Now That You Are A Real (Pot) Business: Employment Law Basics for Marijuana Businesses

When we blog about employment law issues, it is usually on something like an unfortunate employee who lost his job for testing positive for cannabis in the workplace — despite marijuana being legal in his state. Not all employment law issues have to do with draconian employers and anti-pot employment laws. In fact, as a licensed or permitted cannabis business, it is critical that you learn how to deal with your employees and the legal issues surrounding the employer-employee relationship.

As an employer (cannabis or otherwise) you need to ensure that you comply with all applicable employment laws, including those that touch on employment contracts, workers’ compensation and mandatory hour and wage laws.

To assist you with that compliance, here is a basic list of the common issues you are likely to face as a marijuana business with employees:

1. Hiring. You must, must, must get your hiring process straight. This is both the first step to complying with state and local employment laws and the foundation for the personality and reputation of your business as you are only as good as your staff. When hiring, make sure that your application forms set forth the criteria you want in your employees without triggering any anti-discrimination employment laws in your jurisdiction. You should also compile an interview checklist to maximize your interview time with potential employees, and to make sure that you do not ask any questions that can lead to a lawsuit against you.

2. Making the employment decision. After sifting through applications and undertaking multiple interviews, you’ve finally found your star budtender or master grower. So, how do you navigate the hiring decision and what do you do with unsuccessful candidates? For the chosen applicant, you need to decide whether to ask them to sign a non-disclosure agreement (NDA) to protect your business trade secrets. Right before you hire someone as your employee is typically the best time to get them to sign an NDA. If you wait, the NDA might be deemed unenforceable. You should send out rejection notices to those you chose not to hire to ensure that there’s no confusion about the employment relationship.

3. Relationship with the employee.  To have an employment contract or not, that is the question. Regarding your successful hire, you need to decide whether to offer that employee an employment contract or to keep the employment at-will (again, hiring an employment lawyer to walk you through your options is invaluable even if most states are at-will concerning employment). In an at-will state like Washington, should you offer the employee a contract with specific terms and conditions of employment, you’ve just created contract rights for that employee and the “at-will” status of the relationship is forever changed and/or altogether gone.

You will also want to consider whether you want your employees to sign non-compete agreements or any contracts to better protect your business’s intellectual property. Careful with that non-compete though as courts usually reject those that fail to comply with state law.

4. Workplace policy manual. It virtually always makes sense to have a well-drafted workplace policy manual that complies with state and local employment laws. Some states even require such manuals for marijuana business licensing.

A well written policy manual can instill in your employees the sort of workplace conduct that will help you maintain a sterling business reputation. This manual should, among other thing, set forth your company’s policies for holidays, training, insurance, payroll procedures, absences, dress code, anti-harassment and anti-discrimination mechanisms, employee evaluations, and how to deal with employee and customer complaints. Again though, be careful, as courts sometimes deem poorly crafted employee policy manuals to create a contract relationship with your employees that makes terminations and workplace discipline costly or impossible.

Employee policy manuals usually also cover drug policies in the workplace. Make the decision now, will you be a zero-tolerance drug policy employer? If so, be clear in the employee policy manual and be mindful that most cannabis legal states forbid anyone from consuming marijuana at a licensed facility.

5. Termination and lay-offs. Terminating an employee with whom you have a contract should adhere to that employment contract. That’s fairly cut and dry.

By contrast, at-will employers in most states have the right to terminate employees for any reason or for no reason at all, but not for an unlawful reason. Wrongful termination claims against at-will employers typically arise because of the employer’s:

  • discrimination against recognized protected classes into which the employee falls (race, religion, gender, marital status, disability, age, sexual preference, etc.). Note that these classes can vary by state and even sometimes by city.
  • retaliation against the employee
  • having created a hostile working environment that caused the employee to quit

Employment law is no joke and it is absolutely relevant to any marijuana business that hires anyone. If you are now an employer or will be one soon, get educated and get vigilant. Now.