As a fast-growing cannabis company, ensuring your business stays compliant with regulatory agencies of all kinds—planning departments, the U.S. Department of Agriculture (USDA), Occupational Health and Safety Administration (OSHA) and so on—is critical for survival. But is your business also compliant with temporary and part-time employment regulations? Violating these often-overlooked regulations can land your company in hot water at best and force you to shut your doors at worst. Here’s what you need to know about risks, regulations, compliance issues and more.
The 30,000-Foot View: Part-Time and Temporary Employees
Cannabis has proven itself to be a high-turnover industry. But in the ever-shifting, post-COVID landscape, many cannabis employers are seeing the financial and logistical benefits of hiring part-time and temporary workers.
Though the terms “part-time” and “temporary” are sometimes used interchangeably, the fact is, there are legal differences in the definitions of part-time versus temporary work. For starters, temporary employees must work for less than a year at a specific organization, and their work must have a defined end date. Temporary employees, or “temps,” often fill vacant roles in a temporary capacity, such as roles previously occupied by someone on parental leave.
Part-time employees, on the other hand, can work indefinitely for a company—but they must work less than 40 hours per week. And, side note, if a part-time employee works more than 1,000 hours in a calendar year, they could be eligible for retirement benefits—so hiring managers, bear that in mind.
For employers, there are some tangible benefits in hiring part-time or temporary workers. For starters, there are often fewer upfront costs associated with hiring part-time workers (like workers’ compensation and healthcare). Establishing a strong part-time and temp employment strategy also allows for employers to quickly scale up or down based on market tendencies or shifts.
Understanding the Risks of Hiring Part-Time or Temporary Workers
While hiring part-time and temporary workers can help businesses stay agile and responsive to market demands or fill vacancies created by recent resignations, many businesses hire these types of employees without a full understanding of associated regulations. And it can get even trickier: many full-time cannabis industry workers in the cultivation space aren’t considered “employees” at all—they’re defined by the federal government as “agricultural workers.”
It’s essential that businesses classify part-time workers and independent contractors correctly. Attempting to claim a worker is part-time when they’re really a full-time employee (a practice known as “misclassification”) can save a business tax dollars in the short-term but lead to sanctions and hefty penalties down the line. For example, if a worker is misclassified and the Department of Industrial Relations finds out, they can sue the former employer for unpaid wages.
Potential fallout from noncompliance with classification or wage and hour issues includes massive fines, potential litigation and more. Federal agencies are extremely sensitive to cannabis business regulatory violations, it’s vital to adhere to proper staffing regulations and compliance. The wrong kind of attention can tank your business’s reputation and halt your operations altogether. I’ve personally worked with numerous cannabis businesses in their hiring and payroll initiatives, and I’ll say this: It may seem like a headache to cross all the “Ts” and dot all the “Is” in the beginning, but it will make a massive difference down the line.
Understanding the Regulations for Hiring Part-Time or Temporary Workers
All employers must adhere to the regulations set forth by the Fair Labor Standards Act, which mandates that part-time employees must be treated the same as full-time employees. That means they must be paid minimum wage, be paid overtime should they exceed their determined hours, have the opportunity to take job-protected unpaid leave, and so on. I really want to stress how essential it is that employers classify their workers appropriately.
It’s also worth noting that many states have specific regulatory structures for employment, both full- and part-time.
In the heavily regulated cannabis industry, employers must exercise strict due diligence to meet all OSHA standards. Additionally, they must identify all occupational hazards and account for employees’ overtime and double time. Grow operations must also adhere to the Field Sanitation Provisions of the Occupational Safety and Health Act, which includes providing toilets, drinking water, hand sanitation facilities and hygiene information.
Avoiding Compliance Problems with Planning and Diligence
There’s a lot more to hiring workers than businesses realize, especially in cannabis. Most companies don’t intend to be noncompliant with regulations—they simply don’t know the regulations, or they’re overwhelmed by hiring and growing so quickly. To make sure you’re compliant, you might consider building out your HR team, educating yourself as the business leader and reaching out to staffing and HR professionals in the space who can answer your questions. In this rapidly growing industry, which seems to shift and change every day, planting your feet firmly on solid regulatory ground will serve to benefit you in the event of federal legalization, massive business growth or initiatives you may want to undertake in the future.
Let’s just say it. There is an undeniable chaos in the cannabis industry. It doesn’t matter if you’re a big or small operator, it’s likely that you don’t have a documented system for creating and managing ever-changing SOPs or for consistently training all employees on the most current versions of those SOPs. This chaos is often the result of rapid growth, mergers and acquisitions, and the ever-present turnover in our industry. When department leadership changes, and it often does, established policies and procedures are often left behind. In some cases, this is a positive sign of growth. As a company outgrows SOPs and as it develops more sophisticated ways to cultivate, extract, process, manufacture, package and sell cannabis and cannabis products, inevitably, the old ways of doing business need to be replaced. For those operators who have prioritized operational excellence, whether they want to position their company for new investment, merger or acquisition, or just want to create a consistent and standardized, branded product, it’s critical to get control of SOPs, training and documentation.
As with most big goals, to obtain operational excellence, you need to break the goal into manageable steps. Assuming you have accessible quality policies and procedures in place, properly training employees when they first start work and on an ongoing basis as policies and procedures change is the number one key to successful operations. When employees know how to do their job and understand what is expected of them, they are positioned for success. When employees are successful, it follows that the company will also be successful. Documenting operations is a second important step in obtaining operational excellence. While training and documentation appear to be different, in best-practice organizations, they are inextricably linked.
One Set of SOPs
Those of us who have been in the cannabis industry for a while have experienced firsthand or heard stories of facility staff working off of two sets of SOPs. There’s the set of SOPs that are printed or digitally available for the regulators, let’s call them the “ideal” set, and then there are the SOPs that actually get implemented on a day-to-day basis. While this is common, it’s risky and undermines the foundation of operational excellence. Employees often know there are two sets of SOPs. Whether they express it or not, many are uncomfortable with the intentional or unintentional deception. When regulators arrive, will they have to bend the truth or even lie about daily operations? Taking the time to establish and implement one set of approved SOPs that is compliant with both external regulations and internal standards is good for employee morale, productivity and ultimately, profits.
What’s the best way to get control of a facility’s SOPs? Again, break it into manageable steps:
First, task someone with reviewing all SOPs that are floating around. Determine if any are non-compliant, which ones need to be tossed and which ones need to be revised so they work for the company as well as outside regulatory authorities.
At a minimum, establish a two-person team to draft, review, publish and distribute the final SOPs. Ensure that at least one member of the team has management level authority. Assign that employee the responsibility of reviewing the SOPs before “publication” and distribution.
Archive, delete, or actually throw away outdated or non-compliant SOPs
Revise or create new best-practice SOPs that are in compliance with external regulations and internal standards
Establish a system to update SOPs when external regulations and internal standards change
Use a naming convention that distinguishes draft SOPs from final SOPs, for example, “Post-Harvest Procedure, FINAL”
Inform employees that they will be retrained on the new SOPs and that approved SOPs will always have the word “Final” in the title
Store the final SOPs in an easily accessible location and give employees access, not only during training, but on an ongoing basis
Centralized Repository for Final SOPs
Storing final, approved SOPs in one easily accessible, centralized location and giving employees access sounds simple, but again, this is the cannabis industry, so this often doesn’t happen. Many of us have or are currently working for an organization that stores SOPs in multiple places. Each department may have its own way of updating, disseminating and storing SOPs. Some SOPs are stored in a printed binder stuffed in a drawer or left on a bottom shelf. Others are stored digitally. Some use both systems, which creates confusion. Who knows if the digital versions or the printed versions are the most current? Surely someone knows, but often the front-line staff do not.“Once you’ve established a single set of compliant SOPs and have stored them in one accessible location, it’s time to train your employees.”
Establishing a centralized repository for final, approved SOPs is the foundation of operational excellence. It lets employees know that operations are organized and controlled, and it reassures regulatory authorities and external stakeholders—think insurers, bankers, investors—that the company prioritizes compliance and organization. And external stakeholders who believe that an organization is proactive and well-run tend to be more forgiving when the inevitable missteps occur. Companies that are organized, have effective training systems, regularly conduct internal audits to identify potential issues and take identifiable action steps when necessary to remediate issues, receive fewer deficiency notices, violations and fines than their less organized competitors.
Many states require cannabis operators to provide a specific number of training hours prior to an employee beginning work, and a specific number of continuing and refresher training hours annually. Once you’ve established a single set of compliant SOPs and have stored them in one accessible location, it’s time to train your employees. To do so, set clear expectations and decide who is responsible for what. Is the HR manager responsible for initial onboarding and training? Are department managers responsible for ongoing and annual training? Create a training responsibility chart that works best for your company; write it down and share with all stakeholders.
The next step is to figure out how to train your employees. Individuals have different learning styles, so ideally, you’ll offer multiple ways for them to master the requirements of their position. Assign written materials and if possible, attach short videos showing the best way to complete a task. Follow up with a quiz to determine comprehension and a conversation with a department lead or manager to answer questions and review the key take-aways. Ideally, the department manager or lead employee will work with the employee until they are competent and comfortable taking on new assigned tasks and responsibilities.
Sum It Up
Operational excellence begins with:
Knowledge of and access to current external rules and regulations and internal standards
One set of approved and easily accessible policies and SOPs that comply with both external and internal standards
An initial training system with clearly assigned roles, responsibilities, and goals
An ongoing training system with clearly assigned roles, responsibilities, and goals
Test knowledge before employees begin unsupervised work
Stay up-to-date with all changes to external rules and regulations and internal standards
Control policy and SOP revision process
Inform all stakeholders when policies and SOPs change
Test that employees understand new standards
Document all key areas of operation on a recurring basis
Address deficiencies and evaluate whether SOP revisions are warranted
Document and implement necessary remediation when necessary
For those of you rolling your eyes and thinking you don’t have time for this, ask yourself, “Can you afford not to?”
For those of you committed to operational excellence and doing what it takes to get there, congratulations on being a visionary leader. Your efforts will pay dividends for your own company and will help the cannabis industry grow into a well-respected, profitable industry that improves lives.
Cross Contamination – noun – “inadvertent transfer of bacteria or other contaminants from one surface, substance, etc., to another especially because of unsanitary handling procedures. – (Mariam Webster, 2021). Cross contamination is not a new concept in the clinical and food lab industries; many facilities have significant design aspects as well as SOPs to deliver the least amount of contaminants into the lab setting. For cannabis labs, however, often the exponential growth leads to a circumstance where the lab simply isn’t large enough for the number of samples processed and number of analytical instruments and personnel needed to process them. Cross contamination for cannabis labs can mean delayed results, heightened occurrences of false positives, and ultimately lost customers – why would you pay for analysis of your clean product in a dirty facility? The following steps can save you the headaches associated with cross contamination:
Wash (and dry) your hands properly
Flash back to early pandemic times when the Tik Tok “Ghen Co Vy” hand washing song was the hotness – we had little to no idea that the disease would be fueled mostly by aerosol transmission, but the premise is the same, good hand hygiene is good to reduce cross contamination. Hands are often the source of bacteria, both resident (here for the long haul; attached to your hands) and transient (easy to remove; just passing through), as they come into contact with surfaces from the bathroom to the pipettor daily (Robinson et al, 2016). Glove use coupled with adequate hand washing are good practices to reduce cross contamination from personnel to a product sample. Additionally, the type of hand drying technique can reduce the microbial load on the bathroom floors and, subsequently tracked into the lab. A 2013 study demonstrated almost double the contamination from air blade technology versus using a paper towel to dry your hands (Margas et al, 2013).
Design Your Lab for Separation
Microbes are migratory. In fact, E. coli can travel at speeds up to 15 body lengths per second. Compared to the fastest Olympians running the 4X100m relay, with an average speed of 35 feet per second or 6 body lengths, this bacterium is a gold medal winner, but we don’t want that in the lab setting (Milo and Phillips, 2021). New lab design keeps this idea of bacterial travel in mind, but for those labs without a new build, steps can be made to prevent contamination:
Try to keep traffic flow moving in one direction. Retracing steps can lead to contamination of a previous work station
Use separate equipment (e.g. cabinets, pipettes) for each process/step
Separate pre- and post-pcr areas
Physical separation – use different rooms, add walls, partitions, etc.
Establish, Train and Adhere to SOPs
High turnover for personnel in labs causes myriad issues. It doesn’t take long for a lab that is buttoned up with cohesive workflows to become a willy-nilly hodgepodge of poor lab practices. A lack of codified Standard Operating Procedures (SOPs) can lead to a lab rife with contaminants and no clear way to troubleshoot the issue. Labs should design strict SOPs that include everything from hand hygiene to test procedures and sanitation. Written SOPs, according to the WHO, should be available at all work stations in their most recent version in order to reduce biased results from testing (WHO, 2009). These SOPs should be relayed to each new employee and training on updated SOPs should be conducted on an ongoing basis. According to Sutton, 2010, laboratory SOPs can be broken down into the following categories:
Establish Controls and Monitor Results
It may be difficult for labs to keep tabs on positivity and fail rates, but these are important aspects of a QC regimen. For microbiological analysis, labs should use an internal positive control to validate that 1) the method is working properly and 2) positives are a result of target analytes found in the target matrix, not an internal lab contamination strain. Positive controls can be an organism of choice, such as Salmonella Tranoroa, and can be tagged with a marker, such as Green Fluorescent Protein in order to differentiate the control strain. These controls will allow a lab tech to discriminate between a naturally contaminated specimen vs. a positive as a result of cross-contamination.
Labs should, in addition to having good QC practices, keep track of fail rates and positivity rates. This can be done as total lab results by analysis, but also can be broken down into customers. For instance, a lab fail rate for pesticides averages 4% for dried flower samples. If, during a given period of review, this rate jumps past 6% or falls below 2%, their may be an issue with instrumentation, personnel or the product itself. Once contamination is ruled out, labs can then present evidence of spikes in fail rates to growers who can then remediate in their own facilities. These efforts in concert will inherently drive down fail rates, increase lab capacity and efficiency, and result in cost savings for all parties associated.
Continuous Improvement is the Key
Cannabis testing labs are, compared to their food and clinical counterparts, relatively new. The lack of consistent state and federal regulation coupled with unfathomable growth each year, means many labs have been in the “build the plane as you fly” mode. As the lab environment matures, simple QC, SOP and hygiene changes can make an incremental differences and drive improvements for labs as well as growers and manufacturers they support. Lab management can, and should, take steps to reduce cross contamination, increase efficiency and lower costs; The first step is always the hardest, but continuous improvement cannot begin until it has been taken.
Margas, E, Maguire, E, Berland, C. R, Welander, F, & Holah, J. T. (2013). Assessment of the environmental microbiological cross contamination following hand drying with paper hand towels or an air blade dryer. Journal of Applied Microbiology, 115(2), 572-582.
Milo, M., and Phillips, R. (2021). How fast do cells move? Cell biology by the numbers. Retrieved from http://book.bionumbers.org/how-fast-do-cells-move/
Robinson, Andrew L, Lee, Hyun Jung, Kwon, Junehee, Todd, Ewen, Perez Rodriguez, Fernando, & Ryu, Dojin. (2016). Adequate Hand Washing and Glove Use Are Necessary To Reduce Cross-Contamination from Hands with High Bacterial Loads. Journal of Food Protection, 79(2), 304–308. https://doi.org/10.4315/0362-028X.JFP-15-342
Sutton, Scott. (2010). The importance of a strong SOP system in the QC microbiology lab. Journal of GXP Compliance, 14(2), 44.
World Health Organization. (2009). Good Laboratory Practice Handbook. Retrieved from https://www.who.int/tdr/publications/documents/glp-handbook.pdf
In 2002, Dale Katechis revolutionized craft beer. A seemingly simple packaging decision, putting craft beer in a can, sparked an international movement and put craft beer on the map.
Before the craft beer market really gained steam, consumers associated good beer with glass bottles and larger brands selling cheap beer with cans. Through education, creative marketing and a mission to put people over profits, Dale helped the craft beer market expand massively while sticking to his roots. He also managed to convince people to drink good beer from a can.
When Dale founded Oskar Blues about twenty years ago, he didn’t just succeed in selling beer. Through collaboration and information sharing, Dale propelled craft beer as a whole and lifted all boats with a rising tide. He’s hoping to achieve similar results with his new role in the cannabis space.
Veritas Fine Cannabis, the first craft cannabis cultivator in Colorado, announced that Dale joined the company’s leadership team. Jonathan Spadafora, partner and head of marketing and sales at Veritas, told us that he’s excited about working with Dale. He says Dale is already helping them open a whole world of branding and marketing opportunities. “This is our Shark Tank moment – we’ve got someone who’s been through the fire before and will help us keep differentiating, finding new avenues and new ways to solve problems,” says Spadafora.
His colleague, Mike Leibowitz, CEO of Veritas, shares the same sentiment. “Dale maintained company culture and quality as he grew Oskar Blues into a household name,” says Leibowitz. “Maintaining our unique company culture is paramount as we work to build Veritas Fine Cannabis into the same.”
Dale’s role in the leadership team at Veritas is about sticking to his roots. Through raising industry standards in the best interest of quality products and consumers, the team at Veritas hopes to expand the brand nationally, just like Oskar Blues did, while instilling a culture of disruption and innovation without compromising quality.
We caught up with Dale to learn more about his story and what he hopes to bring to Veritas, as well as the cannabis industry at large. And yes, I had a couple of Dale’s Pale Ales (his namesake beer) later that evening.
Aaron Biros: Your success with Oskar Blues is inspiring. Taking an amazing beer like Dale’s Pale Ale and putting it in a can sounds simple to the layperson, but you launched a remarkable movement to put craft beer on the map. How do you plan to use your experience to help Veritas grow their business?
Dale Katechis: I am hoping that I can apply some of the lessons that I’ve learned through making mistakes of growing a business from the ground up. There’s obviously a lot of road blocks in cannabis and that is certainly one of the qualities of Veritas – how they’ve grown and how they had to do it in an environment that is much more challenging than the beer space.
My experience in small business development could potentially help them navigate this next renaissance of the space. I’m going to help them compete and bring the industry to a level that helps everybody win. I certainly felt that way in the craft beer movement. It was very important to us to bring the whole industry along because we were educators, we weren’t salesmen. In doing that, lifting everyone to a level where the industry benefits as a whole is a part of small business growth. To me that’s the most fulfilling part. It wasn’t just about the Oskar Blues ego at the time, it was about the craft beer scene. And what’s happening in cannabis now is very similar to what happened in the nineties with the craft beer scene.
Aaron: How did you get interested in joining the cannabis industry? What made you choose Veritas?
Dale: Most of my life, I’ve been an enjoyer of cannabis. Very recently, in the last two years, I’ve been intrigued by getting involved in the space. I’ve been shopping around for opportunities and nothing really excited me until I met Jon Spadafora and Mike Leibowitz.
It was really the two of them, the comradery and how they treat their staff that was so similar to the culture at Oskar Blues. Call it a “passion play” if you will, but this was the best opportunity to get involved with a small company and hopefully be a value add for them being in the room and sharing ideas.
Aaron: As a pioneer and leader in the craft beer space, do you notice any commonalities between the growth of the craft beer market and the legal cannabis market?
Dale: It is kind of crazy how many similarities there are. Not just the industry as a whole, but specifically the commonalities between my business, Oskar Blues, and Veritas. Overall, that’s really what allowed me to want to lean in a bit more. I wasn’t in the place where I wanted to start anything on my own. I didn’t want to be involved in fixing anything. I’ve been involved in those situations before and I’m at a point in my life that I don’t want to fix anything. Thankfully there’s nothing that needed to be fixed at Veritas. That was an exciting piece of the equation for me.
Back to your question, how the consumer looks at cannabis versus how the consumer looks at beer in the craft beer space is very similar. There is a bit of an educational piece that’s happening where it’s almost a requirement in the cannabis industry and Veritas is leading that charge out front.
That’s what’s going to catapult Veritas and other companies if they follow suit. It’s their mentality and their philosophy of bringing the industry along as a whole, and I think it’s going to end up boding well for the consumer. The craft beer space was the same.
We had to educate people on a beer can and why we felt like a can of beer was important and exciting. The industry and the consumer associated cans of beer with large, industrial lagers and the can got a bad rap as a result. Not because it wasn’t a great package, but because they were putting bad beer in a good package. So, we had a long road of educating the consumer on the benefits of the can and I think what Veritas is doing with packaging now, how they use quality as such a fundamental pillar of their business, how they focus on the employee experience and the consumer experience sets them up for success, instead of just looking at the bottom line.
I’ve said it throughout my entire career, and at Oskar Blues, we never focused on the profits. You do the right thing for the biggest group of people moving the ball forward and the bottom line takes care of itself. Jon and Mike understand that so I don’t need to fight that battle. It’s another big similarity to the craft beer space.
Aaron: How can cannabis companies keep their craft? How can we, as an industry and as individual businesses, celebrate craft cannabis and follow in the footsteps of independent craft beer?
Dale: I believe that we’re starting to see some of that consolidation [that has been taking place in the craft beer market]. We’re at a time in the market right now where companies with such a solid foundation like Veritas don’t need to go that route to grow. I think we’ll start to see a lot more consolidation in the cannabis industry soon.
Back to the point of bonding together as an industry and as a whole. Championing some of the regulatory hurdles that are coming and sticking together is crucial. One company can’t do it. There’s going to have to be some comradery in the industry among everyone trying to hold the bar up high instead of racing to the bottom. You die by a thousand cuts. I’ve lived that life in craft beer and we saw what happened 6-7 years ago when the industry overexpanded because of exponential growth. A lot of egos got in the room, and a lot of breweries spent a lot of money building out capacity and then that same year the market popped out. Everyone who didn’t have a solid foundation, got washed out of the industry.
That’s why I appreciate what Jon and Mike are doing and how they built Veritas. It’s very similar to how we built Oskar Blues. We had humble beginnings; we didn’t spend money on things outside of our core competency. We focused on quality, employee experience, morale and holding on to the culture of Oskar Blues. That’s what Jon and Mike are doing with Veritas and I think that’s really important.
A number of laws have gone into effect in 2021 which may have a major impact on cannabis industry employers; clearly understanding the changing legal landscape is essential to avoid and limit potential liability in the new year and beyond. Below is a brief summary of some relevant new employment laws in cannabis friendly states:
Expansion of family and medical leave: California has long required employers to provide job protected medical and family leave if an employee worked at a jobsite with 50 or more employees within a 75-mile radius.
Senate Bill 1383 now requires all employers with five or more employees to provide up to twelve weeks of unpaid, job-protected leave for employees to bond with a new child or to care for themselves or a family member suffering from a serious health condition. To be eligible for the leave, an employee must have at least 12 months of service with the employer and have performed at least 1,250 hours of work in the previous 12-month period. While on leave, employees are entitled to continue to participate in an employer’s health insurance plan and to return to their job or a comparable position at the conclusion of their job-protected leave. Previously exempt small employers should be aware of these obligations moving forward.
Employer Pay Reporting Requirements: Under Senate Bill 973, employers with 100 or more employees that are required to file an annual Employer Information Report, colloquially known as the EEO-1 report, must submit annual information on its employees’ pay data to the state’s Department of Fair Employment and Housing (DFEH). The report must include the number of the employer’s employees by race, ethnicity and sex in specific job categories and pay ranges and their associated work hours and earnings.
The first report is due on March 31, 2021, and the DFEH has prepared an online portal to assist employers in submitting this information. These reports can be complex and address highly sensitive information, so employers are strongly advised to contact counsel for assistance in preparing and submitting their first report.
Increased pay requirements: Washington’s inflation-based minimum wage system has increased the minimum wage to $13.69 per hour in 2021. Employers with 50 or fewer employees must also pay salaried employees at least $827 per week (or $43,004 per year) and employers with more than 50 employees must pay at least $965 per week (or $50,180 per year) starting January 1st.
Equal Pay for Equal Work Act: Beginning in 2021, all employers with at least one employee must: (1) provide formal notice to Colorado employees of promotional opportunities; and (2) disclose pay rates or ranges in job postings that could be performed in Colorado (this includes virtual or remote work positions).
The Equal Pay for Equal Work Act generally requires employers to take reasonable efforts to promptly announce, post, or otherwise communicate all opportunities to all current employees prior to making a promotion decision. An employer must communicate promotional opportunities when it has or anticipates a vacancy or a new position that could be considered a promotion for current employees in light of pay, benefits, status, duties or further potential promotions.
Under the law, job postings must also include: (1) the rate of pay or pay range for the position; (2) a general description of bonuses, commissions or other forms of compensation offered with the job; and (3) a description of the employment benefits associated with the position.
Cannabis industry employers face a range of new laws, even absent the continued legal burden of managing employees during the COVID 19 pandemic. Employers should consider carefully reviewing all applicable laws and seeking guidance from counsel when needed.
The cannabis industry is growing so quickly that even COVID-19 can’t slow it down. Before the pandemic, the industry amassed $13.6 billion in U.S. legal cannabis sales in 2019 – a figure that is expected to more than double to $30 billion in the next five years, according to New Frontier Data. In states where cannabis is legal for medical or recreational use, dispensaries have been deemed necessary, essential businesses – especially when it comes to calming stress and anxiety in our ever-changing times.
Cannabis legalization and newly budding dispensaries have expanded across the U.S., which may come with an unfortunate counterpart – a higher incidence of crime. Despite lower prices in states that have legalized cannabis, as compared to states where it is still illegal, theft has run rampant across grow operations, warehouses and, most often, dispensaries.
Dispensaries can be targeted more frequently. Robbers may perceive them as an easy target, because they are businesses that have larger amounts of cash on hand. Many dispensaries only accept cash because payment processors and financial institutions aren’t willing to work with them. This is primarily because cannabis is still deemed an illegal substance under federal law, and the actions of financial institutions are governed by federal, not state, laws. Once the Secure And Fair Enforcement (SAFE) Banking Act is approved, cannabis businesses will be able to work more easily with banks, in turn reducing the amount of cash on site and erasing the dollar signs in opportunistic thieves’ eyes.
However, cash isn’t the only high thieves seek when they break into dispensaries. There’s also the product itself. Protecting it – and providing peace of mind to the facilities’ owners and occupants – is a concern for dispensaries, grow operations and warehouses. Robbers are motivated by the opportunity to make even more fast cash through reselling the product found onsite.
To eliminate such easy targets, security requirements for the cannabis industry are a necessity. They are also involved, complicated, and vary from state to state. A number of security specifications apply between state laws and local ordinances. Inventory must be properly surveilled and managed at all stages of transportation and storage. Any discrepancies in inventory can result in large fines and other penalties. To aid in understanding security compliances, the National Cannabis Industry Association (NCIA), a national trade association, recommends that start-ups obtain attorneys to guide businesses through their state’s laws and regulations.
This is why, especially for new business owners, it is critical to consider the best, most advanced security solutions – especially when it comes to doors and points of egress – that are easily integrated into buildings during the design phase. These solutions protect the products, properties, and people throughout the cannabis supply chain.
Understanding State Security Regulations While there are no federally recognized security requirements for the cannabis industry, there are similar requirements across all states that have legalized cannabis, including:
Maintaining strict access control throughout the facility – this is especially important for grow operations and warehouses
Functional alarm systems
Documented standard operating procedures
Video surveillance systems – many states mandate very precise requirements, such as length of storage time and even video resolution specifications
Notifying appropriate regulatory agencies immediately or within a strict timeframe after a security incident or theft
Securing all records and record storage
While these are common, state-mandated security requirements, it is critically important to know and understand all rules, regulations, and laws concerning the industry within the business’s specific state. Making sure the business is compliant with all aspects of state laws for security and preventing violations, including the hefty financial penalties that can accompany them, is key.
States require cannabis facilities to implement sophisticated security features for several reasons. One of the most obvious is the fact that the industry supplies a high-value product and is a cash-intensive business. Integrating security features into the building can be a challenging task for architects and designers. To help tackle these challenges, manufacturers have introduced products to the cannabis industry, creating easier, more effective and aesthetically pleasing security solutions.
Integrated Designs For High Level Security Security shouldn’t be a constraint when considering design aesthetics. Certain elements can be discretely tucked away, including cameras and security doors by way of specifying a concealed rolling door, conveniently disguised in the ceiling during operating hours. These doors can even close under alarm eliminating the need for manual intervention. Other security measures, such as bullet resistant glass, are hidden in plain sight.
Untrustworthy employees, smash-and-grab thefts or meticulously planned heists mean secure building design is of the utmost importance. In order to have the most effective security, there needs to be design vision – a clear intent for incorporating advanced security into the facility, whether visible or not.
Suggested security measures include video surveillance around the outdoor perimeter of the property as well as inside the facility. Physical barriers, such as specialized entrance locking systems – including fingerprint-scanning biometric technology – and security doors that may also include intrusion detection and automatic closure systems are recommended. All systems may be paired with 24/7 visual monitoring by security personnel.
Many state regulations also require restricted access to specific areas within dispensaries, grow operations and warehouses, with employee names and activities logged for reference. These necessary measures aid in inventory monitoring and control, further reducing the likelihood of internal theft.
When specifying building security, it’s important for architects to consider what type of building they are designing. There are differences in providing security for dispensaries versus warehouses and grow operations. Dispensaries and storefronts are frequently out in the open and in locations that are well-known to consumers. Warehouses and grow operations are usually tucked out of the way, rarely publicized, and less noticeable.
Rolling Grilles And Doors Deter Dispensary Theft With a high-value product and cash on hand, dispensaries in particular have unique security challenges. And because they are retail businesses, egress and fire codes must be strictly adhered to, in addition to special security regulations.
In light of this, security doors require special consideration. They are necessary to provide secure protection against theft but shouldn’t distract from the architectural vision of the building or interior design.
Rolling security grilles are the ideal solution to protect the counter inside the dispensary and may also be ideal for the front of the store. They fit in small headspaces where there is limited ceiling room and can be easily concealed when not in use.
Even heavy-duty rolling doors used to protect the glass storefront of the dispensary and prevent intruders from entering the building’s dock area can be hidden when not in use. If building code allows, architects may specify a rolling door that coils up into the door’s header, residing behind an exterior soffit. These robust security doors’ lift-resistant bottom bars also can be obscured from sight.
Heavy-duty security doors at the front of the dispensary block sight access and provide a visual deterrent. They give the building a secured look when in use, but heavy-duty rolling doors don’t need to be imposing to customers during the dispensary’s operating hours.
Robust Visible Protection For Grow Operations And Warehouses
Grow operations and warehouses usually opt for more visible security doors to deter criminal activity. They also have different design considerations because of building layout and production needs. For instance, larger grow operations house plants and supplies which require heavy equipment to move throughout the facilities.
Heavy duty rolling security doors can be made with up to 12-gauge steel with interlocking slats and tamper resistant fasteners – making them stronger than standard garage doors. They provide high-end security at loading docks and limit access to restricted areas inside.
Rolling doors can also be used to block employee access to off-limits areas common in grow operations and warehouses. Because they are heavily reliant on utilities and infrastructure, such as water mains and humidity and temperature controls, warehouses and grow operations are ideal applications for rolling doors. If unauthorized personnel with ill intentions access these utility areas, it could spell disaster with ruined crops and damaged or unsafe products – turning into substantial financial losses. From a design standpoint, these doors do not need to be concealed. In fact, their visibility signals restricted access areas and hints at the security measures taken to protect these facilities.
Enhanced Security Features
Whether designing a dispensary, a grow operation facility, or a warehouse, rolling doors may be paired with automatic protection features to enhance the building’s security and help workers feel safe. These automatic closing systems allow the security doors to be immediately activated by a building alarm or the push of a panic button in emergency situations. The doors also feature advanced locking systems – some of which are hidden in non-traditional locations – providing further tamper resistance.
Some rolling door manufacturers offer in-house architectural design groups to guide architects and designers in choosing the ideal security doors. These groups can address and solve any design dilemmas that arise during the project. Every rolling door is built to a specific opening, making each product unique to that area of the project. Because of this customization, manufacturers can meet virtually any specification.
Meeting Insurance Requirements
Selecting the correct rolling door along with other advanced security features aids in meeting insurance requirements. Each insurance company has individual minimum-security conditions in its policy. Many insurance companies will not provide theft insurance if cannabis businesses do not have adequate security or cannot demonstrate they have it.
Planning Leads To Integrated Protection The technical and legal aspects of securing dispensaries, grow operations, and warehouses can be overwhelming and, at times, confusing. Legal counsel, state agencies, industry associations, and manufacturers encourage new cannabis businesses to use them as resources as they unravel the nuances of the industry’s security regulations.
By combining robust security features such as video surveillance, proper access controls, rolling doors or grilles and automatic closure systems, cannabis facilities can meet state and insurance requirements and deter theft. With thoughtful design consideration and planning, these security features also have the capabilities to seamlessly blend with interior and exterior design aesthetics.
The cannabis industry is growing and evolving at an unprecedented pace and regulators, consumers and businesses continually struggle to keep up.
Cannabis businesses: How do you maintain an edge on the market, avoid costly mistakes?
Case Study: Costly Facility Build Out Oversights
David Vaillencourt will be joining a panel discussion, Integrated Lifecycle of Designing a Cultivation Operation, on December 22 during the Cannabis Quality Virtual Conference. Click here to register. A vertically integrated multi-state operator wants to produce edibles. The state requires adherence to food safety practices (side note – even if the state did not, adherence to food safety practices should be considered as a major facility and operational requirement). They are already successfully producing flower, tinctures and other oil derivatives. Their architect and MEP firm works with them to design a commercial kitchen for the production of safe edibles. The layout is confirmed, the equipment is specified – everything from storage racks, an oven and exhaust hoods, to food-grade tables. The concrete is poured and walls are constructed. The local health authority comes in to inspect the construction progress, who happens to have a background in industrial food-grade facilities (think General Mills). They remind the company that they must have three-compartment sinks with hot running water for effective cleaning and sanitation, known as clean-out-of-place (COP). The result? Partial demolition of the floor to run pipeline, and a retrofit to make room for the larger sinks, including redoing electrical work and a contentious team debate about the size of the existing equipment that was designed to fit ‘just right.’
Unfortunately, this is just one more common story our team recently witnessed. In this article, I outline a few recommendations and a process (Quality by Design) that could have reduced this and many other issues. For some, following the process may just be the difference between being profitable or going out of business in 2021.
The benefits of Quality by Design are tangible and measurable:
Reduce mistakes that lead to costly re-work
Mitigate inefficient operational flow
Reduce the risk of cross-contamination and product mix-ups. It happens all the time without carefully laid out processes.
Eliminate bottlenecks in your production process
Mitigate the risk of a major recall.
The solution is in the process
Regardless of whether you fall in the category of a food producer, manufacturer of infused products (MIP), food producers, re-packager or even a cultivator, consider the following and ask these questions as a team.
For every process, who is performing it? This may be a single individual or the role of specific people as defined in a job description.
Does the individual(s) performing the process have sufficient education and training? Do you have a diverse team that can provide different perspectives? World class operations are not developed in a vacuum, but rather with a team. Encourage healthy discourse and dialogue.
Is the process defined? Perhaps in a standard operating procedure (SOP) or work instruction (WI). This is not the general guidance an equipment vendor provided you with, this is your process.
How well do you know your process? Does your SOP or WI specify (with numbers) how long to run the piece of equipment, the specification of the raw materials used (or not used) during the process, and what defines a successful output?
Do you have a system in place for when things deviate from the process? Processes are not foolproof. Do not get hung up on deviations from the process, but don’t turn a blind eye to them. Record and monitor them. In time, they will show you clear opportunities for improvement, preventing major catastrophes.
What are the raw materials being used? Where are they coming from (who is your supplier and how did you qualify them)?
Start with the raw materials that create your product or touch your product at all stages of the process. We have seen many cases where cannabis oils fail for heavy metals, specifically lead. Extractors are quick to blame the cultivator and their nutrients, as cannabis is a very effective phytoremediator (it uptakes heavy metals and toxins from soil substrate). The more likely culprit – your glassware! Storing cannabis oil, both work in process or final product in glass jars, while preferred over plastic, requires due diligence on the provider of your glassware. If they change the factory in which it is produced, will you be notified? Stipulate this in your contract. Don’t find yourself in the next cannabis lead recall that gets the attention of the FDA.
Savings is gained through simple control of your raw materials. Variability in your raw material going into the extractor is inevitable, but the more you can do to standardize the quality of your inputs, the less work re-formulating needs to be done downstream. Eliminate the constant need to troubleshoot why yields are lower than expected, or worst case, having to rerun or throw an entire batch out because it was “hot” (either too much THC in the hemp/CBD space or pesticides/heavy metals). These all add up to significant downstream bottlenecks – underutilized equipment, inefficient staff (increase in labor cost) all because of a lack of upstream controls. Use your current process as a starting point, but implement a quality system to drive improvement in operational efficiency and watch your top line grow while your bottom-line decreases.
Have you tested and confirmed the quality of your raw material? This isn’t just does it have THC and is it cannabis, but is it a certain particle size, moisture level, etc.? Again, define the quality of your raw materials (specifications) and test for it.
Remember – ranges are your friend. It is much better to say 9-13% moisture than “about 10%”. For your most diligent extractor, 11% will be unacceptable, but for a guy that just wants to get the job done, 13% just may do!
Test your final product AFTER the process. Again, how does it stack up against your specifications? You may need to have multiple specifications based on different types of raw material. Perhaps one strain with a certain range of cannabinoids and terpenes can be expected for production.
Review the data and trend it. Are you getting lower yields than normal? This may be due to an issue with the equipment, maybe a blockage has formed somewhere, a valve is loose, and simple preventive maintenance will get you back up and running. Or, it could be that the raw biomass quality has changed. Either way, having that data available for review and analysis will allow you to identify the root cause and prevent a surprise failure of your equipment. Murphy’s law applies to the cannabis industry too.
You are able to predict and prevent most failures before they occur
You increase the longevity of your equipment
You are able to predict with a level of confidence – imagine estimating how much product you will product next month and hitting that target – every time!
Business risks are significantly mitigated – a process that spews out metal, concentrates heavy metals or does not kill microbes that were in the raw material is an expensive mistake.
Your employees don’t feel like they are running around with their hair on fire all the time. It’s expensive to train new employees. Reduce your turnover with a less stressed-out team.
Maintaining a competitive edge in the cannabis industry is not easy, but it can be made easier with the right team, tools and data. Our recommendations boil down to a few simple steps:
Make sure you have a chemical or mechanical engineer to understand, optimize and standardize your process (you should have one of these on staff permanently!)
Implement a testing program for all raw materials
Test your raw materials – cannabis flower, solvents, additives, etc. before using. Work with your team to understand what you should and should not test for, and the frequency for doing so. Some materials/vendors are likely more consistent or reliable than others. Test the less reliable ones more frequently (or even every time!)
Test your final product after you extract it – Just because your local regulatory body does not require a certain test, it does not mean you should not look for it. Anything that you specified wanting the product to achieve needs to be tested at an established frequency (and this does not necessarily need to be every batch).
Repeat, and record all of your extraction parameters.
Review, approve and set a system in place for monitoring any changes.
Congratulations, you have just gone through the process of validating your operation. You may now begin to realize the benefits of validating your operation, from your personnel to your equipment and processes.
Small cannabis dispensaries face different challenges than those seen with large, multi-state operators. To this end, massive companies like MedMen and Grassroots Cannabis need to accommodate multi-state operations’ compliance challenges. Conversely, small dispensaries must learn to compete with the big box retailers of the cannabis industry.
Small cannabis dispensaries must figure out how to make their size an advantage against larger business entities to stay competitive. To this end, they must critically assess the corporate structure of large cannabis companies like Green Thumb Industries to look for operations and marketing opportunities still “left on the table” for smaller operators.
Luckily, owning and operating a small cannabis dispensary affords creativity and innovation in the workplace. Namely, because small businesses can quickly implement change and pivot to the demands of the ever-changing cannabis landscape. Conversely, due to corporate structures’ difficult navigation, their larger counterparts must go through far more effort to implement operational changes. To better understand how small dispensaries can stay competitive in today’s market, we put together some criteria to examine.
Cross-Training Employee Teams
The fact that small cannabis dispensaries do not have many employees significantly reduces operating costs. However, to capitalize on the savings of a small employee team, you must cross-train your staff. Because if a small team can handle all the required tasks of a shift, you will never waste money on over-staffing your dispensary operation.
Looking at the specific jobs of a small cannabis dispensary, business owners should ensure that budtenders are trained to handle nearly every business task. To illustrate, you should train budtenders to open and close the store, conduct inventory work, recommend products and operate seed-to-sale software. Not only does this cross-training keep you from overstaffing your dispensary when it is slow, but it also insulates your business during busy market fluctuations.
Please note, once you train budtenders to handle a variety of tasks, you should also pay them more than the industry average. In doing so, you insulate yourself from the high turnover rate that plagues the cannabis space.
Lean Operating Principles
Lean operating is a practice that has exploded in popularity across the business world. To help teach lean operating principles, specialty training companies offer Six Sigma certifications. These certifications help business owners and executives save money on operational efficiencies. Methods taken from Six Sigma can be incredibly impactful for small cannabis dispensary businesses.
According to the ASQ professional training website, “Lean Six Sigma … drives customer satisfaction and bottom-line results by reducing variation, waste, and cycle time, while promoting the use of standardization and flow, thereby creating a competitive advantage.”
Lean Six Sigma principles can be beneficial with inventory control in small cannabis dispensaries. To this end, these businesses should apply analytics to track consumer behavior within their stores. After that, they can use data to create precise sales forecasts and conduct highly accurate product procurement. The end goal being to increase liquidity by reducing money tied up in a bloated inventory of unsold cannabis products.
Due to their small size, single dispensaries have the luxury of customizing the retail shopping experience. As such, without the added pressures of corporate oversight, small operators have the creative freedom to make for highly memorable shopping experiences within their stores. In going the extra mile on things like interior design, small dispensaries can help ensure customer retention and benefit from word-of-mouth marketing.
For example, Barbary Coast Dispensary in San Francisco, CA, has the look and feel of a high-end speakeasy, making it the perfect match for the Bay Area’s aesthetic sensibilities. The dispensary interior is decorated with a 19th-century touch and features a dab bar, where clients can enjoy the surreal atmosphere while consuming some of California’s best cannabis. A visit to a small dispensary like this will likely leave a lasting impression.
Memorable retail shopping experiences often translate directly to customer loyalty. In turn, this dynamic directly impacts your bottom-line concerning marketing expenses. Notably, a steady base of loyal customers will sustain your business, significantly reducing your marketing costs. In the end, marketing can be directed at retaining clients through loyalty programs and customer engagement – both can be mainly handled “in house” and relatively inexpensively.
Small dispensaries can utilize product differentiation to stay competitive in today’s market. To this end, small operators are blessed with the ability to pivot quickly with new product offerings. Conversely, large dispensary chains with corporate structures must go through rigorous steps before launching new products at their stores.
Small cannabis dispensaries can immediately “get out ahead” on new product trends as they arise. For example, you can offer rare cannabis strains or boutique extracts that none of the larger dispensaries carry.
By the time the larger dispensaries in your area catch up on the current trends, you can move on to the next one. We recommend making alliances with some of the top craft growers in your area to make this possible.
Every year, the cannabis industry grows more competitive. As this business evolves from an underground affair to a multi-billion-dollar enterprise, the scope and sophistication of cannabis dispensary operations grows exponentially. Within this ever-changing dynamic, many small dispensaries fear the wayside will leave them.
Yet, if you approach the market with creativity and zeal, you can make the additional market pressure work to your benefit. By focusing on critical facets like cross-training employees, lean operating principles and product differentiation, you can build a profitable and sustainable cannabis dispensary by making small size a competitive advantage.
ImEPIK is a research-based online training company that is known for digital safety training in the food industry, offering courses on things like preventive controls. The company announced last week that they are launching their first class dedicated to the cannabis industry.
The two-part Cannabis Edibles Safety Course is designed to help edibles manufacturers put the quality and safety of their products above all. Part I, “GMPs and the Pyramid of Edible Safety” is now live and includes three modules covering cannabis edibles production under a food industry framework. The course gets into prerequisite programs, the principles of hazard analysis and provides an intro to the company’s “Pyramid of Edible Safety.”
The course is intended for employees that are new to the production of cannabis-infused products, those who are on the front lines of a production facility, or for those who might need a refresher on the basics.
“Part I of the Cannabis Edibles Safety Course prepares cannabis employees to support the sanitation, production and QA managers and the facility’s compliance with regulatory and safety goals,” says Kathryn Birmingham, Ph.D. ImEPIK’s chief operating officer. “The course reflects not only the ‘tried and true’ practices from the food industry, but the nuances of cannabis edibles production are also accounted for in ImEPIK’s course.” Birmingham says the course is designed for employees who work at both large and small facilities.
“ImEPIK has a reputation for providing engaging food safety training that gives production employees the technical knowledge they need to make safe products,” says Jill Droge, ImEPIK’s chief creative and business development officer. “It’s more difficult than ever to make time for training, yet it is one of the most impactful things that manufacturers can do to ensure that their products are safe and will be well received by the market.”
Part II is expected to launch in early November and is designed for supervisors and managers. Keep an eye on imepikcannabissafety.com for the latest course releases.
As employers in the cannabis industry adapt to making their businesses run and thrive in the age of COVID-19, federal, state and local jurisdictions have issued new laws and regulations providing rules and guidance on returning employees to work. Employers in the industry should be aware of, and prepare for, these rules moving forward.
Federal guidance regarding COVID testing and employees’ return to the workplace:
The EEOC has already stated that employers may administer COVID-19 tests before initially permitting employees to enter the workplace. In its September FAQs, the EEOC confirms that employers may conduct periodic tests to ensure that employees are COVID free and do not pose a threat to coworkers and customers. The EEOC also clarified that employers administering regular COVID-19 tests is consistent with current Centers for Disease Control and Prevention (CDC) guidance and that following recommendations by the CDC or other public health authorities such as the Food and Drug Administration (FDA) regarding employee testing and screening is appropriate. The EEOC acknowledges that the CDC and FDA may revise their recommendations based on new information, and reminds employers to keep apprised of these updates.
COVID questions for employees
The EEOC also confirmed that employers may ask employees returning to the workplace if they have been tested for COVID-19, which, presumably, permits employers to ask if the employee’s test was positive or negative. Please note that an employer’s right to ask employees about COVID testing is based on the potential threat that infected employees could pose to others if they physically return to work. As a result, the EEOC clarified that asking employees who exclusively work remotely and/or do not physically interact with other employees or customers about potential COVID-19 status would not be appropriate. The EEOC also stated that an employer may not directly ask whether an employee’s family members have COVID-19 or symptoms associated with COVID-19. This is because the Genetic Information Nondiscrimination Act (GINA) generally prohibits employers from asking employees medical questions about family members. However, the EEOC clarified employers may ask employees if they have had contact with anyone diagnosed with COVID-19 or who may have symptoms associated with the disease.
Sharing information about employees with COVID
The Americans with Disabilities Act (ADA) requires employers to confidentially maintain information regarding employees’ medical condition. The EEOC’s updated FAQS clarify that managers who learn that an employee has COVID may report this information to appropriate individuals within their organization in order to comply with public health guidance, such as relaying this information to government contact tracing programs. Employers should consider directing managers on how, and to whom, to make such reports, and specifically instruct employees who have a need to know about the COVID status of their coworkers to maintain the confidentiality of that information. The EEOC also clarified that workers may report to managers about the COVID status of a coworker in the same workplace.
California state guidance on employees returning to work
The state of California also recently released a “COVID-19 Employer Playbook” which provides guidance on employees to return to work. That playbook states that employees with COVID related symptoms may return to work 24 hours after their last fever, without the use of fever-reducing medications, if there had been an improvement in symptoms and at least 10 days had passed since symptoms first appeared. This was also indicated in the California Department of Public Health (CDPH) Order, issued in June, about responding to COVID-19 in the Workplace.
More recently, on August 24th, the CDPH released similar guidance which reiterates when employees who have tested positive for COVID could return to the workplace when: (1) at least 10 days have passed since symptoms first appeared; (2) at least 24 hours have passed with no fever (without the use of fever-reducing medications), and (3) their other symptoms have improved. Conversely, individuals who test positive for COVID and who never develop symptoms may return to work or school 10 days after the date of their first positive test.
Employers should also check local public health orders for their county when determining how and when to return an employee who has recovered from COVID-19. It is important to also confer with your employment counsel when implementing new policies and procedures related to COVID-19, particularly given that the guidance issued by government authorities continues to evolve at a rapid pace.
Return to work laws on the horizon
Finally, a number of local governments in California such as the City of San Francisco, Oakland and Los Angeles have enacted return-to-work ordinances generally requiring employers to offer available positions to former employees who have been separated from employment due to coronavirus related business slowdowns or government-issued shutdown orders. The California legislature is also in the process of enacting a potential law that would similarly require employers in the state to offer vacant job positions to former employees whose employment ended due to COVID.
While the San Francisco ordinance only addresses positions in San Francisco and the Oakland and Los Angeles ordinances primarily address large employers in the hospitality and restaurant industries, cannabis industry employers should strongly consider offering vacant job positions to former employees whose employment ended due to COVID in order to comply with these ordinances and other potentially applicable future laws and in an effort to avoid potential legal claims from former employees.
Employers are strongly advised to consult with counsel to make sure they are following the requirements of these new laws and regulations.
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