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Michigan Legislature Repeals Emergency Powers of Governor Act of 1945

On July 21, 2021, the Michigan legislature approved a petition to repeal the Emergency Powers of Governor Act of 1945, which was the statutory basis used by Governor Whitmer during the early days of the COVID-19 pandemic to institute sweeping health and safety restrictions.

Because the action taken by the legislature was pursuant to an “initiated law,” the repeal does not require Governor Whitmer’s approval, nor can she veto it.

Under Article II §9 of the Michigan Constitution, citizens can put an initiative on the ballot if they gather a certain number of signatures — at least eight percent of the total number of votes cast in the last gubernatorial race. Before an initiative reaches the ballot, the Michigan legislature can, as it did in this instance, pass the proposed law with a simple majority vote in each chamber, and such a measure approved in this manner cannot be vetoed.

Governor Whitmer’s use of the Emergency Powers of Governor Act, which involved ordering lockdowns, mask mandates, and cancellation of youth sports, among other things, has been the subject of considerable controversy throughout the COVID-19 pandemic.

Petition organizers from a group called Unlock Michigan began collecting signatures for the repeal effort in the Spring of 2020, and turned in petitions with more than the required 340,000 signatures to the Michigan Secretary of state in October, 2020.

The Michigan legislature previously approved legislation (through the conventional legislative process) that would have repealed the law, but Governor Whitmer vetoed it.

Court challenges were also raised, and in October, 2020, the Michigan Supreme Court ruled that the use of the Emergency Powers of the Governor Act to institute COVID-19 health and safety measures was unconstitutional.

Subsequently, the Michigan Department of Health and Human Services issued orders pursuant to its authority under the Public Health Code which reinstated many of the same health and safety measures that were invalidated by the court’s ruling. However, Unlock Michigan recently launched a new petition drive to change the Public Health Code to limit any emergency orders issued by the Michigan Department of Health and Human Services to 28 days without legislative approval.

If you have any questions about these issues, please contact Jean Kordenbrock or your Fraser Trebilcock attorney.

Jean E. Kordenbrock is an experienced legal professional and entrepreneur across a broad range of legal areas, business, and a diverse clientele. She has the unique quality of being a skilled attorney while also leading her own teams where outcomes combine legal, political, and business expertise. Jean can be reached at (517) 377-0824 or jkordenbrock@fraserlawfirm.com.

Biden Executive Order To Examine Non-Compete Agreements

On July 9, 2021, President Biden issued an executive order aimed at “promoting competition in the American economy.” A press release that preceded the issuance of the executive order stated the White House’s intention to “[m]ake it easier to change jobs and help raise wages” by removing barriers that “impede economic mobility,” including banning or limiting non-compete agreements.

In the days since the executive order was issued, we have heard from a number of clients who are, understandably, uncertain about the status of their current non-compete agreements. In short, the executive order has no immediate effect on existing non-compete agreements. And nothing in the executive order legally prevents an employer from entering into a new agreement with an employee, provided no other law or regulation prohibits it. Non-compete agreements are not limited or banned under federal law—at least not yet.

However, the issuance of the executive order, plus actions being taken by many state legislatures, suggests that there is significant momentum building to take some form(s) of action against non-compete agreements, and employers should pay careful attention to ongoing developments in this area.

The Law of Employment Contracts

As a general proposition, contract law generally, and employment contract law specifically, is left to the states and, except where federal policy concerns exist – for example, regulation of union-management relations with implications for the national economy. So, for starters, this presidential direction to an administrative branch regulatory agency is an attempt to expand the reach of federal governance.

The Impact of the Executive Order

Section 5(g) of the executive order directs the Federal Trade Commission (“FTC”), in conjunction with other federal agencies, to “address agreements that may unduly limit workers’ ability to change jobs.” It also urges the FTC Chairperson to “consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete and other clauses or agreements.”

Accordingly, in plain terms, the effect of the order is to start a process whereby the FTC will pursue a rulemaking process that would ban or limit the use of noncompete agreements as a matter of federal law. It is unclear how broad or narrow the rulemaking will be until actual proposed rules are presented.

Also, there is significant uncertainty as to whether the FTC has authority to regulate non-compete agreements. Such an action would almost certainly call into question whether the executive branch was encroaching congressional lawmaking power, and/or unconstitutionally infringing on the rights of states to make laws governing contracts.

Possible Secondary Effects

Beyond the more straightforward and intended result of a possible ban, second-order effects may arise which, presumably, would be considered by the FTC in the rulemaking process. For instance, tax-exempt employers, such as hospitals, insurance companies, and universities, sometimes rely on non-compete agreements to establish a “substantial risk of forfeiture” under Internal Revenue Code § 457(f) to delay immediate taxation of deferred compensation amounts. While the 457(f) negative tax consequences would primarily fall on the shoulders of the executive, this could also affect the timing of the inclusion of the income for purposes of the 21% excise tax on excess executive remuneration paid by such employers under Code § 4960, which is payable by the employer.

The Tea Leaves

We believe that if any regulation is attempted, it will be months or years in coming. We also believe that in the event regulation is initiated, it is likely to be directed at lower-compensated work and situations where workers do not possess proprietary skills or confidential information learned or obtained at the workplace.

We have counselled that non-compete agreements used by our clients should be well-founded in protecting the legitimate competitive interest of the enterprise, and should be limited to circumstances where that interest is present and properly described in the agreement or covenant. This advice remains pertinent, and review of those policies may be considered.

We will continue to keep you informed of relevant developments. If you have any questions, please contact Dave Houston or your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. All statements made in this article should be verified by counsel retained specifically for that purpose. Please contact us with any specific questions.

Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

NCAA Issues Interim Policy Allowing Student-Athletes to Monetize Their Name, Image and Likeness

The NCAA recently announced an interim policy that allows student-athletes from all three divisions to monetize their name, image and likeness (often referred to as “NIL”). The new policy went into effect on July 1, 2021.

The NCAA’s new interim policy was enacted on the cusp of laws in a number of states, such as Alabama, Florida, Georgia, Mississippi, New Mexico and Texas, taking effect which allow NCAA athletes to monetize their NIL.

It also follows a June 21 Supreme Court ruling that NCAA restrictions on “education-related benefits,” such as tutoring or scholarships, for college athletes violate antitrust law.

In a concurring opinion in the case, Justice Brett M. Kavanaugh wrote, “Traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated.”

The NCAA guidance allows students to engage in NIL activities so long as they are “consistent with the law of the state where the school is located” and allows students in states without NIL laws to participate without breaking NCAA rules.

Michigan’s new law allowing college athletes to earn money from their NIL goes into effect December 31, 2022, pursuant to legislation signed by Governor Whitmer in December 2020.

What is Allowed Under the NCAA Interim Policy

Prospective student-athletes may engage in the same types of NIL opportunities available to current student-athletes under the interim NIL policy without impacting their NCAA eligibility. However, the NCAA warns prospective student-athletes to consult their state high school athletics association regarding questions pertaining to high school eligibility.
Student-athletes may use a “professional services provider” for their NIL activities.
A “professional services provider” includes, but is not limited to, an agent, tax advisor, marketing consultant, attorney, brand management company or anyone who is employed or associated with such persons.
Student-athletes may enter into NIL agreements with boosters provided the activity is in accordance with state laws and school policy, is not an impermissible inducement and it does not constitute pay-for-play.
International student-athletes may benefit from NIL activities.

What is Not Allowed Under the NCAA Interim Policy

Making NIL compensation contingent on enrollment at a particular institution
Allowing compensation for athletic participation or achievement
Permitting compensation for work not performed

Higher-Education Institution Responsibilities

In issuing the interim policy, the NCAA highlighted a number of obligations imposed on, and issues to be aware of by, higher-education institutions in connection with the policy.

Schools are obligated to apply, and report potential violations of, NCAA rules that remain applicable, including prohibitions on pay-for-play and improper inducements.
While the NCAA does not prohibit schools from arranging NIL opportunities for student-athletes, it cautions schools not to use NIL transactions to compensate for athletic participation or achievement or as an improper inducement. The NCAA also points out that involvement in arranging NIL opportunities may also raise other issues—including potential application of state NIL laws, claims for contractual non-performance, Title IX issues, and employment issues.
Schools are not permitted to provide compensation in exchange for the use of a student-athlete’s NIL.
While the NCAA interim policy does not require student-athletes to report NIL activities to their schools, state laws, conference rules and institutional policies may impose reporting requirements.
The responsibility to certify student-athlete eligibility remains with the school.

The interim policy will remain in place until federal legislation or new NCAA rules are adopted. If you have any questions about these issues and how they affect your higher-education institution, please contact Ryan Kauffman.

Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters. You can contact him at rkauffman@fraserlawfirm.com or 517.377.0881.

Canada to Ease Travel Restrictions for “Fully Vaccinated” Individuals Effective July 5, 2021, at 11:59 p.m.

The U.S. border with Canada has been closed to nonessential travel since March 2020 to prevent the spread of the coronavirus, but Canada recently announced that it will begin easing travel restrictions in early July.

In mid-June, Canada announced the first phase of its plan to ease border restrictions for travelers entering Canada. Pursuant to the new policy, effective July 5, 2021, at 11:59 p.m. EDT, travelers who are “fully vaccinated” will be exempt from quarantine restrictions, mandatory hotel stays pending test results (for air travelers), and day-eight testing, provided all conditions as set forth below are satisfied.

A fully vaccinated traveler must provide documentation verifying that he or she has received, “at least 14 days prior to entering Canada,” the full series of a vaccine or a combination of vaccines that are accepted by the government of Canada.

Acceptable vaccines include:

Pfizer (Comirnaty, tozinameran, BNT162b2)
Moderna (mRNA-1273)
AstraZeneca (Vaxzevria, AZD1222, Covishield)
Janssen (Johnson & Johnson) – single dose

It is important to keep in mind that being “fully vaccinated” will not, in and of itself, guarantee access into Canada. According to Canada’s guidelines, a representative of the Canadian government will make the final decision “at the border based on the information presented at the time of entry.” And irrespective of one’s vaccination status, a traveler must still satisfy certain entry requirements, including:

Pre-arrival and on-arrival COVID-19 testing for all travelers, whether arriving by land or air.
The establishment of “a suitable quarantine plan” that addresses where a traveler can stay in Canada for at least 14 days, if necessary.
Travelers must electronically submit documentation of their vaccination status or COVID-19 test results through ArriveCAN prior to arrival in Canada.

Unvaccinated minors or dependent adults who are travelling with fully vaccinated travelers must quarantine for 14 days and follow all testing requirements, but are not required to stay at a government-authorized hotel.

At this time, there are no exemptions from testing, hotel stop-over or quarantine for travelers who haven’t received the full series of a vaccine or a combination of vaccines accepted by the Government of Canada.

If you have any questions on these issues, please contact your Fraser Trebilcock attorney.

When it matters in Michigan, Fraser Trebilcock is the trusted advisor for businesses and individuals facing legal and regulatory challenges, and our capabilities extend to wherever clients require counsel.

Department of Labor Retains Independent Contractor Test

In January 2021, during the last days of the Trump administration, the U.S. Department of Labor (DOL) issued a “final rule,” to become effective in March of this year, changing the decades-longstanding independent contractor test under the Fair Labor Standards Act (“FLSA”). Under the proposed standard a “two core factor” test was to be applied, which would have narrowed the considerations for exclusion of workers from FLSA coverage as “independent contractors.”

However, on March 12, 2021, the DOL under President Biden announced proposed rulemaking, in effect blocking implementation of the Trump rule. On May 5, 2021, the Department announced a final rule withdrawing the proposed new rule, which the DOL characterized as overly employer-friendly, inconsistent with the purpose of the FLSA, and disruptive to the settled law. Of note, the principal deputy administrator for the DOL Wage and Hour Division stated: “When it comes to digital workers … we want to make sure that we continue to look at their needs, how they are interacting with their individual employers and whether or not they have the protections of the Fair Labor Standards Act.”.

Independent Contractor Test Under the FLSA

The net effect of these maneuverings is that the prior “economic reality” test remains in place without change. This means that the previous guidance from the DOL using a six-factor balancing test, based on Supreme Court precedent, will still be used to determine a worker’s classification. The six factors are:

The nature and degree of the employer’s control;
The permanency of the worker’s relationship with the employer;
Whether the worker, or the employer, provides the means and instrumentalities of the work, such as investment in facilities, equipment, or assistants;
The amount of skill, initiative, judgment, or foresight required for the worker’s services;
Whether the worker is at risk or benefit of profit or loss; and
The degree of integration of the worker’s services into the employer’s business.

IRS Test Remains Unchanged, Also

The IRS test, by comparison, was not changed during the Trump administration. The IRS you will recall uses the “20-factor” test. The test is comprised of three general categories; behavioral control, financial control and relationship of the parties.

The IRS factors are:

Degree of direction of work by employer.
Amount of training required to qualify.
Degree of integration worker’s duties into business.
Must work be done by worker or can worker contract performance to others?
Control of assistants.
Continuance/permanence of relationship.
Control over schedule.
Demand for full-time work.
On-site requirements.
Order and scheduling of work – dictated by worker or employer?
Reporting requirements.
Method of payment.
Compensation for business or travel expenses.
Use of tools, instrumentalities, and materials provided by employer.
Level of investment in employer operations.
Share in gain or loss.
Ability to work elsewhere.
Availability to work for general public.
Control over discharge.
Right to terminate

If you have questions about these changes, please contact Dave Houston or your Fraser Trebilcock attorney.

Michigan Court of Appeals Rules in Favor of Newspaper’s Right to Disclosure of a Document Under Freedom of Information Act (FOIA)

In a precedent-setting case, a three-judge panel sided with a newspaper and journalists in their bid for a public body to disclose documents in a closed-session meeting. The Traverse City Area Public Schools Board of Education (TCAPS) couldn’t depend on a potential loophole in the OMA to shield information from FOIA requests. This case, at its crux, involves the intersection between the FOIA and OMA. The ruling is a victory for journalists and pushes increased accountability in Michigan’s transparency laws.

In the case, Traverse City Record-Eagle v. Traverse City Area Public Schools Board of Education and M. Sue Kelly, the three-judge panel affirmed the 13th Circuit Court Judge Kevin Elsenheimer’s order to the defendants, TCAPS and then-board president, M. Sue Kelly, to release documents related to a closed-session involving complaints against superintendent Ann Cardon. Cardon was hired by TCAPS as the superintendent. Soon after her hiring, complaints ensued. TCAPS requested a meeting to discuss complaints, and Cardon requested a closed session.

The session focused on Cardon’s employment status. A document known as the “Kelly document,” which contained the list of complaints against Cardon, was provided by Kelly at the closed session.

Cardon and TCAPS mutually agreed to her resignation. In an open session, a new interim superintendent, Jim Pavelka, was selected. The newspaper/plaintiff, the Traverse City Record-Eagle, requested the release of the Kelly document via a FOIA request. TCAPS refused to disclose the documentation, arguing that it was protected. The trial court and a three-judge panel disagreed.

TCAPS first argued the Kelly document qualifies as an exemption under OMA, where minutes of a closed session are not available via an FOIA request and only a court order could mandate disclosure. TCAPS cited the precedent established in Titus vs. Shelby, in which the court held the transcript of the closed session is part of the meeting minutes and could qualify as an exemption. This argument didn’t apply to the Kelly document. Although OMA doesn’t give an exclusive list on what may be contained in meeting minutes, it doesn’t mean every document referred to in the session can be exempt from disclosure. This would lead to a slippery slope, in that “it would seemingly allow any public body to attach anything to the official record in order to exempt it from disclosure.” The court did not consider the Kelly document as part of the meeting minutes.

TCAPS also argued that the Kelly document was a part of closed session deliberations and therefore exempt from disclosure under the OMA. This argument failed. The Titus court “focused on the fact that the transcripts were part of the minutes because of the plain and ordinary meaning of minutes and not because transcripts involved deliberations of the public body with the closed session.” In the current case, TCAPS didn’t show how the Kelly document falls within the plain and ordinary meaning of minutes.

The court used prior cases like Bradley v. Saranac Community School Board of Education and Detroit Free Press, Inc. v. Detroit to bolster its position. At issue in these cases was whether personnel files and settlement agreements were disclosable under the FOIA requests. The court found that these documents were not protected under the OMA and made an important clarification. Although minutes of a closed session meeting cannot be disclosed, the documents used in said session may be subject to a FOIA request. The specific discussions and deliberations surrounding those documents, however, are not subject to a FOIA disclosure request. But performance evaluations in Bradley, settlement agreements in Detroit Free Press and complaints regarding Cardon are subject to be disclosed as a part of a FOIA request unless a specific exemption exists. Ultimately, discussions surrounding the documents are not discoverable, but the public cannot be deprived of the documentation at the root of the case. This allows others to make their own interpretation of what is presented and requires a heightened level of transparency.

The newspaper also sued TCAPS for its decision to name Pavelka as interim superintendent. The newspaper claimed the decision was made outside of an open meeting, a violation of the OMA. The Court did not agree. An open meeting was held, and a motion was put forth to name the interim superintendent. All board members agreed. Although Kelly had an outside discussion and approached Pavelka regarding his interest in the position, there was no mention of contract terms or acceptance of the position. The newspaper failed to provide any evidence of a OMA violation. Although the court emphasized that the newspaper might be unhappy with the length of the discussions by TCAPS, “plaintiff points to no authority to show this was improper.”

This case provides important clarity for public bodies regarding their rights and responsibilities under FOIA and OMA. If you have any questions, please contact Ed Castellani or your Fraser Trebilcock attorney.

Edward J. Castellani is an attorney and CPA who represents clients involved with alcohol beverages as a manufacturer, wholesaler, or retailer. He leads the firm’s Business & Tax practice group, and may be contacted at ecast@fraserlawfirm.com or 517-377-0845.

U.S. Senate Passes the United States Innovation and Competition Act Which Would Allocate Billions Toward Higher Education Institutions

On June 8th, 2021, the U.S. Senate passed the United States Innovation and Competition Act (“USICA”), which is bipartisan legislation that would authorize billions of dollars in funding for technology research in the United States. A significant amount of funding is aimed at institutions of higher education.

The USICA, which would authorize $200 billion in funding for fiscal year FY 2022-FY 2026, is intended, according to its proponents, to counter the political and economic influence of China. The bill would provide for an expanded role for the federal government in certain “strategic sectors,” including semiconductors, drones, wireless broadband, and artificial intelligence, with increased funding and regulation of various industries.

The bill contains several higher-education provisions to facilitate research and development in the “key-technology focus areas,” including robotics, artificial intelligence, advanced energy sources, advanced computing, natural disaster prevention or mitigation, biotechnology and data storage and management.

The bill authorizes approximately $81 billion in appropriations for the National Science Foundation, which will oversee the allocation of funds available for higher education institutions, including:

Approximately $9 billion for higher education institutions to create technology centers that conduct research in one of the key technology focus areas.
Approximately $5 billion for scholarships and fellowships for community college students, undergraduates, graduate fellowships and postdoctoral awards for those studying in the key technology focus areas.
Approximately $4 billion for colleges and universities to conduct research and development with a focus on achieving “revolutionary technological advances” in the bill’s key-technology focus areas.
Approximately $4 billion to enable the transition of research results to developed and commercialized technologies within one of the key-technology focus areas.
Approximately $3 billion for establishing and operating test beds that advance the development, operation, integration and deployment of innovative technologies in one or more of the key-technology focus areas.

If you have any questions, please contact Ryan Kauffman.

Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters. You can contact him at rkauffman@fraserlawfirm.com or 517.377.0881.

Michigan COVID-Related Capacity, Mask and Gatherings Restrictions Will be Lifted Beginning June 22

Governor Gretchen Whitmer announced on June 17, 2021 that COVID-related restrictions for capacity, masks and gatherings will be lifted effective June 22. Beginning June 22, capacity in both indoor and outdoor settings will increase to 100 percent and the state will no longer require residents to wear a face mask.

MDHHS Secretary Elizabeth Hertel’s “Rescission of Emergency Orders” provides that most COVID-related restrictions for capacity, masks and gatherings will be ended effective June 22.

The lifting of these restrictions was expected to take place on July 1. However, given that more than 9 million vaccines have been administered and COVID cases are plummeting in Michigan, the timeline has been accelerated.

In addition to the order regarding gatherings and masks, additional orders being rescinded as of June 22 include:

While state mandates on mask wearing are ending, it’s important to note that individual businesses may still require masks.

In addition, some orders will remain in effect to protect vulnerable populations in corrections, long-term care and agriculture. Certain public health measures also will continue for reporting requirements and COVID testing.

If you have any questions regarding how these developments affect your business or organization, please contact Dave Houston or your Fraser Trebilcock attorney.

Judge Issues Preliminary Injunction Blocking Detroit from Issuing Recreational Marijuana Business Licenses; Says Licensing Program “Likely Unconstitutional”

Last November, the City of Detroit announced its rules for allowing licensed adult-use recreational marijuana sales, which included controversial provisions meant to give “social equity applicants” a competitive opportunity. Applicants are entitled to preferential treatment if they have lived in Detroit for:

15 of the last 30 years
13 of the last 30 years and are low-income
10 of the last 30 years and have a past marijuana-related criminal conviction, or
Have parents who have a prior controlled substance record and still live in the city

These rules gave rise to a lawsuit filed on March 2, 2021, in Wayne County Circuit Court, by a plaintiff who has been a Detroit resident for 11 of the past 30 years who intends to apply for an adult-use retail establishment license.

The lawsuit alleges that the “licensing scheme favors certain Detroit residents over other Michiganders based on the duration of their residency.” The plaintiff argues that the ordinance violates the U.S. Constitution’s commerce clause because it “discriminates against out-of-state residents and punishes people for moving between states.”

In April, U.S. District Judge Bernard Friedman issued a temporary restraining barring Detroit officials from receiving any more marijuana business applications.

On June 17, Judge Friedman again ruled in favor of the plaintiff by issuing a preliminary injunction halting Detroit’s recreational marijuana licensing program indefinitely.

The issuance of a preliminary injunction in the case is significant because the U.S. Supreme Court has set a high burden of proof for a plaintiff seeking an injunction. The Court identified a four-part balancing test in Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), which requires plaintiff to demonstrate:

Likelihood of success on the merits
Likelihood of irreparable harm
The balance of both equities and hardships is in their favor; and
That a preliminary injunction would be in the public interest

In his order, Judge Friedman stated that Detroit’s licensing program is “likely unconstitutional.”

To learn more about the Detroit lawsuit, as well as other challenges to municipal licensing schemes related to recreational marijuana in Michigan, click here.

At Fraser Trebilcock we have a strong litigation department that has handled multiple lawsuits in the cannabis field and are able to assist you if you believe you are entitled to relief. If you have any questions or require assistance, please contact Paul Mallon or your Fraser Trebilcock attorney.

Paul C. Mallon, Jr. is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043.

Fraser Trebilcock attorney and former Michigan State Legislator Klint Kesto has nearly two decades of experience working in both the public and private sectors, including serving as Co-Chair of the CARES Task Force. You can reach him at kkesto@fraserlawfirm.com or 517.377.0868.

Federal Cannabis SAFE Banking Act Bill Gains Steam with Backing from Michigan Financial Institutions and Government

In September 2019, the U.S. House of Representatives passed the Secure and Fair Enforcement Banking Act of 2019 (“Safe Act”), which would prohibit regulators from terminating or limiting either deposit or share insurance of a financial institution for doing business with a cannabis company. It would also prohibit regulators from barring such institutions from offering financial services to cannabis companies and stop regulators from encouraging financial institutions to not do business with those companies.

In March 2021, revised versions of the bill were introduced in the U.S. House and Senate, and the House version passed in April with significant bipartisan support (a vote of 321-101).

Currently, cannabis businesses, including those in states such as Michigan where selling cannabis is legal, have extremely limited access to banking services. Many banks are concerned with violating federal anti-money laundering and other laws by engaging in transactions with the proceeds of federally illegal marijuana operations.

The SAFE Act is meant to enable financial institutions and “cannabis-related legitimate businesses” to do business without running afoul of federal law. A cannabis-related legitimate business is defined by the SAFE Act as a manufacturer, producer, person or company that participates in a business or organized activity handling cannabis or cannabis products pursuant to a state’s law legalizing cannabis-related business or activities.

The Community Bankers of Michigan and Michigan Credit Union League both support passage of the SAFE Act. The bill has also received support from Michigan politicians. In April, Governor Whitmer joined 20 other governors in urging Congress to pass the legislation.

In a statement, Governor Whitmer said: “Michiganders voted overwhelmingly to legalize the use of recreational marijuana in 2018, and we must respect the will of the voters. Although legalization continues rolling on nationwide, we still have federal laws on the books that prohibit financial institutions from working with marijuana businesses legally under state law. To be blunt, legalization is great for the economy: it creates jobs and boosts tax revenue that can go towards our schools, communities, and first responders. This legislation ensures that Michigan’s marijuana businesses can grow and access the same resources that all legal businesses can.”

The fate of the SAFE Act resides in the closely divided U.S. Senate, where its passage is uncertain. One of the concerns expressed by Mike Tierney, president and CEO of the Community Bankers of Michigan, is that instead of passing the SAFE Act, the Democrat-controlled Senate will push for full legalization of cannabis instead of the more narrowly tailored SAFE Act.

We will continue to keep you apprised of new developments related to this legislation, which has important implications for the cannabis and banking industries in Michigan. If you have any questions about these issues we are here to assist. Please contact Klint Kesto or your Fraser Trebilcock attorney.