A6003

An Act concerning the Cannabis Regulatory Commission and laboratory testing of cannabis items, and supplementing Title 24 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. The Cannabis Regulatory Commission shall establish laboratory testing standards to improve testing accuracy, consistency in testing, and quality control across the medical and adult-use cannabis markets. Any cannabis testing facility, as such term is defined in section 3 of P.L.2021, c.16 (C.24:6I-33), shall be subject to the standards adopted by the commission.

b. The commission shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations to effectuate the provisions of this section as follows:

(1) requirements for cannabis testing facilities that ensure consistent and scientifically sound testing practices;

(2) a framework for cannabis testing facilities to have systems for planning and assessing work performed by the laboratory;

(3) procedures for quality assurance and quality control; and

(4) proficiency standards and validation criteria that cannabis testing facilities shall be required to meet and maintain in order to obtain licensure to operate pursuant to P.L.2021, c.16 (C.24:6I-31 et seq.).

c. Any method for testing of cannabis items developed by a cannabis testing facility shall meet validation criteria set by the commission and have the results of the validation study be approved by the commission pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

2. a. The Cannabis Regulatory Commission shall employ the services of one or more microbiologists and one or more chemists with experience in testing cannabis for the purpose of conducting audits of cannabis testing facilities licensed in accordance with P.L.2021, c.16 (C.24:6I-31 et seq.).

b. (1) Such individuals employed pursuant to subsection a. of this section shall assist the commission in conducting onsite assessments of licensed testing facilities to ensure compliance with any applicable laws and rules and regulations related to the testing of cannabis items by license testing facilities.

(2) Such individuals employed pursuant to subsection a. of this section may submit recommendations to the commission related to changes to testing standards, which the commission shall consider in establishing any testing guidance for license testing facilities.

c. A cannabis testing facility shall submit, for purposes of approval, the following information:

(1) a cover letter;

(2) a summary of study design;

(3) a summary of results from extraction and preparation method, if applicable, and determinative method and comparison of results to the approved extraction and preparation method, if applicable, and determinative method;

(4) the standard operating procedure or method developed by the cannabis testing facility, including any extraction and preparation method utilized;

(5) the initial demonstration of capability, including a summary data and bench sheets;

(6) a limit of detection study;

(7) the proficiency test scores if offered from an International Organization for Standardization ISO 17025 approved provider, and all ISO 17025 assessment reports, corrective actions, and impact analyses including analyses concerning the implementation of corrective actions;

(8) a certificate of analysis template; and

(9) any other information the commission deems necessary for validation.

3. a. In addition to any commission rules related to internal auditing, the commission shall establish and implement an external audit program to evaluate cannabis testing facilities licensed by the commission in accordance with P.L.2021, c.16 (C.24:6I-31 et al.) operating within the State.

b. The program shall include:

(1) red flag identification, using statistical tools to detect patterns that indicate outliers, anomalies, or manipulation in testing results;

(2) compliance with standard testing methods, including whether testing methods were verified in accordance with section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(3) statistical analysis, audit findings, employee interviews, remote monitoring, review of camera footage, review of operational data of instruments, and inventory of records.

c. The commission, or an independent auditor designated by the commission, shall be authorized to:

(1) access the premises of any cannabis testing facility;

(2) obtain copies of records, instrument data, and other materials necessary to conduct a proper audit;

(3) conduct testing of product samples; and

(4) actively monitor testing of retained product samples at any cannabis testing facility.

d. The commission may by its own action, or upon the recommendation of the independent auditor, require the recall of any cannabis product or temporarily pause the sale or distribution of any cannabis product where an audit raises any questions of contamination, fraud, or significant noncompliance.

e. If the audit reveals contamination levels in a product exceeding commission rules, such findings shall be made public with a summary explanation of the cause. If the audit reveals inaccurate, noncompliant, or fraudulent testing, the commission may initiate enforcement actions against the cannabis testing facility in accordance with commission rules.

4. a. The Cannabis Regulatory Commission shall establish and administer a secret shopper program to evaluate compliance with any law and rules and regulations by entities licensed in accordance with P.L.2021, c.16 (c.24:6I-31 et seq.).

b. Such program shall:

(1) conduct anonymous compliance checks on licensed cannabis facilities;

(2) report compliance with packaging and labeling requirements;

(3) ensure compliance with age verification and point-of-sale requirements;

(4) collect product samples for commission laboratory analysis;

(5) identify any shortcomings in the cannabis market related to public health and consumer safety; and

(6) make all results publicly available.

c. (1) The commission shall contract with or designate trained individuals to carry out the program activities. The commission shall determine the number of individuals that are sufficient to administer the program.

(2) Such individuals are authorized to purchase cannabis products from a licensed retail facility, document the transaction, and submit purchased products to licensed testing facilities for independent analysis.

d. As a result of any information collected pursuant to this section, the commission shall take appropriate disciplinary or corrective action against any licensed facility found to be in violation of P.L.2021, c.16 (C.24:6I-31 et seq.) or any applicable rules and regulations.

e. The commission shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.). adopt rules and regulations as necessary to implement this section.

5. a. A cannabis retail facility licensed in accordance with P.L.2021, c.16 (C.24:6I-31 et seq.) shall maintain accurate documentation of Certificates of Analysis for each cannabis item offered for sale to consumers. Such documentation shall be reported to and made publicly available by the Cannabis Regulatory Commission on its Internet website. Such documentation shall also be made available to purchasers upon request. A licensed retail facility shall conspicuously display a notice of a purchaser’s right to request such documentation.

b. The Cannabis Regulatory Commission shall ensure that all cannabis test results submitted to the agency’s seed-to-sale tracking system by licensed cannabis testing facilities are published on the Cannabis Regulatory Commission’s website no later than three months after the date on which test results were submitted.

c. Testing data published in accordance with subsection b. of this section must include, at minimum, cannabinoid results, contaminant screening results, sample collection date, result submission date, product type, product identifier, batch identifier, lab that performed the testing, licensed cultivator, licensed cannabis business submitting the product for testing, and any notes submitted by the laboratory.

6. a. As used in this section:

“Retaliatory action” means the discharge, suspension, or demotion of an employee, or other adverse employment action taken against an employee in the terms and conditions of employment.

b. The commission shall establish and maintain on its Internet website a whistleblower access and assistance program related to cannabis businesses licensed and regulated pursuant to P.L.2021, c.16 (C.24:6I-31 et seq.).

c. Such program shall offer a toll-free telephone hotline and a secure online portal for the submission of whistleblower complaints. Such program shall be accessible to employees and contractors of licensed cannabis businesses. The commission shall ensure that any individual may opt to submit a complaint anonymously.

d. The commission shall properly investigate and audit any licensed cannabis business who is the subject of a whistleblower complaint.

e. An employer shall not take any retaliatory action against an employee because the employee discloses, or threatens to disclose to the commission an activity, policy, or practice of the employer that the employee reasonably believes:

(1) is a violation of a law or rule or regulation promulgated by the commission, including any violation involving deception of, or misrepresentation to, the commission, consumers, employees, or the general public; or

(2) is fraudulent or criminal under state law.

f. A violation of subsection e. of this section shall be subject to the provisions of the “Conscientious Employee Protection Act,” P.L.1986, c.105 (C.34:19-1 et seq.).

7. a. Upon a finding by the commission following an internal audit or an external audit conducted in accordance with section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) that a cannabis testing facility committed fraud related to quality standards of cannabis items or testing procedures and data, any person aggrieved by such fraud shall have a civil cause of action for damages against the cannabis testing facility.

b. Upon a finding by the court that that fraud did occur, and the plaintiff was aggrieved by the purported fraud, the court shall order the defendant to pay the plaintiff three times the amount of damages sustained plus costs and reasonable attorney’s fees.

c. Nothing in this section shall preclude the commission or the Attorney General from initiating a criminal proceeding for fraud committed by a cannabis testing facility or any licensed cannabis business. Nothing in this section shall preclude the Director of the Division of Consumer Affairs in the Department of Law and Public Safety from enforcing this section pursuant to the “Consumer Fraud Act,” P.L.1960, c.39 (C.56:8-1 et seq.).

d. It is an affirmative defense to this section, if the cannabis testing facility proves by a preponderance of the evidence, that the conduct was not knowingly or recklessly deceptive.

8. a. A cannabis testing facility commits an offense, if in the course of business the testing facility or any employee, owner, or manager of a testing facility:

(1) uses or possesses for use a false weight or measure, or any other device for falsely determining or recording the quality of a cannabis item;

(2) sells, offers, or exposes for sale, or delivers an untested or noncompliant cannabis item;

(3) falsifies any lab test results on potency, contaminants, or composition of a cannabis item; or

(4) issues a certificate of analysis for an noncompliant cannabis item asserting compliance with any law or regulation.

b. A violation of subsection a. of this section shall:

(1) for a first offense, be a disorderly persons offense;

(2) for a second or subsequent offense; be a crime of the fourth degree.

c. It is an affirmative defense to this section, if the cannabis testing facility proves by a preponderance of the evidence, that the conduct was not knowingly or recklessly deceptive.

9. This act shall take effect on the first day of the third month next following enactment, except that the Cannabis Regulatory Commission may take such anticipatory action as may be necessary for the timely implementation of this act.

STATEMENT

This bill establishes various requirements for the cannabis testing facilities related to quality assurance in cannabis product testing. The bill requires the Cannabis Regulatory Commission (commission) to establish a laboratory quality program standard to improve testing by cannabis testing facilities.

The commission is required to adopt rules on: (1) requirements for cannabis testing facilities that ensure consistent and uniform testing practices; (2) framework for cannabis testing facilities to have systems for planning and assessing work performed by the laboratory; (3) quality assurance and quality control procedures; and (4) proficiency standards that cannabis testing facilities are required to meet and maintain in order to obtain licensure to operate pursuant to the “Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act,” (CREAMMA) P.L.2021, c.16. Moreover, it requires any facility which develops a testing method to have the method approved by the commission.

Under the bill, the commission is required to employ microbiologists and chemists with experience in testing cannabis for the purpose of conducting audits of cannabis testing facilities and approving the testing methods developed by cannabis testing facilities. The purpose of these employees is to assist the commission in conducting onsite assessments of testing facilities to ensure compliance with the CREAMMA and any rules and regulations related to the testing of cannabis items by testing facilities.

The bill also requires that in addition to internal audits, that the commission, or a designee of the commission, conduct external audits of cannabis testing facilities to ensure compliance with testing standards and rules.

Further, the bill requires the commission to establish a secret shopper program. The program will permit certain individuals to: (1) conduct anonymous compliance checks on licensed cannabis facilities; (2) report compliance with packaging and labeling requirements; (3) ensure compliance with age verification and point-of-sale requirements; (4) collect product samples for commission laboratory analysis; and (5) identify any shortcomings in the cannabis market related to public health and consumer safety.

In addition, the bill requires that in accordance with current law and rules and regulations, a cannabis business is required to maintain accurate documentation of laboratory testing reports and provide such reports to the commission, who will make such tests publicly available on its Internet website. Such documentation must also be provided to customers upon request.

The bill requires the commission to establish a whistleblower access and assistance program related to cannabis businesses. The program is required to offer a toll-free telephone hotline and a secure online portal for the submission of whistleblower complaints. The program will be accessible to employees and contractors of licensed cannabis businesses, and the program will permit anonymous submission. The commission is required to properly investigate and audit any cannabis business who is the subject of a whistleblower complaint. The bill provides whistleblowers the statutory protections provided pursuant to the “Conscientious Employee Protection Act.”

Finally, the bill establishes a private cause of action and criminal penalties for a cannabis testing facility which commits fraud.

If an external or internal audit finds that the testing facility committed fraud, any aggrieved party by such fraud shall have a civil cause of action for damages. Upon a finding that the fraud did occur and that the party was aggrieved the court shall order the cannabis testing facility to pay the plaintiff three times the amount of damages sustained plus costs and reasonable attorney’s fees.

A cannabis testing facility commits an offense if in the course of business the testing facility: (1) uses or possesses for use a false weight or measure, or any other device for falsely determining or recording the quality of a cannabis item; (2) sells, offers, or exposes for sale, or delivers an untested or noncompliant cannabis item; (3) falsifies any lab test results on potency, contaminants, or composition of a cannabis item; or (4) issues a certificate of analysis for an noncompliant cannabis item asserting compliance with any law or regulation. A violation of this bill is: (1) for a first offense, a disorderly persons offense; and (2) for a second or subsequent offense; a crime of the fourth degree.

A disorderly persons offense is punishable by a term of imprisonment up to six months, a fine of $1,000, or both. A crime of the fourth degree is punishable by up to 18 months imprisonment, a fine of up to $10,000, or both.