Compliance is one of the biggest deterrents to entry into the marijuana industry. For most, it is costly, cumbersome, and confusing. It is also non-negotiable.
Medical marijuana is legal in 37 states and the District of Columbia, with legalization under consideration in a handful of other states. Many states have also authorized recreational use. All these legal cannabis laws have come to fruition under the stipulation of tight regulations.
Unfortunately, each state has varying requirements, which can add a layer of complexity for cannabis compliance.
Proactive Cannabis Compliance
Regulations for cannabis compliance are in constant flux and can be overwhelming. New laws are being introduced, and oversight is constantly changing. This is one of the most difficult components of running a cannabis business. Missteps are easy to take, but they are also costly.
Being proactive is crucial to maintaining compliance in your cannabis business. Looking at your yearly budget, the cost of proactive compliance can seem like an unnecessary use of both time and resources. But that is only until you are hit with an avoidable violation and subsequent fine.
Examples of Cannabis Compliance Violations
Here are a handful of recent examples of cannabis compliance violations that could have been avoided with proactive efforts.
Self-Reported Over Dispensing
A marijuana dispensary self-reported a regulatory violation involving a sale of more than the allowed one ounce of marijuana. The violation was self-reported to the Cannabis Compliance Board three days after the sale. The board still fined the company $45,000.
Environmental Regulations
Three California cannabis growers were fined for environmental violations. It is important to consider that cannabis compliance may involve more than marijuana-specific violations. These violations totalled $50,000, $40,000 and $5,250.
Mislabeling Mistake
Due to a labeling mistake, a marijuana tonic company owes $100,000 to the Oregon Liquor Control Commission. The mistake included 35,000 vials at a cost of $400 per vial per day.
Extraction Safety Violation
Failing to adhere to standards for hotplate cannabis extraction caused a fire harming multiple employees. A medical cannabis company in New Mexico is facing $142,000 in fines and the potential loss of its business license because of the violation.
Lab Safety Testing
A Nevada marijuana edibles manufacturer had its license suspended after regulators found that the company bi-passed lab safety testing by adding thousands of additional products to a batch of tested products. The company also had record-keeping compliance deficiencies.
Labor Law Violation
Failing to pay employees a premium wage in Massachusetts resulted in a $300,000 settlement for restitution and penalties. Hundreds of dispensary employees were not paid proper wages for working Sundays and certain holidays.
Actions for Internal Cannabis Compliance
Cannabis compliance is more than defensive protection. It is affirmatively necessary to progress as a viable marijuana business. Depending on which state your business operates in, laws may be clear or slightly ambiguous. That does not make them any less relevant
It is your responsibility to ensure you understand the regulations for your particular business and execute detailed standard operating procedures (SOPs) to maintain cannabis compliance. Consistency is the pillar for ensuring processes are followed and being able to identify where things go wrong. This includes detailed documentation and tracking in virtually every cannabis business.
Training management and staff is crucial to ensure each person understands their role. Depending on the state, some compliance violations may hold individual employees liable, while others impact the entire organization. For example, in Connecticut, an individual allowing someone under 21 to loiter at a cannabis store will receive a $1,000 fine for a first offense. Subsequent offenses become a Class B misdemeanor.
Mitigating Risk
It can be difficult to identify holes in your cannabis compliance. At least once a year, an independent auditor should review your compliance system, identify areas of weakness, and make suggestions on how to proceed.
It is easy to get into a routine where you are operating efficiently but on auto-pilot. Without intermittent checks, you may be skipping crucial steps that could prove to be costly or even devastating to the business. Setting up a self-audit system could help prevent errors that could otherwise go undetected until it is too late.
Penalties for Regulation Violations
A lot of time and resources go into starting a legal marijuana business. The complexities of cannabis regulations make protecting your investment a top priority.
Failing to comply with state and federal regulations can result in your business license being suspended, having to pay expensive fines, or having restrictions placed on a license. Note that each state is different, but here is a general rundown of fines for cannabis business violations in Colorado:
- Violations affecting public safety: $100,000
- License violations: $50,000
- License infractions: $10,000
A suspension or license revocation could mean the end of your business as you know it. These are explained in the Colorado Code Regulations Colorado Marijuana Rules, which are 478 pages long. Because cannabis is not federally legal, each state has its own set of laws and its own regulatory agency. Fines may be more or less severe in other states.
Getting Ahead of Compliance Regulations
Most cannabis business owners do not enter the industry for the love of compliance. We understand that, and it is what we are here for.
The dedicated team at Simplifya is passionate about navigating the complex cannabis compliance landscape, making it easier for you to conduct business. Our user-friendly software and solutions are designed to minimize the time you spend worrying and maximize the time you spend enjoying the process of building your business.