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Updated: October 2, 2023 Know How

Legal details can make or break cannabis startups

By Danielle Jurema Lederman

The streets may not necessarily be paved with gold for cannabis entrepreneurs, but they are filled with regulations.

a photo of Danielle Jurema Lederman
Photo | Courtesy of Danielle Jurema Lederman
Danielle Jurema Lederman is an attorney in Worcester law firm Bowditch & Dewey’s employment & labor practice area. She represents employers in all stages of mediation, arbitration, and litigation at the administrative, state, and federal levels.

In fact, the cannabis industry is so highly regulated in Massachusetts, businesses can easily lose sight of all the laws applying to them. While cannabis entrepreneurs are rightfully focused on all the zoning and safety regulations specific to the industry, many overlook the significant federal, state, and local employment laws. 

Even though it may be the last thing entrepreneurial spirits want to deal with, it’s important to gain an understanding of applicable employment and labor laws, especially in Mass. – a very employee-friendly state. Creating an employee handbook can be a good start. At a minimum, a handbook should describe a company’s policies, codes of conduct, expectations, and benefits at a minimum. It should spell out the various types of employment relationships, be it full-time, part-time, or temporary work.

Ignoring employment laws can lead to disaster. While paying attention to laws about classifying workers as employees versus independent contractors may seem unimportant, startups making a mistake could be put out of business. That’s because Mass. law levies hefty fines for misclassifications (i.e., classifying a worker as an independent contractor when the worker is legally an employee), including but not limited to triple the amount of any wages and benefits the workers would be entitled to as employees. Damages mount fast.

To avoid confusion over whether someone is an employee or an independent contractor, your business should reserve use of independent contractors for work performed outside the usual course of your business. In addition, an independent contractor’s work should be completed without the direction and control of your business, and the independent contractor should have its own independent business or trade performing that specialized work.

Once companies hire workers, the next challenge is retaining them, especially in these times when employee shortages are unnervingly common. Creating a great workplace culture can be key, focused on rules of respect and fairness. Competitive salaries, bonuses, and incentive pay are certainly important, but to be really attractive, more workers are favoring companies offering workplace flexibility and other types of work/life balance.

Of course, businesses need to plan for worst-case scenarios, including discipline, layoffs, and employee complaints. To effectively prevent litigation and manage employee complaints, it’s important to identify those ripe for early resolution and take prompt remedial action. Most cases resolve at some point: It’s more a question of when, and how much of your time and resources you want to invest. The earlier you thoroughly assess and analyze any claims, the easier it is to efficiently strategize your approach and response.

In the event of layoffs, consider whether voluntary buyouts are an option, since they can be much better for employee morale. You want to ensure your supervisors and managers know how to both appropriately reward employees for their successes and discipline poor performers.

Running any company isn’t easy, but cannabis startups will find if they consider the entire legal landscape before they open their doors, business will run more smoothly. And who knows? Maybe they will realize the promise of the cannabis industry and discover their streets really can be paved with gold.

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