We have previously written about the need for cannabis businesses to systematize their policies and procedures. See Improving Systems and Structures for Cannabis Business Expansion and Understanding and Managing Cannabis Legal Compliance: No Excuses. Marijuana businesses are not standard startups — they are highly regulated and need to act like it from day one. But there is one thing worse than not having systematic procedures in place across your cannabis business — having systems in place but ignoring them.
For example, look at the employment side of the cannabis industry. Many cannabis businesses understand the need to have an employment policy manual, so they find a nice template online, find and replace some words, and adopt it themselves. Other businesses are savvier and work with attorneys or HR professionals to create professionally tailored employment policies. In both circumstances, that manual may include references to things like “performance management plans” or “performance improvement plans.” The plans can have step by step procedures for what happens in the case of employee performance problems. They often include a multi-step process for performance correction, review notes in the employee file, interim sanctions, and finally termination. But life moves fast, and it’s often easiest for business managers to talk to employees on the fly. Let’s say that an employee is consistently late. Instead of going through the formal process, the employer makes a couple of corrective comments, and then terminates the employee when the poor performance continues.
If a disgruntled former employee brings a complaint for wrongful termination, that employee’s case is immensely improved if she/he can show the employer did not comply with the employer’s written policies and procedures. At-will employees are still protected against termination for certain reasons. You can’t fire someone for reporting discrimination, for taking protected leave, and for several other reasons. Even if you had a good reason for the termination, if the former employee can connect the termination to a protected scenario, the employer’s lack of compliance with its own policies and procedures can be the kiss of death.
But employment isn’t the only area where this is important. We advise marijuana businesses to have compliance programs in place. Let’s say your written compliance program includes a weekly audit of your on-site security cameras and alarms to make sure they are all working. State laws often provide for penalty mitigation or even penalty waivers when companies act in accord with written compliance programs. But to get that mitigation or those waivers, you need to be able to document that you actually complied with your written procedures. In fact, if you submitted your written compliance program to the state as part of the licensing process, your noncompliance with that written compliance program can actually be considered an independent regulatory violation.
So what does this all mean? Written policies and procedures are vitally important for highly regulated businesses and any business looking to grow beyond a single location. But written procedures are not about putting in place a program that looks good on paper but is never really implemented. Your compliance programs for your cannabis business should be written and tailored so that the standard procedures set forth within them are achievable by your company’s management and staff. And once you have an achievable system in place, it is likewise supremely important that your company abide by it and stick with it. If you have written procedures and you find that you aren’t doing a good job complying with them, you need to either adjust your actions, adjust the procedures, or both. Otherwise, you will run into a host of problems.