Employer Audits for Cannabis Businesses

Audits are not usually met with open arms. More often than not, these invasive exercises sound awkward and even dangerous for a cannabis business. But that should not be the case! In fact, as in other industries, a preemptive employment practices audit can be a cannabis business’s best friend.

cannabis employment audit
Audits are not always a bad thing.

What is an employment practices audit?  An employment practices audit is simply scrutiny of a company’s employment practices by an outside expert. A successful audit will evaluate a company’s practices for legal compliance, provide recommendations to protect the company from litigation, and assist in the development of a strong human resources department. An audit is a good idea for any cannabis business, but it can be especially useful for start-ups. A good audit will identify weak points in the employer/employee relationship and fix problems before they arise—potentially saving a cannabis business the time, expense and the trouble of litigation.

Wages and Hours

One of the biggest liabilities employers can face in compliance with wage and hour laws. We’ve recently highlighted some of the exposures employer can face for failing to comply with wage and hour laws (here, here, and here). A wage and hour audit will examine your payroll practices to ensure employees are paid at least minimum wage, overtime is correct, and maximum work week hours are observed. A good audit will also determine if employees are accurately classified as exempt from wage and hour requirements, or whether changes are needed.

Pay Equity

Many states are passing equal pay laws—including Oregon and Washington. Equal pay laws require employers to pay similarly situated employees the same rate. An equal pay audit will examine employee job duties and responsibilities, determine if their pay is equal, and if the pay is not equal, provide an employer with a recommendation to comply with the state’s equal pay law. Some states, like Oregon, specifically provide incentives to employers for completing a pay equity audit.

Discrimination, Harassment, and Retaliation

Marijuana employers need to have critical, designated practices in place to address discrimination, harassment, and retaliation in the workplace. In fact, a good training or complaint handling system could reduce discrimination and harassment all together. An audit will examine complaint procedures, investigation procedures and discipline procedures, to ensure employer liability is minimalized. A well executed audit can also provide recommended fixes and trainings to help employees understand the seriousness of harassment and retaliation.

Cannabis Specific Matters

It may seem severe, but a cannabis company runs the risk of losing its license if the acts of its employees violate a state cannabis rule or statute. An audit can examine the practices your company has in place to help employees comply with the state cannabis rules and provide a plan for employee compliance.

Leave Practices

Many states require protected sick leave. In addition to protected sick leave, many businesses are subject to the Family Medical Leave Act or the state equivalent. An employer audit can examine whether employees are given protected sick leave in accordance with the state sick leave laws, and provide protected under FMLA and the state equivalent.

Employee Handbook Review

Employee handbooks are so very important to cannabis businesses. They should be the first place both the employer and the employee look for questions regarding leave, benefits, pay schedules, expectations and disciplinary practices, among other things. A proper audit will examine your employee handbook and determine if the handbook complies with federal and local laws and whether it needs updating (given the rapid evolution of both employment and cannabis laws, we can almost guarantee you that it does). Regardless of whether you do a full audit, an employee handbook should be reviewed by an expert at least once every two years to ensure it still complies with local laws.

Audits are not “one size fits all” and can be tailored to meet your cannabis businesses needs.  Audits can save companies a lot of money in the long run by fixing problems and instilling practices that can prevent employment related litigation before it starts.