Joe Madigan is CEO of Higher Growth Search, a cannabis recruiting and consulting firm working with companies at all stages of development. In addition to helping cannabis employers hire strong candidates for roles across the organization, Higher Growth Search is committed to providing guidance and support to help clients grow their businesses.
In this article, Madigan answers a few questions about the complexities of running a cannabis operation in a highly regulated industry with evolving compliance and legal requirements.
Has compliance always been an issue in cannabis?
Early on, we saw organizations running out the gate getting business licenses, state licenses, local licenses – but then trying to figure out how they were going to pay people.
All of a sudden, their businesses were growing and rapidly expanding, and they wanted to expand with the market, but their compliance programs were really falling behind, specifically in payroll, healthcare, workplace safety, and the finance and accounting function. Any missteps in those areas can come at an extremely high cost.
How bad can fines and violations get?
In any of those areas, you’re talking litigation, you’re talking lawsuits, you’re talking class-action lawsuits, which can spiral really quickly if the company’s not on top of it. Operators are usually worried about seed to sale. They’re worried about distribution. They’re not necessarily worried about tracking whether or not John took his 15-minute meal break.
For example, if they have 50 Johns who didn’t take the 15-minute meal break (in California) and all of a sudden the 50 Johns get a good wage-and-hour attorney, well, that can very quickly turn into a good class-action lawsuit – which they can’t really afford.
What are the three main issues regarding compliance, and what do companies need to be aware of?
- First is basic HR compliance. Does the company have an actual Human Resources Department? Are they compliant with employment laws? Are they following the standards of their license and the law as relates to the cannabis industry? Getting squared away with an HR expert who understands current local and federal requirements is critical for a growing company.
- From our experience, cannabis organizations need to really focus on OSHA compliance (Occupational Safety and Health Administration). They need to look at how their facilities are set up. If they’ve invested a lot of money in their facilities, do they have a safety and risk manager on site? Are they prepared to assess and maintain a safe and compliant workplace? Cannabis organizations operate under maximum scrutiny and can’t afford mishaps related to worker safety.
- It’s also critical for cannabis owners to build a strong finance and accounting team that comes with compliance expertise. Even if that team is one person, they should have demonstrated knowledge of the industry’s complex tax, reporting, and regulatory requirements. In cannabis, financial oversight is often an afterthought and the financial function is left to an inexperienced person. But those companies that invest in a highly qualified individual likely will be ahead in the end, as noncompliance, or even simple mistakes, can be extremely costly and legally risky.
How does Higher Growth Search help companies be compliant?
We not only help companies hire the right people, but we also guide them through various compliance processes so they understand what’s required. We help organizations with worksite risk and safety and with any of the compliance issues around filings and finance and accounting. We can do some of the more nuanced processes that are really going to keep clients safe, but that doesn’t guarantee the solutions are 100% risk free. Ultimately it’s up to each business to implement and stay on top of their programs.
I think the most important piece is that we got into this business to help cannabis organizations mature and grow. We’re always here to pull our resources together and help emerging and more established companies – and the industry as a whole – really fully blossom.
Need help tackling compliance or business growth issues at your organization? Contact the experts at Higher Growth Search today. We’re here to help.