Published April 20, 2021

Compliance in Cannabis: A CEO's Perspective

As the cannabis industry matures, so do our 420 celebrations. To mark this year's occasion, we sat down with Joe Madigan, CEO of both Higher Growth Search and Nelson, for a chat about how compliance has evolved within the cannabis industry over recent years. As more companies get rolled up in the cannabis craze, HGS has been steadfast in helping clients to navigate the complexities and legalities of running a cannabis company.


So, how did you end up in this cool job you got?

You mean CEO of Cannabis? (laughs) I’ve been in the staffing industry for 27 years. And our focus on cannabis really just came out of interest from client requests.


Can you talk about the creation of HGS?

We created Higher Growth Search because of demand. We were already a 50-year-old staffing firm in Northern California and had a reputation of being a legacy player in the marketplace. We saw an emerging industry, and knew we could support it. Nelson, the parent company, has been known for working with emerging companies to support them from a staff augmentation level more than any other staffing agency. And it’s worked – that's why we’ve been around for 50 years.


Creating Higher Growth Search was done with a focus on maintaining the same level of integrity that Nelson is known for. Yes, it's about employment. Yes, it's about staff augmentations. And yes, it’s about providing services, but we really do it in a manner that supports the industry. We’re not necessarily just coming in, fly by night, and in a few years we'll be gone doing something else.


What was the goal in forming HGS?

Our objective early on in forming HGS was not just to place people, but to really help companies that were very good at growing cannabis to also organically grow their organizations in a compliant manner.


Has compliance always been an issue in cannabis?

Early on, we saw organizations running out the gate getting business licenses, state licenses, local licenses, but then trying to figure out how they were going to pay people. All of a sudden, their businesses were growing and rapidly expanding, and they wanted to expand with the market, but their compliance programs were really falling behind, specifically in payroll, healthcare, and workplace safety. Any missteps in those areas can come at an extremely high cost.


How bad can fines and violations get?

You're talking litigation, you’re talking lawsuits, you're talking class-action lawsuits, which can spiral really quickly, because the businesses are not on top of it. They're worried about seed to sale. They’re worried about distribution. They’re not necessarily worried about tracking whether or not John took his 15-minute meal break.


If they have 50 Johns who didn't take the 15-minute meal break (in California) and all of a sudden the 50 Johns get a good wage-and-hour attorney, well, that can very quickly turn into a good class-action lawsuit – which they can't really afford.


In your professional opinion, what are the three main issues regarding compliance, and what do companies need to be aware of?

  1. Besides paying their taxes? Companies should really focus on wage-and-hour payroll compliance. This means they should have a trustworthy payroll organization that they know for a fact is on top of all wage-and-hour laws and who updates their clients all the time. And we are that. We've been doing it for 50 years. That’s what sets us apart from anybody else.
  2. I think the other piece that organizations need to really work on and stay focused on is OSHA compliance. How are their facilities set up? If they’ve invested a lot of money in their facilities, do they have a safety and risk manager on site? If not, we can help them build that type of program. Again, we’ve been in this for 50-plus years, we know what safety and risk look like from a food manufacturing standpoint. We have a subject matter expert on staff.
  3. And then, just your basic HR compliance. Do they have an HR Department? We can be an extension of their HR Department, but do they actually have human resources? Are they compliantly there? Are they following the standards of their license and the law as it relates to the cannabis industry?

Can you describe how HGS is able to help?

HGS thrives at helping organizations with payroll, with risk and safety on a worksite level, and with any of the compliance issues around filings and accounting and finance. We guide clients through those various compliance processes, not just place employees with them. And we can do some of these finer things that are really going to keep them safe. But that doesn’t guarantee the solutions are 100% risk free, because ultimately it’s up to each business to implement and stay on top of their programs.


I think the most important piece that we never want to lose sight of is that HGS got into this business to help organizations mature and grow. And we built that philosophy not only out of 50 years of experience, but also by adding subject matter experts to our team who have over 30 years’ industry experience and who can really help organizations grow. We know organizations will probably eventually outgrow us, but we're definitely in it full-on. It's not always just about the money for us – it’s also about watching an emerging organization or industry really fully blossom.


How are you going to celebrate 420? 

How am I celebrating 420? Happily.