Michigan voters approved recreational marijuana: What does that mean for Michigan businesses and residents?

November 8, 2018

Michigan voters approved Proposal 1 enacting the Michigan Regulation and Taxation of Marihuana Act. Michigan is the first state in the Midwest to legalize recreational marijuana. Marijuana will be legal for broader use in Michigan under Michigan law; however, marijuana is still an illegal narcotic under federal law. Below are answers to important questions about marijuana under Michigan law after the passage of the Act.

1.   Is marijuana now legal for all purposes in Michigan?

A.   With the passage of Proposal 1, marijuana will be legal under Michigan law for both medical and recreational purposes. State law will limit the use, possession and cultivation of recreational marijuana and impose licensing requirements on businesses that want to enter the cannabis industry. In addition, as discussed below, local governments, employers, and property owners will be able to prohibit the use of marijuana in some circumstances.

Importantly, though, both medical and recreational marijuana remain illegal, with limited exceptions, under federal law. Proposal 1 only decriminalizes the recreational use and possession of marijuana under state law. Marijuana is regulated as a Schedule I substance under the Controlled Substances Act (21 U.S.C. § 811) — the same as cocaine and heroin. It is a violation of federal law to possess, grow, transport, distribute or prescribe cannabis, for medicinal or other purposes. The use of marijuana and conducting a marijuana business is illegal under federal law and such activity may be subject to federal prosecution. Persons and entities who engage in these activities are exposed to federal criminal, civil and administrative forfeiture actions.

The federal government does not need to pursue criminal prosecution for marijuana-related activities to seize, and seek the civil forfeiture of, real or personal property used to facilitate the sale of marijuana as well as the money or other proceeds resulting from those sales. Any assets used or money invested in marijuana-related activities is subject to potential seizure and forfeiture.

2.   Does the change in Michigan law affect what the federal government can do regarding marijuana in Michigan?

A.   No. In the past, the United States Department of Justice has exercised its discretion not to prosecute cases where the production, distribution or possession of marijuana complies with state law and certain priorities, such as prohibiting the sale of marijuana to minors, are met. Earlier this year, Attorney General Jeff Sessions stated that federal prosecutors will continue to use their discretion in enforcing federal law and will be guided by the Department of Justice’s priorities, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of violations on the community.

3.   What is permitted under the new Michigan law?

A.   The new law permits persons 21 years or older to possess, use, or, if licensed to do so, engage in the business of producing and selling marijuana in Michigan. Under the law, a person 21 years or older is permitted to possess up to 2.5 ounces of marijuana, except that not more than 15 grams may be in the form of a marijuana concentrate. In a person’s residence, a person may store up to 10 ounces of marijuana, so long as any amount in excess of 2.5 ounces is stored in a locked container. Individuals are permitted to grow up to 12 plants for personal consumption. The new law also creates a state licensing system for businesses that grow and sell marijuana commercially.

4.   When does the new Michigan law go into effect?

A.   Under the Michigan Constitution, the new law will take effect 10 days after the official declaration of the results of the election. The commercial production and distribution of recreational marijuana will not become legal until the State of Michigan adopts regulations under the Act and licenses firms to engage in the recreational marijuana business.

5.   May I prohibit the possession, use, or sale or marijuana on my property?

A.   Yes. The initiative allows a person to prohibit the consumption, cultivation, distribution, sale, or display of marijuana and marijuana accessories on property the person owns, occupies, or manages, except that a lease agreement may not prohibit a tenant from lawfully possessing and consuming marijuana by means other than smoking, such as edible marijuana products.

6.   Must I allow my employees to possess marijuana at work? May I test employees for marijuana and fire those who test positive?

A.   The new state law does not require an employer to permit or accommodate marijuana at the workplace or on the employer’s property. Employers may still use pre-employment drug tests and implement drug-free workplace policies, enforced through drug testing. Although employers may still maintain drug-free work policies, an employee who is terminated for using licensed medical marijuana may still be able to recover state unemployment benefits.

7.   Will people be allowed to consume marijuana in public places under the new Michigan law?

A.   Marijuana must be consumed on private property or at a business zoned for marijuana use. Marijuana may not be consumed in a public place or on property where smoking marijuana is prohibited. Marijuana also may not be consumed on K-12 school grounds. Marijuana may not be consumed on federally-owned property.

8.   Can a local government limit marijuana businesses?

A.   Yes. Municipalities, including cities, villages and townships, can ban recreational cannabis businesses and can cap the number of licenses. A municipality can charge an applicant up to $5,000 in licensing fees. A municipality cannot ban the use of recreational marijuana.

9.   The Act imposes a 10% excise tax on the sale of marijuana (plus 6% sales tax). Where will the tax proceeds go?

A.   Excise tax receipts go in the “marijuana regulation fund.” Monies in the fund will be used to implement, administer and enforce the Act. In addition, for at least two years, the fund will provide $20 million annually to certain clinical trials approved by the federal Food and Drug Administration. The remainder of the monies in the fund will be distributed 35% to K-12 education, 35% to the Michigan Transportation Fund for the repair and maintenance of roads and bridges, 15% to the cities, villages or townships that allow marijuana retailers or marijuana microbusinesses in their communities, and 15% to counties where a marijuana retailer or marijuana microbusiness is located.

10.   A lease cannot prohibit the possession of marijuana, but can a Michigan landlord restrict the use of marijuana?

A.   Yes and no. A Michigan landlord has the right under the Act to ban marijuana smoking on the property, but cannot prohibit the possession of marijuana or its consumption by means other than smoking. The commercial cultivation, distribution, processing and the sale of cannabis may be forbidden by a landlord.

11.   What are the state law penalties for possessing marijuana in excess of the limits permitted under the new law?

A.   First and second violators are responsible for civil infractions and potential fines of not more than $500 and $1,000, plus marijuana forfeiture. A third violation renders a violator guilty of a misdemeanor with a possible fine of $2,000, plus marijuana forfeiture.

12.   Will marijuana be legal on college campuses?

A.   No. Students at Michigan colleges and universities that receive federal funds are not allowed to possess or use cannabis on campus. According to the Drug-Free Schools and Communities Act of 1989, any institution that receives federal funds must implement and enforce federal drug policies. Therefore, in order to continue receiving federal funds, even if a university wanted to amend its drug policy program to allow marijuana use, the university could lose funding. Currently, the University of Michigan and Michigan State University do not allow medical marijuana use under the Michigan Medical Marijuana Act.

13.   What is required to engage in the business of growing, processing, distributing, or selling of recreational marijuana under the new law?

A.   Businesses that want to enter the recreational marijuana industry in Michigan must be licensed by the Michigan Department of Licensing and Regulatory Affairs. The Department of Licensing and Regulatory Affairs has up to 12 months from the effective date of the ballot initiative to develop rules to regulate recreational marijuana. In addition to obtaining a license from the State of Michigan, a business must receive approval from the local municipality in which the business desires to locate. The process is expected to be similar to the process the State of Michigan has adopted for medical marijuana, except that license applications will be reviewed by the Department of Licensing and Regulatory Affairs rather than a separate licensing board. It is anticipated that this may speed the process of obtaining a recreational cannabis license.

14.   How many plants can a commercial grower of recreational marijuana in Michigan have?

A.   The new law establishes three tiers of business licenses, scaled by the number of plants a license holder may cultivate:

i.   Class A business license allows up to 100 plants at one time;
ii.   Class B business license allows up to 500 plants at one time; and
iii.   Class C business license allows up to 2,000 plants at one time.

15.   Must a person still apply for a medical marijuana card to buy marijuana?

A.   Yes, for now. The sale of recreational marijuana will not be permitted until after the state adopts regulations and issues licenses to businesses to engage in the recreational marijuana business. Once that occurs, patients could buy recreational marijuana without using their medical marijuana card. It is expected that obtaining a medical marijuana card will offer certain advantages to the holder when further regulations are implemented. Currently medical marijuana is subject to a 3% excise tax and 6% sales tax, while recreational marijuana would be subject to a 10% excise tax, plus 6% sales tax. Individuals 18 and older may apply for medical marijuana cards, but you must be 21 to purchase recreational marijuana under the new law.

16.   May a person grow as many plants as they want for personal use?

A.   No. Under the new law, a person may cultivate up to 12 plants in his or her home. Plants must be grown in a secure, enclosed area, and may not be grown where visible from a public place.

17.   May a person give marijuana to others under the new law?

A.   If the giver and the recipient are both over the age of 21, giving marijuana products as gifts is permitted under the Act. A person may not receive any payment for the gift and the gift may not contain more than 2.5 grams of marijuana.

18.   May a gift of marijuana be sent through the mail?

A.   No. The U.S. Postal Service is an arm of the federal government, which still considers marijuana a controlled substance. Even if the package remains in Michigan, using the U.S. Postal Service would be illegal.

19.   If a person was previously convicted of marijuana possession under Michigan law, will that past state conviction be expunged?

A.   No. The proposal is not retroactive. A previous conviction may not be expunged unless the person qualifies for expungement under existing state law. There is no expungement for federal convictions.

20.   Can I drive after consuming marijuana?

A.   No. Similar to alcohol, it is illegal to operate a vehicle under the influence of marijuana. How police will enforce this is still uncertain, because there are no national standards to determine drugged driving. Additionally, tetrahydrocannabinol (THC), the active chemical ingredient in cannabis, remains in the body long after marijuana is ingested.

A 2013 Michigan Supreme Court case defined impaired driving under the influence of marijuana as having “a substantial and material effect on driving.” In that case, the individual was a medical marijuana patient. It is expected the same standard would apply to a recreational user.

Disclaimer: Warner routinely provides clients and contacts with our insights and updates concerning new laws. The following information is being shared for those who may be interested in or curious about an issue impacting businesses operating in the State of Michigan.

This alert is not intended to cover all aspects of Proposal 1, but instead highlights some of the more common questions and answers associated with the new law. If you have any questions, please contact your Warner attorney or contact Rodney Martin at rmartin@wnj.com or Matt Johnson at mjohnson@wnj.com.