In the rush to hire staff to get your cannabis company up and running, traditional human resources (HR) functions often take a backseat. Well, they shouldn’t.

The competitive cannabis industry, expected to reach $66.3 billion by the end of 2025, actually faces greater exposure to employee practices liability (EPL) than non-cannabis companies.1 Sure, they’re higher profile, but it’s more than that.

The 11 states where cannabis is legal for recreational use and the 33 where it’s medically legal tend have more onerous EPL laws, where liability is often assumed by the employer for mistakes like poor hiring and layoffs. Both are common functions for cannabis companies that ramped up very quickly only to find a softer demand for product than expected, which often leads to layoffs.

HR departments at fledgling cannabis companies tend to be small or non-existent, ill prepared to deal with the legalities that come with immature hiring practices.

Cannabis companies have a lot to lose. Ensuring the right hiring practices are in place prior to any employees signing on is critical. Consider the following best practices for hiring employees at your cannabis company:

  1. Build out a formal onboarding process. Take your hiring process out of the hands of a single individual and create a uniform process that can replicated as you grow, or across your existing organization. Make sure the process is the same, whether you’re hiring a cultivation technician or an accountant. Consult your state’s EPL laws for regulations you’re required to uphold. Remember, if you’re a multi-state operator, your policies and procedures will have to include those of all states in which you operate. Consider your employee base and the protected classes they may belong to. Businesses with more than 50 employees are subject to Family and Medical Leave Act and more.
  2. Compose an employee handbook. Once you’ve got a formal hiring strategy, put it and more into an employee handbook. Again, consider state rules and what your policy will be for drug testing, etc. Have the handbook reviewed by either internal council or an outside attorney that specializes in employment practices.
  3. Keep time religiously. Maintain timekeeping protocols consistent across locations, and make sure they’re actually enforced so that if you’re called on to defend them, you’ll know when and how often your employees took breaks and how many hours they work daily and weekly. Avoid wage and hour exposure by enforcing brakes, lunch time, pre-approval for overtime, vacation days and PTO. Managers who are trained on proper timekeeping will be able to enforce state laws and manage breaks appropriately. Make a distinction in your policies between exempt and non-exempt employees and keep in adherence with regulations in all states you operate. Your HR team, regardless of size, should be running monthly and annual reports to ensure the business is meeting state standards in all areas of employment liability.
  4. Get the right EPL policy. A dedicated EPL policy is key to protecting your business from these risks. An EPL policy will defend a business from claims of sexual harassment, discrimination and wrongful termination and will include defense costs and can include coverage for government-imposed fines. Work with your broker to determine what defense limits you should retain. Base this on your location, clientele, employee profile and what you see as your biggest risks.

Contact HUB’s Cannabis experts for more information on instituting these procedures as well as transferring your EPL exposure to the right insurance policy for your cannabis business.

1https://www.grandviewresearch.com/press-release/global-legal-marijuana-market