Noncompliance with employment law is one of the biggest legal pitfalls cannabis business can face, according to Maria Denzin, owner of MJ HR Strategic Solutions, a cannabis-focused HR consulting company.
“One of the things that I tell all of my clients is HR has a very important and specific function,” Denzin says. A human resource professional at a cultivation facility or dispensary can interpret compliance law into action or policy that can protect the company against litigation from partners, employees and suppliers.
Here, Denzin shares how.
Cannabis Business Times: What are some of the biggest legal pitfalls that cannabis businesses can encounter when it comes to state and local compliance with employment law?
Maria Denzin: The biggest legal pitfall that I believe that a dispensary with five or more employees has is not having an HR person. If the owner, operator or manager tries to do things in HR, like recruiting, posting jobs, hiring, managing leads and firing—tries to do all that and also tries to do the job they’re supposed to do, which is development and implementation of the business plan—that’s a huge legal pitfall. They are not trained. They are going to make terrible mistakes, usually in their language [and] in how they approach things.
The dispensaries that I’ve visited [in] Southern California, … what I’ve found is that most of the smaller dispensaries—and by that, I mean five to seven employees … —they don’t have an HR person. They outsource their accounting function, payroll, security, forms and some compliance, but they don’t have anybody in-house that is doing any kind of employee relationships and really overseeing interviewing, hiring, firing, etc. So, … some of these ads that are posted on these job boards just make me shudder—I’m just waiting for a lawsuit. For example, when some dispensary advertises for a budtender and says, “We’re looking for a young, energetic, passionate person to work in our cannabis dispensary,” … they’re already setting themselves up for a lawsuit. … First of all, you’ve asked for somebody young, so you’re referring to age. You’ve asked for somebody passionate, so maybe I use the product. You’re discriminating against, “I’m not an emotional person, I’m a rational person.” And energetic also implies some kind of ageism
Wages [are] another legal pitfall that falls under HR, which we’re seeing here in California. … There’s a minimum wage that’s set by the federal government, then there’s a state minimum wage that’s set by California, but then different municipalities have different wage laws. … An HR person really needs to know that. … Those are the kinds of issues that are going to blindside dispensary or grow owners who do not have an HR function.
Another thing I’m seeing is employers who are trying to get around the wage and labor law by calling people contractors. Again, there are very strict rules about what is a contract and what is an employee. And again, that’s where HR would be a great help to an employer to make sure that they have the right guidelines and are compliant.
CBT: Can you outline some HR risks associated with wrongdoing by partners, suppliers and employees, and how these can be avoided?
MD: For this year anyway, my biggest concern as an HR consultant would be with sexual harassment. It’s a big deal. Every state is drafting or has drafted new laws requiring additional training of managers and employees regarding sexual harassment. To me, that is something that suppliers, partners and employees all have to be aware of.
California, Colorado [and] Washington … all have very strict laws regarding training. … All [employees] have to have sexual harassment training—at least two hours of training for management and employees. What’s a dispensary owner to do? He’s never developed a training course. He can go online and buy one and make sure everybody gets it, but at least he or she knows to do that.
CBT: What are some other common HR issues that cannabis businesses face, and how can these be addressed?
MD: No. 1 is they’re so concerned with bottom line. Everything that HR does is considered a cost because it costs money to hire. Hiring a full-time HR person probably just sounds hugely expensive. But what I would say is, let’s look at the money that’s saved. … I would say [there] is a cost savings when you avoid lawsuits [and] when you have happy employees.
I think that one of the common HR issues [is] turnover and retention. Again, let’s pretend for a moment that all the recruiting, advertising, interviewing processes are all good, all in place, and no lawsuits there. However, now we get to: How long do these employees stay? How do you attract the right employee, and then how do you keep them? This is a common HR issue in any business. Hiring is grossly expensive, … [but] for every employee you have to replace, you figure that you’ve trained that employee, you’ve spent all that money on recruitment, you spent all your managers’ and employees’ time on interviewing, and then the employee doesn’t stick. Well, that’s very expensive, and they’re figuring that averages somewhere between $14,000 and $20,000 … [for] the business to replace an employee who’s been there for six months or more. … If I get an HR person that I pay a salary of $35,000 a year, but I expect that you keep our employees here and I’m going to look at that as your ROI, I think you’ll be fine because your HR person can really help keep employees happy on the job through engagement, through the right benefit package [and] through keeping the work environment healthy.
CBT: What is an example of a “worst-case scenario” in HR, and how can businesses prepare for this?
MD: The worst-case scenario is it can actually put you out of business. If, for example, … you’re part of a class action suit, you’re going to be wiped out, period. At minimum, let’s say that your dispensary has a sexual harassment suit. … Well, everybody will know about it.
The worst-case scenario is called social media. Anything that happens in your grow or in your dispensary is going to be known within a day [by] hundreds and hundreds of people. So, if you become known as an employer who’s not good to work for or you become known as a grow operation that doesn’t pay fair wage or you become known as a dispensary that has [poor] benefits, that will get known in the industry, and you’ll have a hard time keeping people or employing people. So, again, worst-case scenario for me really is what happens on social media. Your problems are never private. … You don’t want to be on the 5:00 news, and you don’t want to be on Glassdoor as one of those employers to avoid.
CBT: What is one important lesson or takeaway that you hope to impart on attendees at Cannabis Conference 2019?
MD: The takeaway that I would hope to impart on attendees is: Hire an HR expert. Again, there are many ways of doing that, but have someone either on staff as a consultant that you can easily contact and do work, hire a part-time person, hire a full-time person, but make sure they’re truly and HR person—they’re certified, they have education and a degree in human resources. Don’t just hire your brother because he loves people. That isn’t going to cut it. The function will keep you out of the courts, it’ll keep your employees informed, and they’ll understand what is expected of them. It’s also how you can stay compliant. The HR person working in tandem with the employment law attorneys really keep your business humming. The owner, partner and the other execs don’t have to be concerned. They’ve got their backs covered.
Editor’s Note: This interview has been edited for length, style and clarity.