Cannabusiness Bosses: Labor & Employment Issues in the Regulated Era
Part 2: Hiring, Special Situations, and Wage & Hour Basics
By Sarah Smale
This is part two of our Cannabusiness Bosses series, covering hiring, special situations, and wage & hour basics.
Part 2: So, you’re an employer. Now what?
Employers must comply with employee reporting, tax withholdings, and wage and hour requirements. Front-end compliance is key because California does not play when it comes to employee protections. Penalties add up fast and are often more expensive than the cost of paying overtime, giving mandated meal/rest breaks, and otherwise following the rules.
When you hire someone, you must report the employee to the Employment Development Department (“EDD”), gather multiple documents, and provide various brochures. You also have to display a labor poster (or binder) somewhere employees can easily access.
The required forms and brochures can be gathered online at the EDD’s website, which provides tons of great information. Read through the 2019 California Employer’s Guide to learn more than you ever wanted to know about being an employer.
I am often asked about non-traditional working relationships, such as employing family, casual labor, and volunteers. Don’t fall into the trap of believing these types of workers are categorically exempt from reporting and tax requirements. They are not!
While family members may be exempt from some (but not all) types of taxes, you still must report their employment. More importantly, family exemptions do not apply if the employer is a corporation, LLC, or other business entity.
Temporary or short-term workers are still employees. If the work is not in the course of your regular business, you must report casual laborers as employees if you pay them more than $50 and they worked at least 24 days in the preceding or current quarter. If the work is in the course of your regular business (such as seasonal trimmers), these employees must be reported regardless of pay or how long they work.
As for “volunteers,” simply dubbing someone a volunteer is not a solution. True volunteers “perform work for a civic, charitable, or humanitarian reason” for public agencies or qualified corporations. Cal. Labor Code § 1720.4.
Wage and Hour Requirements
Employers must comply with wage and hour laws, including minimum wage, overtime, and meal/rest breaks. Cultivation workers are not considered agricultural workers by the Department of Industrial Relations. Instead, MAUCRSA expressly places them under Industrial Welfare Commission (“IWC”) Wage Order 4-2001, so the overtime requirements are similar to office workers.
Employers must familiarize themselves with this wage order (and post it at the job site). It covers everything from overtime, tools of the trade, and lodging credits. Read IWC Wage Order 4-2001 here. There are also tons of rules regarding when you have to pay an employee (you cannot wait until harvest), mandatory record keeping, and information wage statements must contain.
If you fire someone or they quit with more than 72 hours’ notice, you need to pay all wages owed on their last day. Cal. Labor Code §§ 201, 202.
Employees owed wages can file administrative wage claims relatively easily, and there are lots of attorneys who happily take these cases because they’re easy to win. Countless Labor Commissioner hearings have taught me these generally go in the employee’s favor, particularly when the employer did not maintain records.
The regulatory agencies take labor violations seriously. Violations in the past three years must be reported in your annual application, and post-licensure violations must be reported within 48 hours. 3 CCR §§ 8102(i)(15), 8204(c)(3).
The best way to avoid headaches is to create an action plan before hiring. Gather the documents you need. Pay the taxes you owe. Create a mechanism for workers to communicate concerns. Create your system and stick to it.
Next time—workers’ compensation: who needs it, who can be exempt, and what it will cost.
Founding Partner, Origin Group Law LLP