency or fire exit, for maintenance purposes, or which leads directly to a part of a building not regularly used by the general public or patrons.

Note that in addition to the above setback requirements imposed by the OCM, dispensaries must comply with any local zoning ordinances that are not preempted by the OCM regulations or determined to be unreasonably impracticable by the Cannabis Control Board (CCB).

 

16.  Are dispensaries required to have armed security?

No. However, licensees are permitted to hire armed service providers as part of the dispensary’s security measures, if they wish, and are required to implement and maintain a security plan to deter diversion, theft or loss of cannabis products, theft or loss of cash, prevent unauthorized entrance into areas containing cannabis products, and to ensure the safety of the licensee’s employees and the general public.

 

17.  Can dispensaries hire employees who are under twenty-one years of age?

Yes. A licensee may hire any employee over eighteen years of age. However, only employees who are at least twenty-one years of age can have direct interactions with customers inside of the store, transport cannabis products in any way, or be involved in any delivery operations.

 

18.  Can dispensary employees refuse to sell cannabis products to a customer?

Yes. Dispensary employees may refuse to sell cannabis products to a customer if they believe the sale would endanger the health or safety of the customer. However, dispensary employees must refuse a sale if, based on the information available to them at the time, the sale would (1) be to an individual who is under twenty-one years of age; (2) result in the customer exceeding the legal possession limit; or (3) create a risk of diversion.

 

19.  Can dispensary employees or customers use cannabis products on dispensary premises?

No. Under no circumstances is the use of cannabis products permitted anywhere on the premises, inside or outside, of any dispensary.

 

20.  Are there limitations on dispensaries’ retention of customer data?

Yes. A dispensary cannot retain a customer’s personal information for marketing and/or advertising purposes unless the customer consents to the information being retained for this reason.

 

 

As always, Prince Lobel’s dedicated team of cannabis attorneys are here to help you navigate New York’s evolving cannabis laws and regulations. If you have questions regarding the OCM’s Guidance for Adult-Use Retail Dispensaries or any other cannabis related licensure or regulatory matters, please contact James K. Landau, David C. Holland, Andrew Schriever, or any other member of the firm’s Cannabis Practice Group.

 

With thanks to Dalton Battin for his work on this Client Alert.

Primary Sponsor

Top Marijuana Blog