Working in the cannabis space is challenging at the best of times because of the looming possibility of dispensary fines and lawsuits in the United States. Cannabis is technically illegal under federal law, so navigating the industry can be pretty precarious, especially if you are a business owner.
Under the Controlled Substances Act of 1970, cannabis is classified as a Schedule I substance, described to have a high potential for abuse and no accepted medical use. It means that possession and use of cannabis, even for medical purposes, are legally prohibited.
Since 1970, at least 37 states have legalized the medical use of cannabis, and 19 of them consider recreational use of cannabis legal. As a dispensary owner, it is imperative that you stay on top of these ever-changing laws and local regulations to avoid hefty dispensary fines and expensive lawsuits.
Cannabis may be illegal at the federal level, but there is an understanding that individual states have the freedom to handle marijuana-related matters.
However, states must still follow some non-negotiable marijuana laws and law enforcement priorities:
- Prevent the distribution of cannabis to minors.
- Prevent revenue from the sale of cannabis from going to criminal entities.
- Prevent the distribution of cannabis from states where it is legal to states where it is illegal.
- Prevent legal cannabis businesses from becoming fronts for illegal drug activities.
- Prevent violence in the cultivation and distribution of cannabis.
- Prevent cannabis-related activities from exacerbating adverse public health consequences, i.e., drugged driving.
- Prevent the cultivation of cannabis on publicly-owned land.
- Prevent marijuana possession or use on federal property.
This article contains a comprehensive guide for cannabis businesses in the U.S. and what dispensary owners and entrepreneurs in the industry need to know to avoid a lawsuit.
What are dispensary fines and lawsuits in the USA?
Dispensary owners must be very prudent with their cannabis business. At all times, they should be aware of and follow the laws at the federal and local levels.
First, there are very stringent legal requirements for opening a dispensary:
Local requirements
Opening a cannabis dispensary is not nearly as easy as launching any other type of business—there are much stricter regulations to obtain the appropriate licenses. State laws and regulations will largely dictate their operational practices.
Cannabis may be illegal federally, but national authorities have already said they will focus their resources on violent crimes rather than enforcement of marijuana violations. As long as dispensary owners follow state laws and do not cross state lines, they can continue to operate their businesses.
Employment
All employees must be 21 years old to work in a cannabis dispensary. Local governments also impose specific employment regulations, and business owners must learn about them. For example, states mandate different amounts for minimum wage.
Taxes
The Internal Revenue Service prohibits cannabis businesses from deducting common expenses such as transportation, marketing, and training from their tax return.
Banking
Since cannabis is federally illegal, many financial institutions are hesitant to cater to marijuana-related businesses. You must do your due diligence to determine which local banks are open to an economic partnership with your cannabis dispensary.
Top things to consider to avoid a lawsuit at your American cannabis dispensary:
After extensive research, we discovered that these are the top things to consider to avoid dispensary fines or fees and lawsuits at your dispensary.
Let’s dig in.
1 - Stay on top of critical legal updates.
It’s important to know that state-regulated marijuana dispensaries can operate only in the following states:
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Hawaii
- Illinois
- Louisiana
- Maine
- Massachusetts
- Michigan
- Minnesota
- Montana
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- Utah
- Vermont
- Virginia
- Washington
There are also locally regulated dispensaries in Washington D.C. Some states also have drive-thru dispensaries: California, Colorado, Illinois, Maryland, Michigan, Pennsylvania, Oklahoma, Oregon, Utah, and Washington.
While there are dispensaries in the above-mentioned states, some are dedicated solely to medical marijuana. It is important to delineate a medical and recreational dispensary; it’s the easiest way to determine which laws and regulations will apply to your business.
In the next section, we will explore the differences between medical and recreational dispensary rules.
Medical dispensaries
A medical dispensary is where cannabis is exclusively grown to mitigate symptoms that patients experience due to certain chronic conditions. They have very different legal requirements than recreational enterprises and are taxed differently.
A doctor’s recommendation is usually needed to purchase medical marijuana. Note that doctors are not allowed to prescribe—only recommend—the use of cannabis because of federal limitations.
Dispensary owners should also be aware of the marijuana packaging requirements in their state. Medical marijuana must be packaged carefully. In Rhode Island, for example, there are certain approved fonts for labeling. In Maine, packaging must be child-resistant and tamper-evident. California encourages the use of the universal symbol for cannabis in packaging products to alert people of the contents of the package.
Recreational dispensaries
Most recreational dispensaries have an integrated medical marijuana section. They also have fewer legal restrictions.
However, the uniform rule is that buyers must be at least 21 years old to be served. For medical marijuana, an 18-year-old can purchase it as long as there is a doctor’s recommendation.
Where is recreational marijuana legal?
Recreational marijuana is legal in Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington. It is also legal in D.C.
2 - Hire a consultant or a lawyer.
The marijuana landscape in the United States is ever-changing and shifting. There was a time not long ago when cannabis was entirely illegal. Now, many states in the country have at least one dispensary. Oklahoma, California, and Oregon now have at least 1,000 dispensaries.
Hiring a consultant or lawyer allows dispensary owners to focus their time and energy on business operations and nothing more. When there are changes to local or federal law, the lawyer or consultant has the expertise to guide the owner to ensure compliance.
What a cannabis consultant in the U.S. can help you with.
A good cannabis consultant is expected to know everything about the local and federal laws and regulations regarding legal operations in the industry, from the cultivation process to the manufacturing and distribution of cannabis products. More importantly, they know about the various operations of a cannabis dispensary, such as sales and distribution, packaging, and even stealth marketing, since explicit cannabis advertising is largely prohibited.
An ideal consultant can also use this knowledge to help the dispensary owner scale the business and run it productively in the long term.
What a lawyer can help you with.
You must hire a lawyer before you even launch your cannabis dispensary. They will be your partner and guide through every step of opening the business, from the legal paperwork to the physical composition of your brick-and-mortar store.
Cannabis lawyers also have the knowledge to pursue complex business requirements, whether you are opening a medical or recreational dispensary. Your business should comply with all federal and state laws, or you will lose your operating license.
3 - Use technology to avoid a labor lawsuit in the US.
Technology can help streamline operational processes no matter the nature of the business. A labor lawsuit is expensive and will disrupt your enterprise; it may also tarnish your dispensary’s reputation. Here are some ways to leverage technology that can help your cannabis business:
Track and trace technology to avoid lawsuits.
Marijuana Enforcement Tracking Reporting and Compliance (Metrc) is a cloud-based complaint management software solution that monitors marijuana use and distribution. It is a crucial tool for business owners in states that regulate cannabis use—the product is tracked through its journey via RFID tags.
Metrc has a web-based platform where users can report information for compliance, such as marijuana cultivation, preparation, packaging, and distribution.
Time-tracking tools to avoid a labor lawsuit.
All business owners should know their state’s labor laws. Generally, they impose good working conditions for all employees and regular breaks during their shifts. A daily time record is needed to monitor attendance and corresponding breaks.
KayaPush, a workforce management software, has robust time-tracking software with facial recognition. The system ensures accurate time-in and time-out recording so that management can compensate all employees properly to avoid labor disputes.
Dispensary payroll software to avoid dispensary fines.
Businesses should pay employees on time and accurately. Errors in payroll calculations and compliance cannot be prevented—this is where dispensary payroll software can be leveraged to minimize mistakes.
KayaPush is also a fully integrated cloud-based payroll service designed especially for dispensaries. It delivers smart calculations and data transfers, making the entire process a breeze for employers.
Other software for compliance.
Use any other technology or software to help your dispensary develop efficient operation strategies. It will save the management team a lot of time and effort and may even save your business some money.
With an automated system, you will need fewer people. When the business is done efficiently and legally, you can prevent any dispensary fines or lawsuits.
4 - Don’t do anything illegal.
The cannabis industry used to be underground. In fact, there are many underground cannabis growers and sellers in states where it is not yet legal. It’s a massive industry with legal sales expected to reach $33 billion at the end of 2022.
When you do things the right way, you will gain credibility and a positive reputation in your industry, which are essential in establishing and maintaining a successful business. There is also a lot to lose when a dispensary is discovered to be doing illegal activities—the company could lose its license and credibility, not to mention the fines and financial loss.
5 - Invest in good HR protocols and tools.
Like any other business, a cannabis dispensary can also be subject to lawsuits stemming from the misconduct of managers, supervisors, and employees. Companies must have clear HR protocols in place to handle such misconduct.
Investing in good HR tools is also valuable. For example, a tool like Kendr allows employees to communicate discreetly and anonymously about workplace issues they face.
Additionally, human capital management software provides HR teams with an efficient, all-around system that includes applicant-tracking design, hiring tools, paperless onboarding, and a performance management system.
6 - Keep pristine records.
The dispensary must also have proper documentation on policies and procedures. Institutionalizing policies within the organization ensures that employee turnover will not affect operations.
Cloud-based technology is a very efficient way to maintain business records and ensure continuity. What records should you file?
- Business license and permits
- Tax returns
- Financial records: operating cash, accounts receivable, accounts payable
- Inventory
- Employees and their payroll records
When you have an organized system, you significantly reduce the risks of facing lawsuits and dispensary fines.
7 - Train your staff on compliance.
Employee training is crucial for all businesses, especially in a cannabis dispensary. Budtenders and all dispensary staff must be very aware of the cannabis laws and regulations at the federal, state, and even county levels. They should know how much they can sell to clients to avoid violations.
The staff should also know all about the cannabis products they sell, especially if they work in a medical dispensary. Branding training is vital, too: simple things like greeting customers and correctly displaying and packaging products must also be in line with regulations.
8 - Enlist a compliance officer.
A compliance officer can be your man on the ground to keep things operating smoothly and legally in the dispensary.
What does a compliance officer do?
A compliance officer must be up-to-date on the goings-on in the cannabis industry so they can communicate emerging laws and regulations to the dispensary staff. They are responsible for shaping the cannabis culture that the business embodies and the employees implement.
Protect your business with technology
Dispensaries and other cannabis businesses in the United States face certain risks, and owners must know how to overcome these challenges.
If you are looking for a compliant and integrated software solution, check out KayaPush. KayaPush provides integrated payroll, HR, time-tracking, and scheduling software that accommodates your compliant POS system, giving you an end-to-end compliant solution that could save you from lawsuits and dispensary fines.
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