Stacey Newell has been working in HR for 25 years, including for big retailers like The Gap. Near the end of May 2018, she got what she described as the weirdest phone call she'd ever received in a professional setting.
That call was from a representative with payroll and HR services vendor Paylocity. At the time, Paylocity had an agreement to provide services for Green Dragon, the Colorado-based cannabis company for which Newell works as director of HR. The rep called to say Paylocity would no longer be working with Green Dragon. The rep gave no reason for the change, Newell said, only stating "we don't want to work with your company anymore."
Newell said she was shocked, especially now that the call had left her and the company's workforce of 180 employees without a provider for payroll, among other services. "It was like a bad breakup," Newell said of the phone call. "It's not you, it’s me."
"It's not you, it's me."
Director of HR, Green Dragon
In interviews with HR Dive, company officials and other stakeholders in the cannabis industry said Green Dragon's experience is far from unusual. Those who grow and sell byproducts of the Cannabis plant frequently deal with the prospect of being dropped by vendors and banks without warning. And the problem is so common, it's created an industry within an industry, giving rise to vendors that specifically work to solve the challenges faced by cannabis companies.
HR Dive contacted several payroll and HR services vendors, including Paylocity and BambooHR, in the process of reporting this story. None responded directly to questions about their work with cannabis industry employers.
A backdrop of legal and financial challenges
The cannabis plant produces a number of byproducts including marijuana, which has been classified as a Schedule I substance since 1970 under the federal Controlled Substances Act. Since that time, 11 U.S. states and the District of Columbia have legalized recreational use of the drug, while others have decriminalized its possession.
These conflicting standards have repercussions for HR professionals not only in the hiring, accommodation and testing contexts, but also — and particularly for those who do HR for cannabis businesses — in the compensation context. Previous reports have detailed, for example, how cannabis industry employers have few choices to establish a 401(k) retirement savings account for their workers.
"It's both a real and actual technical problem, but it's also an attitude problem."
Managing Director, Industry Intelligence, BDS Analytics
"Cannabis companies have grief from every corner of the finance industry," Tom Adams, managing director, industry intelligence at BDS Analytics, a cannabis industry analysis and market research firm, told HR Dive in an interview. "It's both a real and actual technical problem, but it's also an attitude problem."
Banks often are at the center of stories like Green Dragon's, Adams said. They may not want to deal with the extensive paperwork and documentation required to process payments from a cannabis company, even if that company operates within the boundaries of state law. And they may fear federal enforcement action, others report.
Adams also noted the existence of a "green line" between those businesses that "touch the plant" and those that don't. Retailers, growers and others who do cross that line are more likely to face issues. "It's a struggle but everybody has it, whether you touch the plant or not," Adams said.
Additionally, banks are not always initially aware that the vendors they bankroll are working with cannabis companies, Keegan Peterson, founder and CEO of Wurk, a company that specializes in HR and payroll services for cannabis firms, told HR Dive in an interview.
"Despite strict corporate messaging, salespeople continue to pitch and sell products to cannabis companies," Peterson said in follow-up statement emailed to HR Dive. "In many cases, representatives even advise legal cannabis companies to downplay their involvement in the industry in order to meet sales targets. These partnerships can operate under-the-radar temporarily but are eventually exposed by routine audits conducted by the major banks behind the payroll companies."
The issue of bankrolling cannabis companies has attracted the attention of federal legislators. In September, the U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act of 2019, which would create protections for financial institutions that provide banking services to "legitimate marijuana-related business." Still, some financial sector observers question whether the bill’s provisions would be sufficient to allow banks to enter the cannabis space comfortably, HR Dive's sister publication, Banking Dive, reported.
Keep it on the down low
Payroll isn't the only area of HR for which cannabis companies have had to make contingency plans. California-based cannabis grower and product manufacturer CannaCraft had to find a replacement employee performance management and HR platform after it was dumped by earlier this year by BambooHR.
Kial Long, vice president of corporate communications at CannaCraft, said the organization was told BambooHR based its decision on the fact that CannaCraft is a cannabis company. Long said CannaCraft also has experienced issues with its bank accounts for short durations, and that it pays employees biweekly in cash.
"Finding these partners is a challenge that is certainly unique to the cannabis and CBD industries."
Spokesperson, Green Growth Brands
Such news is more than a mere inconvenience. Cannabis companies have to quickly work to find solutions if they don't already have a backup plan in place. "Finding these partners is a challenge that is certainly unique to the cannabis and CBD industries," Julia Fulton, a spokesperson for Green Growth Brands, which manages a portfolio of Cannabis products and retailers, told HR Dive in an emailed statement. "What is often a standard RFP process can be far more complicated for companies in our industry."
Newell said she was fortunate: When she received the call from Paylocity, she had already connected with a sales representative from Wurk months prior. She said she reached out to Wurk even before informing Green Dragon's ownership about the call.
Though Newell admitted that "it was a pretty scary time" having to deal with the aftermath of getting dumped, she said Green Dragon was able to move quickly enough so that the issue could be kept "on the down low as much as possible." The company made quick changes to its policy manuals and was able to get its system up and running again by June 2018. "It wasn't that scary for employees," Newell said, "it didn't leave a lot of room for a rumor mill."
An opportunity for HR professionals
Adams said he thinks vendor difficulties — like other conflicts — aren't likely to be a long-term issue. "These are problems that are going to go away," he told HR Dive, noting that upcoming elections may result in action on legislation like the SAFE Banking Act and the STATES Act, which would provide additional protections to those who work with marijuana in compliance with state law.
But others, like Peterson, see full legalization at the federal level as the only way to solve the problems cannabis employers face.
Still, conflicts with vendors and banks haven't dented enthusiasm among workers in the industry, according to Adams. "Frankly, it's not just that the companies are eager to work in it, people are eager to work in it," he said. "It's changing the economy in many ways and it's a great opportunity."
Newell said she understands that a stigma still exists around cannabis and marijuana, but that she believes the industry also presents a good opportunity for HR leaders who currently work in other industries. Those who make the move to cannabis will have to familiarize themselves with the many regulations involved as well as procedures around background checks, which can be strict, she added.
"[T]he biggest opportunity for professionals in this industry is on the HR side of the business."
Founder and CEO, Wurk
Peterson agreed, saying that "the biggest opportunity for professionals in this industry is on the HR side of the business."
The industry stands to benefit as well. Newell said if experienced HR staff enter the space that could help improve its image: "It's going to help people dispel a lot of stereotypes about people who work in the industry. Many cannabis companies are asking about how they can better manage employees," Peterson added. "These companies need professional help."
If those shifts occur, stakeholders say the vendors breaking up with cannabis today may regret not getting in on the ground floor. "I really think these companies are going to look back in five years and be kicking themselves for not taking that opportunity to work in this space," Newell said.