Restricting Marijuana Investment by Law Enforcement Personnel

By Susan E. Coleman

In 1996, California decriminalized the medical use of marijuana via Proposition 215, the California Compassionate Use Act.  In 2016, California decriminalized the recreational use of marijuana via Proposition 64, also known as the Adult Use of Marijuana Act (AUMA).  But the use, manufacture, possession, and distribution of marijuana, as well as investment of capital into marijuana-related business, still remains illegal under federal law.  28 U.S.C. §§ 812(c), 841, 844.  So what does that apparent conflict in the law mean for employers?

It is clear that employers can prohibit their employees from the use of marijuana, both on and off-duty.  After all, it is illegal under federal law.  Marijuana remains an illegal Schedule 1 substance under the federal Controlled Substances Act.  (See AUMA § 26120.)  For peace officers in particular, there are public safety reasons to prohibit use.  Officers need to be able to chase suspects, use a firearm or other weapon, and their actions reflect on both the department and the hiring governmental entity.  Federal law also prohibits marijuana users from possession of firearms or ammunition, and not just while actively under the influence.  18 U.S.C. § 922(g)(3).  Firearm qualification and use is an important part of the job description for most peace officers.  Additionally, if an employer adheres to the Drug Free Workplace Act, it establishes a zero tolerance policy for any drug use.  Medical marijuana use is not exempted under the Americans with Disabilities Act, although the underlying disability itself must be accommodated, such as by light-duty tasks.

But what about a law enforcement officer investing in a marijuana store or grow operation?  Is it any different from investment in a winery, brewery, or bar?  The short answer is yes.  Because marijuana is illegal under federal law, in contrast to alcohol, departments may prohibit their employees from investing in marijuana-related businesses.  Given the federal laws in place, a departmental policy may not be strictly necessary in order to discipline employees on this basis or prevent them from such investment, but it is always advisable to have a policy expressly prohibiting any activities the department seeks to prevent (particularly when their legality may be a gray area).  This also helps to educate unwitting employees from investing in a marijuana-related business, believing that it is now legal, and prevent them from a good faith but illegal act.

Under federal law, investment of capital into marijuana-related business is a crime.  21 U.S.C. § 812(c). The capital is also at risk of forfeiture.  21 U.S.C. §§ 858, 881.  The investment of profits from marijuana violates federal law.  21 U.S.C. § 854.  Financial transactions that involve proceeds from marijuana may be subject to federal prosecution under money laundering statutes, unlicensed money transmitting statute, and the Bank Secrecy Act.  18 U.S.C. §§ 1956-1957.  These crimes have a 5-year statute of limitations.  18 U.S.C. § 3282.

The risk of prosecution has been low for marijuana-related federal crimes in California and other states that have decriminalized the drug. The U.S. Department of Justice issued a memo in August 2013, entitled Guidance on Marijuana Enforcement, which noted that enforcement funding will be concentrated on certain priorities.  These include prevention of the following: marijuana use by minors, funds going to gangs or cartels, use as a pretext for other drugs, violence and use of firearms, drugged driving, and growth on public lands or federal property.  Prosecution of other types of marijuana-related criminal activity lack funding; however, the new President could shift priorities for funding.  But the fact that adult employees are not likely to be criminally prosecuted for marijuana use, possession, or growth, or investment in marijuana-related business does not mean that these activities need to be tolerated by a law enforcement agency.

What if the employee’s pension plan or 401(k) invests in a marijuana business or stock?  With consumer spending on marijuana currently at $25 million, stocks are already being sold.  Given the fact that marijuana businesses are mainly penny stocks, it is unlikely that big pension plans such as CALPERS are investing in marijuana.  Further, since investment by corporations or mutual funds is hard for individual employees to control, or even possibly be aware of without constant monitoring, this should not be a source of employee discipline.  Rather, if a law enforcement agency desires to prohibit investment in certain companies, such as marijuana and/or tobacco companies, those directions can be given directly to the pension agency.

The laws involving marijuana will continue to evolve, at both the state and federal level, and it is a good idea for departments to stay abreast of developments.  Training or updates should also be provided to employees, particularly when it affects their expected conduct both on and off-duty.  This article is meant only as a starting point, and general guidance, and further legal consultation should be obtained before implementing policy.

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