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Employee Handbooks for Cannabis Businesses


employment cannabis marijuana
One of the most important books your cannabis company can have is an employee handbook.

The cannabis industry continues to grow. Each year we see additional states legalize recreational marijuana. Along with more legalized weed, comes more cannabis employees. And more employees means more employment litigation.

We recently hosted a litigation webinar where I spoke about employment litigation and ways to protect your marijuana business. One of the tools I mentioned was documentation. When it comes to that, one of the most important documents your cannabis business can have is an employee handbook. This is true whether you have one employee or 100.

An employee handbook plays many roles. This post will discuss some of the more important reasons to have a comprehensive employee handbook.

Communication and Orientation

An employee handbook serves as an important communication tool between employees and employers. A well drafted employee handbook will contain a mission statement, along with the values, goals, and expectations of the company and its employees. This communicates a sense of belonging to employees and provides them with an understanding of the goal they are working towards achieving.

The handbook will also communicate the benefits to which employees are entitled as cannabis business workers (free pot is not one of them). A good handbook will explain to employees can question about company benefits. This will save you time as an employer because you won’t have to answer the same questions over and over.

Guidelines and Expectations

One important aspect of an employee handbook is that it creates a uniform set of rules for employees. Employees need to know what is expected of them and when. Employee handbooks should cover everything from attendance requirements to dress requirements and drug use policies. Handbooks should also lay out discipline that can be expected if these policies are violated.

Employee handbooks should provide guidance to employees when problems arise. The employee will know who to talk to and, if properly drafted, supervisors will know how to handle situations.

Legal Protection for Employers

The most important aspect—at least from a lawyer’s point of view—is the legal protections a well drafted employee handbook can provide. In most states, employer employee relationships are “at will”, meaning the relationship can be terminated at any point by either party, as long as there is no discrimination at play. An employee handbook makes it clear that the relationship is “at will” and that other agreements cannot change that relationship.

Employee handbooks also provide the basis for defense in a harassment claim. As previously discussed,  a valid defense to harassment claims if proof of an anti-harassment policy and a complaint procedure. Employee handbooks should outline both a policy and a complaint procedure.

Handbooks also provide protection in wrongful termination cases. Wrongful termination is a broad term used to describe cases brought by former employees against employers alleging the employee was terminated for some illegal reason—for example, discrimination. An employee handbook laying out attendance requirements can be used to show that an employee was terminated for violating a clear policy rather than for other, illegal, reasons. If an employer does not have a clear policy, it will be hard to prove the employee violated any such policy.

Employee handbooks can also serve as means to inform employees of required information. Both state and federal laws require employees be informed of their rights under certain acts such as Family Medical Leave Act. Every employee handbook should have an acknowledgement page to be signed by the employee, proving they were provided with the information.

Employee handbooks are not “one size fits all.” Each cannabis business is unique and has a different mission and goal. Further, employment laws are state specific and at times, location specific. There are many drawbacks to pulling a generic employee handbook from the web. A specialist familiar with the state and local laws should draft or review handbook, or the handbook could become a liability rather than an asset.

Handbooks should also be reviewed and revised at least once every two years. Many states, including California and Oregon, have seen an uptick in state employment regulations offering more protections to employees as of late. Laws change quickly and it could mean your employee handbook is out of date and non-compliant if it is not updated frequently.

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California Cannabis Licensing and Labor Peace Agreements


marijuana california employment union
Labor Peace Agreements can save you from strikes.

We recently hosted a webinar discussing cannabis disputes and litigation. Over 1,000 people signed up to learn about the different types of litigation that can occur, how to avoid disputes, and, if necessary, how to prevail when litigation is unavoidable. During the presentation, I covered employment litigation and received quite a few questions. Several people were curious about labor peace agreements in particular, which are an important topic for the California cannabis industry. Because we ran short of time during the webinar, however, I will address those agreements here.

California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) requires adult use cannabis and medicinal cannabis licensees with 20 or more employees to provide a statement that the applicant will enter into, or demonstrate that it has already entered into, a labor peace agreement. In other words, once your business reaches a certain size, you will not be able to operate in California without a labor peace agreement. But, what is a labor peace agreement?

In short, a labor peace agreement is an agreement your cannabis business enters into with a union that represents cannabis workers. The agreement includes obligations for both the union and the cannabis employer. This types of agreements are highly specialized.

As a preliminary matter, the cannabis employer must agree to remain neutral regarding unions and their representation of employees. This means the employer cannot make any statement opposing or advocating for unionization and cannot retaliate against any employee for discussing joining a union or disparaging unions. Employers are responsible for ensuring all managers and supervisors are aware of the neutral requirements of labor peace agreements.

Usually, labor peace agreements include a provision that requires employers to provide a list of the name and contact information of all non-supervisory employees. Employers typically are required to provide these lists at the request of the union, although most labor peace agreements include a limit on the frequency of the requests the union may make (i.e., no more than once a week). A labor peace agreement also grants the union the right to contact the cannabis business employees. However, this right must not disrupt normal business and productivity activities.

Unions also have obligations under Labor Peace Agreements. The union is required to be neutral in its communications with employees. The union cannot disparage the company and cannot paint the cannabis employer in a bad light to employees or to the public. The union must also agree to not disrupt or interfere with the employer’s operations or businesses, and cannot encourage or engage in a strike, slowdown, or picketing of the company.

In addition for individual obligations for both employer and the union, labor peace agreements also typically contain provisions related to collective bargaining if the cannabis employees decide to unionize. The collective bargaining agreement requires the parties to bargain in good faith, and it usually includes a provision about how to resolve an impasse if the parties cannot reach an agreement.

Labor peace agreements may seem intimidating or burdensome but they are nothing more than an agreement to work with your local union and allow the union access to your cannabis employees. In return, the union agrees to not disrupt your business practices in contacting employees, and agrees to not strike or to cause a labor strike.

Ultimately, when looking to enter into a labor peace agreement, your foremost concern should be entering into the agreement with a union that is easy to work with. The union should be open to your ideas and open to negotiations in the labor peace agreement. In the end, you will have options over what union you choose to enter the agreement with, but you will always need a labor peace agreement if your California cannabis business has more than 20 employees.

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The Tax Act and Cannabis Employment Practices


cannabis marijuana employment tax
Look out for a change in tax deductions for employer provided benefits — at least for some businesses.

President Trump signed the Tax Cuts and Jobs Act (the “Act”) into law on December 22, 2017.  The Act contains several sections that will impact companies that work with cannabis businesses and provide important indications of where states might be going with taxes in the coming year. As for the Act itself, its sweeping provisions went into effect on January 1, 2018.

Note that much of the Tax Act’s deductions and credits won’t apply to cannabis businesses due to IRC 280E, but these deductions and credits are still important to many ancillary businesses that serve the industry, and which may not be subject to 280E (we recommend that anyone with questions as to where they fall seek advice from their CPA or cannabis tax attorney). If these credits and deductions prove to be popular we may see states enact similar changes that will directly affect cannabis business themselves.

On the employment front, many cannabis businesses obtain employees through staffing agencies. Those agencies should will be subject to these new tax deductions and credits. We may see an influx of agency recruits, or a decrease, depending on how the recruitment companies take advantage of these deductions and how the new laws remove deductions for benefits provided to employees.

Sexual Harassment Settlements

Prior to 2017, we didn’t hear much about sexual harassment in the workplace. One reason for this is because a majority of sexual harassment settlements contain nondisclosure agreements. A nondisclosure agreement typically prohibits the employee from discussing the sexual harassment suit, its result or even the fact that harassment was ever alleged. Currently, employers are allowed to take a tax deduction for settlements paid out for sexual harassment and sexual abuse, regardless of the terms of the settlement agreement. That’s finally changing.

Going forward, employers cannot deduct settlement payments related to sexual harassment if the settlement agreement contains a nondisclosure agreement. Employers can receive a tax deductions on sexual harassment settlements that do not contain nondisclosure agreements. Payments in sexual harassment suits can be huge–meaning the tax deduction can also be huge. (Bill O’Reilly paid $32 million to one female accuser.) This will force employers to carefully consider how sexual harassment suits are settled, which is a welcome change. States might follow suit. Plan now how to handle sexual assault cases so you don’t have to make this decision.

Paid Leave Credit

Paid family and medical leave is a significant benefit for cannabis employees. Providing paid family and medical leave can attract highly qualified employees and help retain those employees. In what has been described as the first step towards a “nationwide paid family leave policy”, the Act provides employers incentives to provide paid family and medical leave—admittedly in a very complicated fashion.

Employers can qualify for up to a 25 percent tax credit for providing paid leave for qualifying employees under the Family Medical and Leave Act (FMLA). Employers qualify for the credit by providing at least two weeks paid leave equal to at least 50 percent of the employee’s regular wages. At a minimum, employers will receive a 12.5 percent tax credit for providing paid leave. The credit incrementally increases based on the percentage of regular wages the employee receives. The paid leave credit is only applicable to employees who earn less than $72,000 and have been employed at least one year. Paid leave must be provided separately from vacation leave, personal leave, or other medical or sick leave.

The Paid Leave credit expires in 2019 unless extended by Congress. Some congressional members have suggested Congress is considering enacting separate legislation that requires paid leave. Paid sick leave requirements are already in effect in several states, including those with cannabis laws.

Pay attention to expenses related to paid leave, and consider whether this a feasible option for your cannabis business. Several states already have paid leave and more are likely to follow. If your state does not already have paid leave that applies to your cannabis business, you should assume they will enact similar tax incentives soon.

ACA Individual Mandate

The Act removes the Affordable Care Act individual mandate to purchase health insurance. At first glance, this does not seem like it would affect your cannabis business, but staffing agencies employing more than 50 full time employees. are required to purchase healthcare for their employees. Employees that are recruited to your cannabis business are considered employees of the staffing agency. The ACA’s individual mandate was designed to work with the employer mandate to provide health insurance. The employer mandate is still in place. Employers with 50 or more full-time employees are still required to provide health insurance.  Without the individual mandate, it is likely insurance premiums will continue to rise unless Congress acts to reform health care.

Further, given the mandates were designed to work together, there is a strong suggestion that Congress will start to undo the employer mandate. It will likely come in the form of fewer reporting requirements or a complete removal of reporting requirements. This means that staffing agencies may reduce the number of recruits they have out at a time to avoid the employer mandate of the ACA, meaning you will have less of a pool to pull from.

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Oregon Cannabis: New Year, New Minimum Wage


Oregon cannabis marijuana employment
More for the workers, less for the boss.

It’s 2018! That means your Oregon marijuana business will be subject to increased minimum wage requirements this summer. The new federal Tax Act has everyone considering money, so now is a great time to think about how the increase in state minimum wage will affect your business expenses.

In 2015 the Oregon legislature established a progressive series of annual minimum wage rate increases. The rate increases began on July 1, 2016 and continue through July 1, 2022. On July 1, 2023 the minimum wage rate will be indexed to inflation based on the consumer price index, which is a figure published by the United States Bureau of Labor Statistics.

The location of your Oregon cannabis business will dictate the amount of increase of the minimum wage for your non-exempt employees this July. (“Non-exempt employees” are employees who must be paid minimum wage and overtime, for any hours worked beyond 40 in a given week.)

Date Standard Portland Metro Nonurban Counties
July 1, 2016 $9.75 $9.75 $9.50
July 1, 2017 $10.25 $11.25 $10.00
July 1, 2018 $10.75 $12.00 $10.50
July 1, 2019 $11.25 $12.50 $11.00
July 1, 2020 $12.00 $13.25 $11.50
July 1, 2021 $12.75 $14.00 $12.00
July 1, 2022 $13.50 $14.75 $12.50
July 1, 2023 Adjusted annually based on the increase, if any, to the US City average Consumer Price Index for All Urban Consumers $1.25 over the standard minimum wage $1 less than the standard minimum wage

The Portland Metro rate applies to all employers located within the urban growth boundary. Metro has an Urban Growth Boundary tool to help determine if your cannabis business is within the Portland Metro area. The nonurban counties rate applies to: Baker, Coos, Crook, Curry, Douglas, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Marrow, Sherman, Umatilla, Union, Wallowa, and Wheeler. All other counties must pay the standard rate.

Both the state of Oregon and the federal government set minimum wage requirements. The federal minimum wage is and remains at $7.25. As you can tell, Oregon’s minimum wage is significantly higher than the federal minimum wage. When federal and state employment laws conflict, employers must apply whichever standard is most beneficial to employees. In the case of minimum wage, Oregon employers, including all cannabis businesses, must pay their employees minimum wage based on the Oregon rate. Start planning ahead.