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Holding Employees Accountable for Cannabis Violations

September 10, 2021

Danica Hibpshman and Clay Creps - Tonkon Torp LLP

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Oregon

Cannabis businesses are highly regulated, with complex rules applicable to each level of the supply chain; from checking ID of customers to ensuring proper entry of plant weights in the state’s seed-to-sale tracking system, there are almost infinite ways for employees to make mistakes that could cause cannabis businesses to incur violations. Regulatory violations can not only cost cannabis businesses considerable expense in fines and/or suspension times, but can greatly impact business growth in Oregon and elsewhere.

Recently, the Oregon legislature passed SB 408 into law, a sweeping omnibus bill that goes into effect in early 2022, which includes numerous industry-friendly changes for cannabis businesses. One of those changes allows the Oregon Liquor and Cannabis Commission (OLCC) to pursue violations against individual holders of worker permits rather than cannabis businesses themselves, when appropriate. What qualifies as “appropriate” will likely be defined further in administrative rules by the OLCC later this year. Presumably they will address, at least in part, circumstances where the business-employer has taken appropriate proactive steps to avoid violations, and can’t reasonably prevent a rogue business partner or employee from committing offenses. SB 408 will require the OLCC to start considering mitigation factors when pursuing violations, such as self-reporting, demonstrating that the incident was isolated and not serious, and indications that the cannabis business is otherwise able to comply with regulations.

This article highlights steps cannabis businesses can take to mitigate potential violations caused by employees.

Employee Training and Standard Operating Procedures

Historically, the OLCC has charged violations against a cannabis business when the acts or omissions were committed by its employees. Only more occasionally were individual employees charged for violations of their worker permits. With SB 408, cannabis businesses may now have more opportunity to mitigate violations against the business when the business can show proper and adequate training was given on all regulatory requirements.

 It is important that employees are trained accurately on the current OLCC regulations they are expected to follow, and that the business’ Standard Operating Procedures (SOPs) are kept up-to-date with any rule changes that occur. The OLCC will be issuing significant rule changes in the coming months; cannabis businesses should consult with legal counsel as those changes occur, and proactively ask questions as they arise.

Good Employer Practices and Policies

When an employee commits a regulatory violation, the question of employee discipline often arises. Because of the highly regulated nature of cannabis businesses, it is critical that cannabis employers have clear, written standards and policies governing expectations for employee compliance with regulatory requirements – and consistent practices by the employer for disciplining employees when violations are committed. Employees should be required to review all policies and SOPs, and verify in writing that they are read and understood. Changes in policies should be reviewed and trained on as well. Employee actions should be documented consistently. A routine of required refresher trainings should be established to cover all regulatory expectations of employees, in addition to any more standard expectations (such as showing up to work on time, behaving in a professional manner, etc.). 

Having unclear HR policies in this regard can put cannabis employers in awkward positions when employees commit violations, and can lead to employment disputes and claims as well. Because all business operations are different, as are the potential consequences of various cannabis law violations, it is important to consult with your legal counsel about proper HR policies that can help protect your business should you need to take action against an employee who violates OLCC rules.

Questions? Contact Danica Hibpshman (danica.hibpshman@tonkon.com or 503.802.2160), Clay Creps (clay.creps@tonkon.com or 503.802.2059), or one of the other experienced attorneys in Tonkon Torp’s Cannabis Industry Group.

About Tonkon Torp
Tonkon Torp LLP is a leading business and litigation law firm serving public companies, substantial private enterprises, entrepreneurial businesses, and individuals throughout the Northwest. For more information, visit tonkon.com.