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Cannabis Employment Compliance - Part 3

In the first 2 installments of this series we discussed the differences between an independent contractor (I/C) and employee and classification of exempt vs. nonexempt employee. Now that we've determined that an individual is an employee, we need to ensure we document their hire correctly.

We all understand that this industry has been "off the grid" for decades, without having a legal business entity, paying people under the table, etc. Now that many existing cannabis operators are transitioning to legal operations, many are struggling with compliance. Understanding all of the regulations related to being a legal employer alone is difficult, let alone all of the cannabis specific regulations. Don't risk your license for neglecting the basics!

Even leading up to hiring, you need to ensure you are compliant with your state's rules which generally means your business needs to be registered with the department of labor/industrial relations (mainly so you can pay in to the unemployment insurance compensation fund).

You'll then need to have your new employee fill out an I-9 form in addition to providing acceptable forms of identification. The I-9 is documentation of an employees eligibility to work in the U.S. It is important to do this properly and retain the form for at least 3 years after the employees start date or 1 year after the employee is terminated, whichever is longer.

The U.S. Department of Homeland Security (DHS) lays out the requirements and acceptable forms or documentation for ID here:

The DHS may inspect your records at any time to verify if you are hiring appropriately and maintaining all necessary documents. Failure to complete or retain I-9s for the required period will result in substantial penalties. Penalties for knowingly employing individuals not eligible to work in the U.S. range from $548 to $22,000 per violation and penalties for other violations including failure to produce an I-9, range from $220 to $2,200 per violation. Each employee or I-9 would be considered one violation so fines do add up quickly.

Don't be lax in addressing employment compliance. What may appear to be a minor matter can turn into a headache costing you tens of thousands of $$$. I had one client that was inspected by DHS for their employment practices. They had about 25 employees for which they were unable to produce I-9s for many of them. The client contended that a former employee deliberately threw the I-9s away in retaliation for being fired but with no proof of that, they were fined almost $20,000. Luckily, I was able to help them reduce the fine to about $5,000. Not inconsequential but much better than $20k.

This article from our partner Remedy Intelligent Staffing has a more detailed guidance and few more horror stories of the result of non-compliance:

Ensuring you hire people that are legally able to work in the U.S., classifying them properly and documenting it will not only help you to avoid any potential fines and penalties, but more importantly, it will not put your cannabis license in jeopardy.

In our next installment, we'll address the importance of workers' compensation insurance.

By utilizing CannaBOS staffing services, you can avoid all of these headaches and not have to worry about classification or documentation as we handle all employment and administrative compliance issues. Give us a call.

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