Cannabis-related businesses face several regulatory and compliance issues that impact their HR practices. The quickly changing regulatory and legal landscape can be challenging to comply with, particularly when it comes to payroll. But there are other implications, as well, said Liesl Bernard, CEO of Cannabiz Team, an executive search and staffing firm focused exclusively on the cannabis industry.
Challenges for Those in Cannabis-Related Companies
Bernard likens the cannabis industry to the alcohol industry. "From needing all employees to be of age—21 in most states or 18 in select U.S. states—to clean background checks, hiring the correct team makes or breaks a regulated business," she said.
Hiring employees for cannabis-related companies, she said, "is more expensive because many states require additional screening, licenses and background checks."
The need to avoid hiring the wrong person for a cannabis business, Bernard said, is even greater than for other types of businesses.
Getting employees on board is one challenge. Getting them paid is another.
Banking, said Ben Michael, an attorney with Michael & Associates, is a big issue that these businesses face. Because cannabis use is legal in a number of states but not at the federal level, national banks can't support these companies, he said. "It's sometimes even quite difficult to find local or statewide banks to support these companies, which results in many companies operating out of an all-cash structure."
That, he said, "obviously comes with problems as well when it comes to things like security, taxes and overall risk."
In addition, Michael said, the cannabis industry is extremely regulated and if a company makes even small errors, they can easily be shut down. That's why, he said, "doing everything by the book is absolutely crucial."
These complications can make it challenging for cannabis companies to find HR technology providers. PayNW is a human capital management (HCM) software and services provider that recently began serving cannabis-related businesses. There are a few other companies that offer these services, too, said Lori Brown, CEO of PayNW, but for now, the larger HCM providers like ADP haven't wanted to operate in this space. This is primarily because these companies don't want the risk of doing something that is federally illegal, she said.
Lindsay Mastrogiovanni, an HR consultant, business coach and founder of Blue Moon Growth Co LLC, said this "makes technology and otherwise easy-to-obtain payroll processes a super tough hurdle to overcome for the cannabis industry."
There's the potential that the federal government may eventually follow the lead of states to legalize recreational cannabis use. That would obviously impact demand for the type of cannabis-related services that companies like PayNW provide.
But, Brown said, she doesn't think that this will happen anytime soon and, even if it did, cannabis-related businesses would still be regulated and still have unique requirements. A new type of business just a few years ago, cannabis-related companies are rapidly emerging and expanding.
Brown feels the most important consideration for cannabis companies shopping for an HR tech vendor is to look for a provider that is "openly and proudly serving the cannabis industry."
There have been instances, she said, when a client with a business name that has no direct indications of cannabis involvement has come to PayNW and said their provider "just found out we're a cannabis company so they kicked us off their service."
Selecting the right vendors and being up front about the business your company is in can help to minimize risks. Beyond that, Brown said, it's a matter of identifying what your workforce needs might be.
"If you've got five employees and you don't need a full HCM system, then don't implement a full HCM system," she advised. Determine what your needs are, then find a provider that can meet and support those needs well.
Lin Grensing-Pophal is a freelance writer in Chippewa Falls, Wis.