In 2018’s Queen’s Law Reports cover story, several faculty and alumni weighed in on the hottest legal topic of the year: the impending legalization and regulation of marijuana for recreational use. Now that the Cannabis Act has been in effect since October 17 and its one-year anniversary is set to introduce to the legal marketplace three new forms – cannabis edibles, extracts and topicals, QLR editor Lisa Graham checked back in with our experts for their latest perspectives.
The View from Ottawa
By Nathaniel Erskine-Smith, Law’10
MP (Liberal), Toronto Beaches-East York
Successes
The public health approach to regulating cannabis has largely met expectations. Public health is prioritized through restrictions on commercial advertising and youth access, and Canadians are treated like the responsible adults we are through a legal marketplace, a home-grow limit of four plants, and possession limits for domestic travel.
Challenges
There have been some supply challenges, and Health Canada has responded by increasing resources to expedite applications for cannabis producer licences.
Two bigger policy challenges also lie ahead. First, the government should completely expunge cannabis possession records to both recognize that cannabis prohibition disproportionately impacted visible minorities and to acknowledge that cannabis possession should never have been criminalized in the first place. Second, the government should prioritize patients’ needs through low-cost, fair access to medical cannabis and should remove the excise tax on it.
Preparing for new forms of cannabis
Proposed federal regulations restrict mixing cannabis with alcohol or nicotine, restrict marketing flavours that may be appealing to kids, and limit THC* levels and health claims.
*THC, tetrahydrocannabinol, is the chemical compound in cannabis responsible for a euphoric high or intoxication.
Taxation
By Professor Art Cockfield, Law’93
Tax Law Scholar and Policy Consultant
Tax revenue changes? Two tax controversies
It hasn’t really changed. The federal government imposed two levels of tax: the GST/HST (depending on the province or territory where the product is produced) and a special excise tax of $1 per gram of marijuana or 10 per cent of the final retail price, whichever is higher. The legal market has not taken off as much as anticipated, and taxes are paid only by consumers who buy from licensed producers. There are a couple of controversies. Is cannabis over-taxed? Why is the government taxing prescription drugs? Normally drugs for medical purposes are exempt from all taxes. The taxes create a big price difference between the black market and the legal market. With legal cannabis being more expensive, consumers are staying in the black market.
The government should get rid of the excise tax for both medical and recreational marijuana and get rid of the GST/HST on medical product. As I said in my 2016 op-ed, I recommend reducing the tax burden until there is a viable market and then maybe reintroducing taxes at some future point.
Policy goals for tax compliance
The big players, all the licensed producers, are clearly complying with the tax laws; they’re public companies. There is still a grey and black market producing illegal marijuana, and Canada is not getting any money out of it. That can’t be the long-term situation. There haven’t been any successful efforts to get these tiny, illegal players to comply.
Production
By Ruth Chun, Law’06
General Counsel, Newstrike Brands Ltd./Up Cannabis, Toronto*
Biggest changes
Ramping up cannabis supply and distribution has arguably been the toughest challenge facing producers since legalization. The reality is that supply will not be able to meet market demand in the immediate near term, despite industry’s collective efforts to grow quality, compliant product as efficiently as possible. But this comes from an operational standpoint, not a legal one.
The proposal to amend the Cannabis Act and its regulations to create three new categories of cannabis – edibles, extracts and topicals – is an exciting expansion of the adult-use market and facilitates the entry of high-margin derivative products. The cannabis industry moves at lightning speed, and getting market-ready for new products means reviewing and commenting on the proposed legislation and guiding the operations and marketing teams based on the anticipated legal framework, while also dealing with everyday regulatory, marketing and capital markets work.
*Since this interview, Newstrike has entered into a definitive arrangement agreement under which HEXO Corp. of Quebec will acquire all Newstrike shares.
Indigenous Impacts
By David Sharpe, Law’95
CEO, Bridging Finance Inc., Toronto
First Nations’ economic development
Bridging Finance has been unwavering and remains very committed to using cannabis as an economic development tool for First Nations. The company is providing financing to numerous First Nations for cultivation and distribution of cannabis, including all 13 First Nations in Nova Scotia, Rama First Nation and Peguis First Nation.
The most immediate positive impact for First Nations has been job creation and training. Our cultivation facilities with First Nations are majority owned by the First Nation. This majority ownership provides autonomy to the First Nation and wealth creation for generations to come. We are still tackling equality for First Nations with the provincial governments regarding cannabis distribution to ensure that First Nations have access to the lucrative sales market.
Licensing
By Trina Fraser, Law’97 (Com’94)
Co-Managing Partner and Head of CannaLaw Group, Brazeau Seller Law, Ottawa
New licence categories
With the introduction of private cannabis retail in Ontario and the new federal licence categories and product types, over 90 per cent of my practice is now cannabis based. Legalization marked the creation of new federal licence categories such as nursery, micro-cultivator, micro-processor and medical seller. There has been a great deal of interest in these licence categories and the new opportunities that they present. As the October 17, 2019, deadline for regulating edibles, extracts and topicals is quickly approaching, my clients are busy conducting R&D and building business models around the virtually unlimited number of new cannabis products that these regulations will permit.
Security clearances for those with convictions
The framework is permissive regarding prior possession convictions, but still allows the refusal of required security clearances on the basis of prior production, distribution or selling convictions. There is still discretion to grant security clearance in such cases, where it is determined that doing so would not pose an “unacceptable risk to public health or public safety.” The problem is a lack of clarity and transparency on how this determination is made. The uncertainty this creates (i.e., the inability to predict with confidence whether certain individuals will get cleared and how long it will take) imposes barriers (for example, in procuring required investment) and thus creates a disincentive for some to apply.
By Matt Maurer, Law’06
Partner and Vice-Chair of Cannabis Law Group, Torkin Manes LLP, Toronto
Biggest practice changes
Perhaps not surprisingly, there has been a surge of legal work involving retail cannabis operations. Helping clients acquire licenses from the government, as well as all the traditional legal work associated with setting up a business and operating a bricks and mortar store, has consumed a large portion of my practice since legalization. Although cannabis law has been the majority of my practice for a number of years, legalization has led to exponential growth of our practice and has required us to add multiple new lawyers to help handle the ever-growing workload.
Industry market trends
The market is shifting away from being focused mainly on licensed cultivators. Instead, lots of focus is now being placed on service and accessory companies. It is an exciting time in this space because there really is an explosion of new products, services and concepts and a need to help clients get those items to market. Services include companies providing delivery, technology to log medical usage, and, financially, to provide payment product solutions. Concepts include companies manufacturing things to assist with home growing, such as grow tents and lighting.
Cannabis Law
By James Munro, Law’04
Capital Markets Group Partner and Cannabis Practice Group Co-Chair, McMillan LLP, Vancouver
Biggest changes
We’ve been acting for large licensed producers for years, and now, on top of advising these issuers on cannabis matters, we’re assisting them in making their respective businesses larger. They’re fine-tuning their models for what they’re acquiring and for building out their brands. We’re seeing a large rise in M&A transactions as the industry consolidates. Before recreational cannabis was legalized, clients who had been in the business’s medical sphere for a significant time were preparing for that new market. The recreational market is here now, and issuers already have large market caps, the largest ones in the billions of dollars. Now they’re becoming senior issuers, looking at policies and taking corporate governance seriously. It’s well known that we represent Aurora Cannabis (a leader in the industry) and acted on all of their major acquisitions last year, including the two largest M&A transactions: CanniMed and MedReleaf. Our Cannabis Practice Group had a very strong year in 2018.
B.C.’s hybrid retail model: points of failure
The B.C. model hasn’t been effective for a number of reasons. Acting as a warehouse, the government buys cannabis from licensed producers and then sells it to certain retail stores. The government has its own stores and has not been quick to open them. Vancouver had a prolific culture of having dispensaries; many of those are still open, but it’s unclear to the public what is legal and what is not. That’s a point of failure on the B.C. government. Another is the few stores open in B.C. that are privately owned. One of the best ways to meet the federal government’s key policy objective of keeping profits out of the hands of criminals is to involve in the industry those people who have excellent knowledge of what consumers actually want to buy and how they will consume it. In my mind, that’s not government; that’s private industry.
Criminal Defence
By Sean Robichaud, Law’04 (Artsci’01)
Founder, Robichaud’s Criminal Defence Litigation, Toronto
Enhancing criminalization?
One might have expected the move towards cannabis decriminalization would reduce prosecutions and investigations; however, the opposite is manifesting in the criminal justice system. The most obvious examples are through the implementation of Bill C-46.
Ostensibly, this bill was intended to provide the necessary means for police to address the legalization of cannabis in the context of impaired driving offences; however, it has fundamentally changed Canada’s impaired driving law, raising serious concerns relating to the constitutional validity of the enhanced investigatory powers C-46 brings with it. Those include enabling police to detain drivers and obtain bodily samples without reasonable grounds to believe or suspect impairment or consumption of alcohol. Undoubtedly, this will increase criminal charges rather than reduce them. It’s not only in impaired driving, but also the ancillary police searches that will stem from these investigations and detentions.
Many legal experts, including retired Queen’s Law Professor Donald Stuart, have sounded alarms on the potential for abuse of these powers towards racialized and other vulnerable groups. As the courts come to interpret this new regime, we will come to see how much liberty is sacrificed in the pursuit of lawful cannabis consumption. In my view, we have compromised far too many Charter rights in exchange for a lawful ability to consume a substance that was effectively decriminalized prior to the legislation coming into effect. In short, whatever “legalization” has come from the Cannabis Act, is disproportionately offset by criminalization elsewhere.
Public Health
By Dr. Chris Simpson
Vice-Dean (Clinical), Queen’s School of Medicine; Medical Director, Southeastern Ontario Academic Medical Organization
Public education campaigns
There has been a noble effort to educate the public about the potential health risks of cannabis use by organizations like the Canadian Medical Association and the Canadian Centre for Substance Abuse and Addictions. Thankfully, the efforts have centred on providing advice about reducing risk if individuals do choose to consume cannabis, rather than saying, “Thou shalt not.” However, the factual message that cannabis use can be harmful, particularly for teens and young adults, has been largely overshadowed by the barrage of “cannabis-positive” messaging on social media and in popular culture. The additional confounder has been the promotion of cannabis as a therapeutic agent. Claims for marijuana’s “medicinal” applications far exceed what the evidence currently suggests, leading to a further perception that it must be “safe.”
Evidence from the Emergency Department
ED physicians have been seeing an increasing number of cannabis-related illnesses for several years now, among them cases of hyperemesis syndrome, acute psychosis, and injuries from crashes caused by impaired drivers. Teens and young adults are the largest demographic group. Accidental ingestion of cannabis products (ones that look like candy, for example) is increasingly seen too, particularly in toddlers. It’s premature to know with certainty whether legalization has changed this trend in any way.
Strict marketing regulations
Health Canada has done a great deal of work, and its approach has been generally very good. Its prohibitions on cannabis promotion include a requirement for plain packaging, and it provides information for consumers on the potential health impacts of cannabis use. But it’s been a bit of a wild west out there since legalization. Edibles and synthetics are out there already, so many producers and suppliers seem not to be following the rules.
Queen’s Health and Safety
By Ann Tierney, Law’89
Vice-Provost & Dean of Student Affairs, Queen’s University
Policies and resources
Legalization of cannabis has prompted changes to university policies, as well as new resources and education initiatives to ensure the campus community is aware of the restrictions and protocols now in place. From a Student Affairs perspective, we take a harm-reduction approach, as we do with other drugs, tobacco and alcohol.
In terms of health promotion, for example, we ran a cannabis harm reduction campaign that included the risks of mixing substances. We base our programming on Canada’s Lower Risk Cannabis Use Guidelines and the Ontario Centre for Innovation in Campus Mental Health’s guide to reducing cannabis harms. To increase reach and impact, we involve students in developing and disseminating our materials, which include a comprehensive, student-focused Cannabis and Campus webpage.
We have students evaluating the cannabis harm reduction campaign, and we added cannabis questions to a student health and wellness survey. We’ll look to the resulting data as a post-legalization baseline. To date we haven’t seen an increase in cannabis-related incidents or complaints on campus, or in residences or Queen’s-owned housing.
We also expanded our Campus Observation Room (COR) to assess students under the influence of alcohol and cannabis. The COR, a space where students who have had too much to drink can be monitored, is run by Student Wellness Services, with trained student volunteers supported by hospital detox staff.
Once regulations or other details respecting the introduction of new products are available, we will update our current education programs and harm reduction strategies.
Workplace Safety
By Barbara Johnston, Law’93
Senior Partner & Head of Labour and Employment Group, Dentons, Calgary
Safety and privacy
Employers face onerous obligations under both the Criminal Code and health and safety legislation to ensure a safe work environment. Cannabis use poses significant safety risks in hazardous work environments. Since the legalization of cannabis, there has been an enhanced focus on workplace policies that ensure employers are appropriately addressing their obligations to minimize the safety risk associated with its use, including drug testing. Such policies engage two important interests: privacy and safety. Balancing these competing interests in light of legalization has led to significant legal challenges to employers’ rights to take the required steps to ensure workplace safety.
Employer impact
In 2013, the Supreme Court of Canada (SCC) in CEP, Local 30 v. Irving Pulp & Paper (Irving) confirmed that where there is enhanced safety risk in a hazardous worksite, such as a general problem with alcohol and drugs, random testing may be appropriate. Around the same time, Suncor announced it would implement random alcohol and drug testing for safety-sensitive workers in the Regional Municipality of Wood Buffalo (RMWB). After lengthy litigation, including a leave application to the SCC, the matter was settled in 2018. Suncor implemented random alcohol and drug testing – a significant step for ensuring the safety of all workers in the RMWB. Given the decision in Irving and the settlement in Suncor, we anticipate employers will continue to be able to be proactive in taking appropriate steps to address safety concerns with cannabis use in hazardous workplaces.
By Denis Mahoney, Law’93
Labour and Employment Partner, McInnes Cooper, St. John’s
Challenges in safety-sensitive workplaces
We are seeing an increase in violations of drug and alcohol policies. We are also seeing a slight increase in cases being contested through some form of adjudication, whether under the unjust dismissal provisions of the Canada Labour Code, human rights, arbitration, or wrongful dismissal lawsuits.
We continue to see expected negative impacts of employee cannabis consumption. Recreational use outside of working hours is showing up in reasonable cause and post-incident testing. When the test results indicate the presence of marijuana in the employee’s system in an amount above company policy cut-off levels, these workers are unfit for duty and pose considerable safety risks to themselves, coworkers, and/or the public. This often results in major discipline, up to and including discharge. These decisions are being challenged, and we expect to see the prevailing view of adjudicators in these cases throughout 2019.
Our firm represented an employer dealing with two employees using medically authorized cannabis who applied for safety-sensitive positions. Given the uncertainty associated with assessing their fitness for work and the workplace risks involving medically authorized cannabis, Arbitrator John Roil concluded if an employer can’t measure the risk, it is undue hardship to expect an employer to manage that risk. The two candidates were denied the positions. That decision is probably one of the most significant indicators of the risks associated with cannabis and safety sensitive workplaces. When balancing competing interests, we are advocating that arbitrators recognize the risks of cannabis use involving safety-sensitive positions; we need to reduce exposure to cannabis for employees in such positions.
Parting thoughts on global leadership
“It’s a world-wide movement,” says James Munro. “Dominoes are falling quickly, with other federal jurisdictions adopting cannabis laws and quickly following Canada’s example. The next big example will be Mexico. That’s an interesting development for North America. In my view, the U.S. will also adopt federal legalization one day.”
Professor Art Cockfield agrees. “We want Canada to be a world leader in this industry, and it’s not clear under the current government’s regulatory plan whether that will be achieved. If another big country comes along and legalizes cannabis fully, like the Americans are slowly doing, state by state, they will crush us, so we need to get the solution right for businesses and consumers. Why shouldn’t Canada be a global leader?”