I. RECOMMENDATION:
Provide policy direction to the City Manager regarding revisions to the employee permit and background check provisions contained within the City’s cannabis regulations to guide preparation of the comprehensive cannabis ordinance update currently underway.
Council may provide direction on one of the following policy options:
Option A – Live Scan for Employees; Full Investigation for Owners
Retain Live Scan fingerprinting for cannabis employees but eliminate the City-conducted full background investigation for employees. Continue requiring Live Scan fingerprinting and a full background investigation for owners and individuals with a financial interest or operational control of cannabis businesses.
Option B – Owners Only Background Checks
Eliminate all employee permit and background check requirements for cannabis employees. Continue requiring Live Scan fingerprinting and a full background investigation only for owners and individuals with a financial interest or operational control.
Option C – Default to State Law
Eliminate all local background check requirements and the employee permit system and rely entirely on State licensing requirements administered through the California Department of Cannabis Control.
II. BACKGROUND:
The City of Coalinga has adopted a comprehensive regulatory framework governing cannabis businesses operating within the City. As part of these regulations, the City established an employee permit system administered by the Coalinga Police Department that requires individuals working in cannabis operations to obtain an employee permit prior to beginning employment.
Under the current Municipal Code, the employee permit process includes:
- Submission of an application to the Police Department
- Live Scan fingerprinting through the California Department of Justice
- A City-conducted background investigation
- Final approval of the employee permit by the Chief of Police
In addition, cannabis business owners and individuals with financial interests or operational control are subject to fingerprinting and background investigation requirements as part of the City’s cannabis regulatory permit process.
As part of the City’s ongoing comprehensive update to the cannabis ordinance, the City Council directed staff to evaluate the employee permit provisions to determine whether adjustments could be made to maintain appropriate public safety safeguards while reducing unnecessary regulatory burdens, particularly for seasonal and entry-level employees working within the industry.
To assist the City with this effort, SCI Consulting Group was retained to provide policy analysis and assist with preparation of the ordinance amendments.
III. DISCUSSION:
State Cannabis Regulatory Framework
Under California law, cannabis businesses are regulated by the California Department of Cannabis Control (DCC). The State requires criminal history background checks for owners and individuals with financial or operational control of licensed cannabis businesses.
As part of the State licensing process:
- Owners must submit fingerprints through the California Department of Justice using Live Scan.
- Fingerprints are transmitted to both the California Department of Justice and the Federal Bureau of Investigation for review of criminal history records.
- The State evaluates criminal convictions that may be substantially related to cannabis business operations.
Importantly, State law does not require background checks or fingerprinting for employees working at licensed cannabis businesses. Employee eligibility is generally handled through the hiring practices of the cannabis business itself rather than through the State licensing process.
General Employment Law Requirements
The City Attorney has also reviewed whether any State laws require additional background check standards for employees working in the cannabis industry. The review determined that no heightened employment background check requirements exist under State cannabis regulations.
Cannabis businesses are subject to the same employment laws that apply to other industries, including the California Fair Chance Act, which governs the use of criminal background checks in hiring.
The Fair Chance Act requires that:
- Employers must wait until after a conditional job offer has been extended before conducting a criminal background check.
- If an applicant has a criminal conviction record, the employer must conduct an individualized assessment before making a decision not to hire the applicant.
The assessment must consider:
- The nature and gravity of the offense
- The amount of time that has passed since the offense occurred or the sentence was completed
- The nature of the job being sought
- Employers must also provide notice and an opportunity for the applicant to respond before making a final decision based on criminal history.
Because the Fair Chance Act applies broadly to all employers in California and does not provide exemptions specific to cannabis businesses, it further demonstrates that the State does not require enhanced background investigations for cannabis employees.
The City’s Municipal Code currently establishes regulatory requirements that exceed the minimum standards imposed by State law.
Policy Considerations
As part of the comprehensive cannabis ordinance update, the City Council expressed interest in reviewing these provisions to determine whether the current system appropriately balances regulatory oversight with operational efficiency for licensed businesses.
Key considerations include:
- Maintaining appropriate safeguards for cannabis operations within the community
- Ensuring oversight of individuals who own or control cannabis businesses
- Reducing unnecessary regulatory barriers for entry-level and seasonal employees
- Efficient use of Police Department staff resources
- Aligning local regulations more closely with the State regulatory framework
SCI Consulting Group has provided several policy options for Council consideration in the attached executive summary and mentioned in the recommendation section of this report.
IV. ALTERNATIVES:
Following Council direction, staff will work with SCI Consulting Group and the City’s planning consultants to incorporate the selected policy framework into the comprehensive cannabis ordinance update.
The ordinance amendments will then proceed through the Planning Commission and City Council public hearing process as part of the zoning text amendment currently under preparation.
V. FISCAL IMPACT:
Changes to the employee permit program may result in a modest reduction in permit-related fee revenue. However, these changes would also reduce staff time associated with processing applications and conducting background investigations.
Any fiscal impacts will be evaluated further during preparation of the full ordinance amendments. |