Fraser Blog | Fraser Trebilcock Blog

CBD Likely to Receive Stricter Regulatory Scrutiny in Michigan Following Governor’s Executive Order

Significant changes in Michigan’s cannabis regulatory framework go into effect on April 13, 2022, following Governor Whitmer’s Executive Order No. 2022-1.

Pursuant to the Executive Order, the Marijuana Regulatory Agency, which oversees marijuana growing, processing, and sales, will become the Cannabis Regulatory Agency (the “Agency”).

And the authorities, powers, duties, functions, and responsibilities of the Department of Agriculture and Rural Development to license and regulate processor-handlers under the Industrial Hemp Research and Development Act are being transferred to the Agency to be administered by the Agency. While the Agency will begin overseeing the processing, distribution and selling of hemp products, such as CBD, the Department of Agriculture and Rural Development will continue to oversee hemp cultivation.

An article in Crain’s Detroit Business which discusses the changes wrought by the Executive Order, also speculates about the possibility of more stringent regulations on CBD products. Andrew Brisbo, executive director of the Michigan Regulatory Agency, is quoted as saying “nothing will change” in the short term, and that “changes that will potentially come will be through a legislative process.”

Brisbo suggests that changes will focus on CBD products meant for human consumption, and that such products will “likely…be put through some kind of testing regime.”

We will continue to monitor these developments and keep you informed about other changes impacting Michigan’s cannabis industry. If you have any questions, 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.

U.S. House of Representatives Passes MORE Act to Decriminalize Cannabis

On Friday, April 1, 2022, the U.S. House of Representatives voted to decriminalize cannabis on the federal level, allow for the expungement of certain marijuana convictions, and offer loan opportunities to cannabis businesses. The House passed The Marijuana Opportunity Reinvestment and Expungement (“MORE”) Act by a vote of 220-204, and would have the following changes:

Remove marijuana from the list of scheduled substances so that growing, selling, or possessing the drug would no longer carry criminal penalties;
Allow the federal government to offer loans to cannabis businesses and impose a tax on cannabis products, which the revenue would be used for grant programs focused on helping disadvantaged small businesses get into the marijuana industry; and
Create an expungement process for non-violent cannabis convictions and review criminal sentences for offenders.

While the MORE Act was passed by the House, the bill must still be passed by the U.S. Senate, and signed by President Biden. If you have any questions, 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.

MI AG Nessel Reissues Consumer Alert Following Verizon Smishing Warning

On April 1, 2022, the Michigan Attorney General reissued a consumer warning that targets Verizon phone users. The scam often works since the text message looks like it is coming from Verizon, the user’s own phone number, or another trusted number. The scam texts from Verizon thank the user for paying their bill and offers something free by clicking on a link. The link will likely download malware to your phone that may lead to identity theft. Verizon is aware of the issue and is working to prevent these scams.

For more information, read the Attorney General’s full press release here.

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

The Defense of Employment-Based Sexual Harassment and Assault Claims is Likely to Get More Expensive – Employer Beware!

Savvy Michigan employers have adopted broad “mandatory arbitration” provisions in employment contracts, policies, and handbooks. The primary purpose of those policies is to keep employment discharge and related claims out of court, where defense costs and jury damage awards can be significant. This development occurred in response to federal and Michigan Supreme Court decisions expanding the scope of arbitration policies by enforcing arbitrator awards rendered not only in contract (discharge) claims, but in employment discrimination and related claims as well.

Following public focus on such provisions and sharpened criticism in light of the “#MeToo” movement, Congress was spurred to intervene. In February, Congress passed, and on March 3, 2022, President Biden signed into law, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the “Act”).

Technically, the Act amends the Federal Arbitration Act. The effect of the Act is to assure that any person bringing a sexual assault or sexual harassment claim under any state or federal law, has the protected right to have such claim litigated in court, rather than arbitration. Under the Act, any person who had signed or otherwise agreed to be bound by an arbitration arrangement may nevertheless be excused from such agreement or contract and elect to proceed in court.

In addition, certain “pre-dispute” restrictions on waiver of the right to pursue a collective or “class action,” that had avoided judicial invalidation, may also be invalidated by a plaintiff-litigant who elects to do so.

Importantly, arbitration employment policies and pre-dispute collective action waivers remain permissible. Further, those policies remain enforceable to the extent that a party-litigant does not challenge or seek to invalidate them upon pursuing a claim. Given most plaintiffs’ and plaintiffs’ counsel’s preference for court rather than arbitration proceedings, however, it is expected that many or most claims will be pursued in court.

Fraser Trebilcock Labor and Employment Lawyers are here to help you keep your employment policies at the forefront and navigate the ever-changing landscape. If you have any questions about these issues, please contact 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.

Change to Slip and Fall Law in Michigan – Might You Now Recover?

For the past two decades, Michigan courts have ruled that persons who slip and fall on ice/snow have little or no right to recover from their landowner for their injuries. This is because the hazard created by snow and ice is “open and obvious” and, therefore, no duty to warn is owed to the injured person. Typically, lawsuits seeking recovery for injuries suffered as a result of a slip and fall on sidewalks/parking lots have been summarily dismissed by trial and/or appellate courts under the “open and obvious” defense, which states that snow and ice are dangers that are readily apparent to all, and as such, no warning or remedial measures need to be taken by the owners of these properties. As an example, if a person is on his or her way to a grocery store and slips and falls on ice while traversing, they are out of luck as far as successfully suing the owner of the parking lot for failure to remove snow/ice or to adequately salt the area. However, an exception to this so-called “open and obvious” defense has been created by Michigan’s appellate courts.

Recently, the Michigan Court of Appeals has carved out a narrow exception to the “open and obvious” defense to premises liability claims. In Estate of Brenda Bowman and Derick Bowman v. Larry Walker and Rodney Lauderdale, No.355561 (Mich. Ct. App. Feb. 10, 2022), the Court held that a “special aspect” existed where a tenant, who needed to go to work, lacked the ability to safely leave her apartment to go to her place of employment due to an accumulation of ice and snow on the grounds of the rental property. The Court found the apartment complex in question potentially liable, without regard to the “open and obvious” defense, where the tenant needed to get to work and in doing so, the tenant needed to be able to safely exit her apartment.

In forming this opinion, the Michigan Court of Appeals relied heavily on the recent Michigan Supreme Court decision of Estate of Livings v. Sage’s Investment Group LLC, 507 Mich 328 (2021). The Estate of Livings decision, also carved out an exception to the open and obvious defense where an employee fell due to ice while trying to enter her place of employment. Emphasizing the social importance of a person needing to get to their place of employment, the Michigan Supreme Court wrote:

Given that our state is prone to winter, it is reasonable to anticipate that many businesses will remain open even during bleak winter conditions. A landlord cannot expect that every one of its tenant’s employees will be permitted to stay home on snow days. Therefore, it is reasonable to anticipate that a person will proceed to encounter a known or obvious danger for purposes of his or her work. Accordingly, an open and obvious hazard can become effectively unavoidable if the employee confronted it to enter his or her workplace for work purposes.

Id. at p. 345.

These recent decisions by the Michigan Supreme Court and the Michigan Court of Appeals present a new exception to the “open and obvious” defense, changing the rules for slip and fall personal injury cases. Now, if a person who slips and falls while trying to get to work may have a cause of action where none existed prior to 2021 in limited circumstances. Given the current makeup of Michigan’s Supreme Court, more exceptions, or perhaps the elimination of the open and obvious defense altogether, may be anticipated.

If you have any questions, please contact Emily or your Fraser Trebilcock attorney. Fraser Trebilcock lawyers have expertise in insurance law and would be happy to consult with you.

Emily M. Vanderlaan is a litigation attorney at Fraser Trebilcock handling all aspects of personal injury and property litigation. Emily has had great success in Michigan and Colorado trial courts and in the Michigan Court of Appeals. You can reach her at (517) 377.0882 or at evanderlaan@fraserlawfirm.com.

Michigan HB 4722 Would Limit Local Governments’ Ability to Regulate Short-Term Rentals

Local communities will be limited in their ability to regulate short-term housing rentals if a bill passed by the Michigan House of Representatives, House Bill 4722 (“HB 4722”), becomes law.

HB 4722 would amend the Michigan Zoning Enabling Act to establish that the rental of a dwelling, including a short-term rental:

Is a residential use of property that is permitted in all residential zoning districts
Is not subject to a special use or conditional use permit or procedure different from those required for other dwellings in the same zone
Is not a commercial use of property

The bill restricts local communities from adopting or enforcing zoning ordinance provisions that have the effect of prohibiting short-term rentals. However, it does not prohibit zoning ordinance provisions that regulate noise, advertising, traffic, or other nuisances related to the rental of a dwelling, provided that such regulations apply consistently to owner-occupied residences as well.

The bill makes clear that the proposed changes do not prohibit a local unit of government from (i) inspecting a residence for compliance with or enforcement of an ordinance provided that it is for the protection of public health and safety, is not a zoning ordinance, and does not have the effect of prohibiting short-term rentals, or (ii) collecting taxes otherwise authorized by law.

Local governments may limit the number of short-term rentals under common ownership, which is defined as “ownership in whole or in part by the same individual, individuals, or legal entity,” to two or more. Local governments may also limit the total number of units that may be used as a short-term rental in their jurisdiction. According to the bill, the limit shall not be less than 30% of the total number of residential units in the municipality.

The bill faces substantial opposition from numerous municipalities, the Michigan Townships Association, the Michigan Municipal League, and the Michigan Association of Planner. The opposition seems to center upon “undermining local control and upsetting the delicate balance between property rights and the established, transparent process for local decision-making.” (Michigan Township Association newsletter)

HB 4722 has only passed the House, and in order to become law must still be passed by the Senate and signed by Governor Whitmer. If you have any questions or concerns about the effects of HB 4722, please contact Norb Madison or your Fraser Trebilcock attorney.

Norbert T. Madison, Jr. is a highly regarded corporate and real estate attorney with more than three decades of experience. Primarily focused on real estate matters, Norb represents clients in all facets of the practice, including the purchase, sale, leasing, and financing of various types of real estate, as well as the development of industrial, office, retail, condominium and residential real estate. Contact Norb at 313.965.9026 or nmadison@fraserlawfirm.com.

Addressing Tax Considerations in an M&A Transaction

Whether you’re the buyer or seller in an M&A transaction, it is important to understand and address the various tax considerations associated with the transaction. Numerous factors during the buying/selling process will shape the transaction, and without a tax specialist advising you, it is likely you may miss the myriad of important tax issues that are involved.

What You Need to Know

Before any deal between a buyer and seller is structured, it is vital to clarify between each party what form the transaction will take. A stock purchase acquisition has different tax implications than an asset acquisition and will affect how the deal is structured. Another factor is the form of consideration, which may determine whether the transaction is taxable or not. If the consideration is mostly cash or debt, then the transaction will likely be taxable. However, if the payment is made in stock and is properly structured, the transaction may be non-taxable.

Once the type of deal is agreed upon, the next item to address is the deal’s structure, specified in a Letter Of Intent (LOI). It is important the LOI include information regarding the tax consequences of the transaction.

The purchase agreement between the parties should address the allocation of the purchase price to the assets, which may require qualified experts, such as CPAs or other valuation experts, to ensure proper allocation of the purchase price to the assets.

M&A transactions are complex and can lead to unexpected issues, which may have tax implications. At Fraser Trebilcock, we have M&A attorneys with experience in handling transactions for both buyers and sellers.

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.

MRA Proposed Expansion of Class A Microbusiness License

Last year the Michigan Marijuana Regulatory Agency (MRA) proposed changes to marijuana industry rules that would expand the state’s Class A microbusiness license.

Introduced in late July 2021, the proposed rule changes would add two new license types and reduce fees and costs associated with obtaining and renewing licenses. Previously, a Class A microbusiness could grow, process, and sell its own marijuana and marijuana products, but not purchase wholesale products from other licensed businesses for resale. The proposed rules would make the following changes:

Double the amount of plants a microbusiness can cultivate, from 150 to 300;
Allow for the purchase of marijuana concentrate and marijuana-infused products from licensed processors; and
Authorize licensees to purchase or accept mature plants from an individual, registered qualifying patient, or registered primary caregiver.

There is one important caveat – the new microbusiness license would ban in-house processing that was previously allowed under the old license.

The Michigan Cannabis Manufacturers Association (MCMA) has stated its opposition to the proposed changes, arguing that the proposed Class A microbusiness license changes exceed the MRA’s authority to broaden license types under state statute.

We will continue to monitor this situation and other important developments in the Michigan legal cannabis industry. If you have any questions, 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.

Despite Supreme Court Vaccine Mandate Defeat, OSHA Still has Authority to Regulate COVID-19 Workplace Safety

The major headlines about the Occupational Safety and Health Administration (OSHA) and COVID-19 over the last few weeks have all been focused on the fact that on January 13, 2022, the United States Supreme Court blocked OSHA’s vaccine mandate for employers with 100-plus employees. On January 25, 2022, OSHA officially withdrew the mandate.

But that doesn’t mean that OSHA has no role in enforcing workplace safety in connection with COVID-19. A stark reminder of OSHA’s enduring enforcement powers is a recent case in which significant fines were proposed by OSHA against an Ohio-based auto supplier because it failed to follow its own policies and federal guidance related to COVID-19 health and safety protocols.

OSHA’s Investigation and Allegations

According to a January 14, 2022, news release from OSHA, a complaint was lodged against the auto supplier alleging that it ignored guidelines to limit employee exposure to COVID-19 and that several employees became sick. OSHA then launched an investigation.

During its first inspection of the facility, OSHA found that 65 employees had tested positive for COVID-19. A few days later, 88 had tested positive. Five employees were hospitalized and two died, and OSHA determined that at least one of the deaths was work-related.

While investigators determined that the company issued a corporate-wide social distancing policy in March 2020 and trained employees in May 2020 on precautions for returning to work that included social distancing and mask wearing, OSHA found that the company did not adhere to these policies during the COVID-19 outbreak and OSHA inspection.

OSHA cited the company and proposed penalties of $26,527.

Implication for Employers

Given that we have now been dealing with the COVID-19 pandemic for two years, employers (and their employees) are understandably fatigued and finding it difficult to remain vigilant in terms of maintaining COVID-19 safety protocols. Many welcomed the Supreme Court’s ruling blocking OSHA from enforcing its large employer vaccine mandate. However, it’s important for employers to remember that OSHA—as well as other federal, state and local regulatory authorities—are still investigating violations of safety protocols, and levying penalties when appropriate.

Indeed, as demonstrated by the Ohio auto supplier case described above, OSHA still has the authority to regulate workplace safety—notwithstanding the Supreme Court’s ruling. OSHA’s authority derives from several provisions of federal law, including 29 C.F.R. § 1910.132-140 (Personal Protective Equipment), 29 C.F.R. § 1904 (Recording and Reporting Occupational Injuries and Illnesses), and 29 U.S.C.A. § 654 (General Duty Clause).

Accordingly, vigilance remains essential. If your business hasn’t audited its COVID-19 protocol compliance recently, or is uncertain of its obligations, please contact your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Lauren D. Harrington is an associate attorney at Fraser Trebilcock focusing on Employment Law. You can reach her at 517.377.0874, or email her at lharrington@fraserlawfirm.com.

Michigan Law Imposes New Product Liability Insurance Requirements on Legal Cannabis Licensees

At the end of 2021, the Michigan legislature passed and Governor Whitmer signed into law a new cannabis liability insurance law that mandates proof of product liability insurance coverage for licensed cannabis businesses and new applicants. The new rules take effect March 30, 2022.

Michigan Senate Bill 461 (Public Act 160 of 2021) requires every licensee or applicant to file with the Michigan Marijuana Regulatory Authority (MRA): “[P]roof of financial responsibility for liability for bodily injury to lawful users resulting from the manufacture, distribution, transportation, or sale of adulterated marihuana or adulterated marihuana-infused product in an amount not less than $100,000.00 for each license.”

The statute defines “adulterated marihuana” as “a product sold as marihuana that contains any unintended substance or chemical or biological matter other than marihuana that causes adverse reaction after ingestion or consumption.”

Additional requirements include:

The insurance policy is issued by a licensed insurance company or licensed captive insurance company in Michigan.
The insurance policy does not include a provision relieving an insurer from liability for payment of any claim for which the insured may be held liable under the act.
Covers bodily injuries to a qualifying patient, including injuries that are caused by the intentional conduct of the licensee (but not if the licensee acted with the intent to harm).

In addition, a licensee must file an “attestation of compliance” with the requirements of the statute with the MRA, on a form approved by the MRA, which is signed by the officer of the licensed insurance company or licensed captive insurance company that issues the policy.

To the extent a licensee fails to maintain proof of financial responsibility as required under statute, the MRA will immediately suspend the licensee’s license until such proof is provided. A licensee also cannot cancel required liability insurance unless the licensee gives the MRA 30 days’ prior written notice and procures new proof of financial responsibility and delivers that proof to the MRA within 30 days after giving notice.

Given that this law takes effect on March 30, 2022, it is important for existing licensees and applicants to move fast in order to meet its requirements. For questions or 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.