Well run companies comply with the law. This means all federal laws as well as the laws of all applicable states, counties, cities, towns, and other jurisdictions. If you are operating a business you should approach compliance from the perspective that you cannot “get out of” legal violations by arguing that you were unaware of or did not understand the regulations. Ignorance of the law is no excuse.
How can anyone be expected to comply with all those laws? Generally, they aren’t. It would be impossible to do so even if companies implemented the most robust compliance programs. And, of course, marijuana businesses cannot comply fully with federal law because federal law deems marijuana illegal.
In recent years, large U.S. companies have prioritized legal compliance efforts, established compliance departments, appointed compliance officers, and implemented corporate-wide compliance policies, procedures, and training. These efforts represent the “gold standard” of legal compliance programs. This gold standard approach is not feasible for all companies and some companies would not choose it even if it were.
Compliance efforts are important for the marijuana industry. Because marijuana remains illegal at the federal level and subject to stringent regulatory requirements in those states and Washington, D.C. where it is legal, compliance efforts are especially important for cannabis producers, processors, distributors, and retailers.
Cannabis companies need to develop strategies for complying with laws and regulations that are tailored to their own particular needs and that address their own particular risks. Effective compliance programs ensure that a cannabis company undertakes the following actions:
- identify applicable laws and regulations
- prioritize laws according to possible impact on a company’s operations
- develop and implement procedures to address prioritized legal obligations
- document compliance procedures
- communicate procedures throughout the company and to the company’s business partners, specifically through training
- archive compliance procedures.
Identifying and keeping records of all laws and regulations that apply to a cannabis company’s operations should be an ongoing effort, as should be initiatives to develop and train on processes to enhance regulatory compliance. However, cannabis companies should prioritize those state regulations that can result in criminal sanctions and/or license revocation and address these compliance risks first and early in the companies’ operations.
Cannabis companies benefit from compliance initiatives in various ways. Most importantly, these initiatives can help companies avoid situations or actions that could result in criminal penalties or licensure revocations.
Compliance efforts also promote a cannabis company’s reputation and good will with state and local regulators. The importance of this benefit cannot be understated. Because regulations for commercial marijuana operations are relatively new, state regulators must often decide how to interpret the new regulations and how they apply to a company’s operations. Generally, these regulators want to know that cannabis companies are committed to doing the right thing. If the regulators can view a company’s documented compliance efforts, they are more likely to work with a company to remedy the company’s minor regulatory violations than to issue penalties.
By way of an example, Washington State specifically codifies mitigation of regulatory violations in Washington Administrative Code 314-55-515 as follows:
Mitigating circumstances that may result in fewer days of suspension and/or a lower monetary option may include demonstrated business policies and/or practices that reduce the risk of future violations.
Examples of mitigating circumstances can include something as basic as having a signed acknowledgment of the business’ responsible handling and sales policies on file for each employee or having an employee training plan that includes annual training on marijuana laws.
A cannabis company’s compliance program – including standard operating procedures (“SOPs”), manuals, and training – provides documented proof of the company’s efforts to conduct its business in accordance with applicable regulations. Such programs, especially personnel training documented with training sign-in sheets, also provide documentary support of employees’ understanding of the laws governing the marijuana industry.
Bottom Line: Cannabis businesses benefit from implementing compliance programs early in their operations. Such compliance programs should document and substantiate your commitment and efforts to operate in accordance with the law and should be set up so that they can be easily reviewed and referenced by state and local regulators. Compliance programs can help you to avoid criminal sanctions or license revocation and help to mitigate less serious offenses. Compliance requires diligent hard work and monitoring, but it really comes down to understanding the legal basics and remembering that ignorance of the law is no excuse.
For more on cannabis compliance, check out the following: