06 Oct 5 Cannabis Compliance Mistakes that Dispensaries & Retail Stores Should Avoid
Maintaining compliance is an ongoing challenge for cannabis dispensaries and retail stores as each state has different regulations that frequently change. Fortunately, many mistakes and violations that occur can be avoided if owners and managers work to stay ahead of issues before they become unmanageable and unlawful. Learn the top compliance pitfalls and start implementing best practices for your business to be better protected from legal risk.
Cannabis Compliance Mistakes to Avoid
1. Possessing expired or illegitimate licenses
States where medical and recreational cannabis is legal have their own licensing requirements. Common types of licenses include business, retail, dispensary, and cultivation. Some cannabis businesses need specific documents that prove a business is legitimate. Cannabis businesses need to know what’s required in their state and avoid the risk of getting shut down for lack of proper documentation.
Just like more traditional businesses, employees also require proper licensing to work in the cannabis industry. Cannabis owners and managers should ensure employees have an active license and are up-to-date on the state’s work requirements. An abrupt audit of your employees could land you in legal trouble, otherwise.
2. Insufficient employee training
It is critical to conduct employee training to avoid liability and compliance risks. Employees must learn standard operating procedures, and managers must ensure they are followed consistently. If there are any updates to laws and regulations, it is critical that the manager report changes to employees. Even after months of being on the job, managers must check in with employees to make sure operational procedures are still being fulfilled accordingly.
For example, one of the easiest compliance mistakes a dispensary employee can make is improperly storing cannabis, which at times, can result in cannabis gaining or losing water weight depending on the humidity of the room. When shipping cannabis, a mismatch in weight from what the manifest says and what the dispensary recorded could mean legal trouble for the dispensary owner, the cannabis supplier, or both. Training in proper cannabis storage can help avoid this situation, which otherwise, can end up costing the owner thousands of dollars in fines or a loss of their license.
3. Violating patient/customer privacy
Just like any business that collects sensitive patient and customer information, cannabis dispensaries and retail stores are vulnerable to data breaches and need to implement proper security measures to protect confidential data. After point-of-sale software company THSuite’s significant data breach in 2019, it brought to the attention of cannabis business owners the need to think more critically about cybersecurity or risk facing civil and/or criminal penalties for privacy violations.
Cannabis Business Times recommends to train staff on cybersecurity first, so they are privy to common scams that often compromise data. In addition, requiring passwords, instituting multi-faceted authentication, encrypting sensitive data, and keeping operating systems and other software always updated will help safeguard against security breaches. Moreover, it is critical to work with legal counsel, insurance companies, and cybersecurity consultants who are familiar with data privacy regulations to develop a cybersecurity strategy and a plan of action in the event of a breach.
4. Neglecting to follow packaging, labeling, and product safety laws
Some of the greatest cannabis compliance risks are issues with safety, packaging, and labeling of the products. Of course, specific regulations also vary within each state. In California, all packaging must be child-resistant, with specific government warnings and symbols clearly and prominently placed. In Colorado, all edibles must be marked with a THC or cannabis warning on each piece. Violations come with significant fines, so ensure that you’re current on your state’s local laws and keep an eye out for any changes to remain compliant.
In 2019, Massachusetts cannabis company Cultivate agreed to pay a $75,000 fine after a surprise inspection showed 3,000 improperly labeled products. The products did not include required labels stating that they contained THC and that they were unsafe for children. They also didn’t show serving size, identification numbers, or directions for use.
5. Not investing in robust technology
Having state-of-the art technology may not be a state requirement, but not investing in it can only increase compliance risk. Activities like tracking inventory and monitoring transactions manually or with antiquated systems opens your business up for error or theft.
It’s important to work with a technology provider that offers top-of-the-line software and systems that help keep your business compliant. A sophisticated technology system should be able to do the following:
- Verifies and validates customer identification to avoid illegal sales
- Prevents overselling of product because regulations limit the quantity to purchase
- Automates and monitors transactions to minimize staff errors and reduce theft
- Stores records of operations, inventory, and orders needed for routine audits
- Aids in reporting daily, weekly, and monthly sales required by state laws
Protecting Your Business from Compliance Risks
Unfortunately, cannabis compliance will continue to be a struggle for dispensaries and retail stores. Not only do the everchanging rules and regulations make it challenging for business owners and managers, maintaining compliance can become a full-time responsibility, on top of other daily operational tasks. Being proactive and following best practices can help ensure your business is protected as much as possible. Additionally, working with a reputable human resources provider can help offload the compliance responsibilities, so you can focus on other priorities.
Connect with an HR provider like OROleafhr for all of your legal and compliance needs. OROleafhr works specifically with cannabis businesses to assist with HR administration, payroll, benefits, tax compliance, and risk management. Already have staff fulfilling HR duties? OROleafhr can lend additional support or can serve as your legal arm of your business. We are knowledgeable in cannabis regulations and will ensure your business is always in good standing with the law.
Contact OROleafhr to develop a compliance solution for your business.