New York Marijuana Law: What Businesses Need to Know

On March 31, 2021, New York State (NYS) became the sixteenth state to legalize marijuana for recreational use. Under the new law, it is legal for individuals age 21 and older to possess and purchase up to three ounces of marijuana, as well as to possess up to five pounds at their residence. Although the law took effect immediately, it may take up to two years to implement, including the setup of the critical licensing system for marijuana retailers across a wide range of industry categories, including cultivation, processing, distribution, retail, delivery, and nurseries. Notably, although the law does not specify how many licenses will be available in each category, NYS aims to grant at least 50% of available delivery and nursery licenses to minority-owned and women-owned businesses, as well as to disadvantaged farmers and veterans. 

The Application Process

The NYS Cannabis Control Board (CCB) will review all applications to cultivate, process, distribute, deliver, or dispense cannabis, and a separate license will be required for each facility where any such activities take place. The substantial fees to apply for such licenses are non-refundable, and the application package must include, among other things, information about the applicants’ identity (including racial and ethnic diversity), evidence of good moral character (including verification through fingerprint submissions), and financial statements. The licenses will typically be valid for two years and then must be renewed. Many applicants, such as those requesting dispensary and processor licenses, must notify the municipality, city, town, or village where their premises will be located at least thirty days prior to filing their application in order to allow the local government an opportunity to object to the grant of the license. 

Local Government Oversight over Cannabis Regulations

Although local NYS governments are preempted from adopting any laws relating to the operation of adult-use cannabis businesses, all local codes applicable to businesses generally still apply (e.g., time, place, and manner restrictions, zoning rules, etc.). It is unknown to what extent NYS localities will regulate cannabis businesses in their territories. Even the newly-enacted law itself contains important geographic constraints, such as a prohibition on certain licensees being located within 500 feet of school grounds or 200 feet from a house of worship. There are additional restrictions on advertising and marketing content, which is prohibited within 500 feet of (or where it can be readily observed from) school grounds, daycare providers, playgrounds, libraries, public parks, and public transit vehicles. This presents certain difficulties for marketing in dense locations like New York City. 

Licensing and Landlords

There are many other limitations regarding licensed premises, including restrictions on transfers to a different location, security requirements, and entrance and exit arrangements. Most applicants must typically own the to-be-licensed premises or possess them under a lease for a term as long as their prospective license. The CCB can revoke licenses and refuse to issue them to the same premises for up to five years. Therefore, landlords with prospective cannabis licensees should carefully verify them as tenants, although they cannot refuse to lease their premises to such businesses other than under very limited circumstances. Landlords may also run into issues with their commercial lenders, who may consider the landlords in default if they lease to a business that is illegal under federal law. Please see our earlier update on New Jersey’s marijuana legislation, for additional information about this federal-state conflict. 

What Employers Need to Know

New York State employers can now discipline or terminate employees for using marijuana only under very limited circumstances, and cannot generally refuse to hire a prospective employee from consuming the drug. Action can still be taken where otherwise required by federal or state law, or when an employee is impaired on the job. Consequently, NYS employers should promptly review their internal policies to comport with the new marijuana-related changes, as well as monitor developments both at the state and local levels regarding marijuana use by employees. 

We encourage you to contact us should you have any questions regarding the above-described changes, as well as to assist you with any associated licensing matters.