Identifying and Disclosing your Cannabusiness’ “Managerial Employees”

After obtaining a cannabis business license, maintaining a stellar track record of compliance with the laws and rules is essential​ to your company’s continued success.

To achieve this goal, your company must know all applicable regulatory requirements. This is to ensure that the business stays above board and does not incur fines, sanctions, or worse (suspension or loss of your license).

One of the most important requirements for licensed companies that may get overlooked at the beginning stages—especially now as Michigan’s cannabis industry is in its infancy—is to accurately identify and disclose key employees (“managerial employees”) to the State of Michigan.

To avoid delaying your business operations and putting your license at risk for rule violations, certain steps must be followed before any “managerial employees” work at the facility.

The MMFLA and “managerial employees”

● Employees who have the ability to control and direct the affairs of the marihuana facility and/or the ability to make policy concerning the marihuana facility.

In addition to the owners of the company, all individuals who fall within this definition of “managerial employee” must:

1. Be identified by the company
2. Submit all required disclosures and application documents to the MRA
3. Undergo the same criminal and financial background check as the owners.

The MRA has also made clear that a person who is merely “supervising” is not a “managerial employee.”

● An employee who has supervisory duties, meaning those employees that carry out policy but don’t set or make policy or have the ability to control or direct the affairs of the marihuana facility, do not fall within the context of a “managerial employee” in the MMFLA.

Lastly, the MRA has indicated that an employee’s job title does not necessarily mean that he or she is a “managerial employee”:

● Additionally, an employee who has the title of “manager” is not a “managerial employee” in the context of the MMFLA if they do not have the ability to control or direct the affairs of the marihuana facility and/or they do not have the ability to set policy concerning the marihuana facility.

Why identifying your “managerial employees” matters

Since the State of Michigan must approve each individual who is a “managerial employee” before he or she can start working at your facility, it is essential to start this process as early as possible. This will provide each person with enough time to submit a complete application and obtain approval from the MRA. If this does not happen and your company receives its license, the opening of your business will likely be delayed until every key employee is properly vetted and approved.

Regardless of the job title assigned to a particular person, the MRA may consider he or she as a “managerial employee” based on the circumstances. This determination will happen on a case-by-case basis, but it will likely come down to an assessment of:

• The individual’s duties and responsibilities outlined in his or her employment contract and the application documents submitted to the MRA, such as the company’s organizational chart;
• The type of activities the person is actually performing at the facility; and
• The person’s actual authority to set policy (for example, physical evidence of making key decisions for the company, as opposed to merely supervising and carrying out policy).

Maintaining compliance to ensure your cannabusiness’ success

Unless the owners possess the perfect combination of expertise and knowledge required to run every aspect of the business, every licensed company needs to employ at least one or more “managerial employees.”

In other words, it is not enough to simply say that your company does not employ any “managerial employees” in hopes of expediting the license application process by only having the owners vetted by the State of Michigan.

If that is truly the case and the owners will run all business operations, then there is no harm in disclosing that to the MRA. However, if other individuals set policy and make decisions about the company’s affairs, there is a high risk that the regulators will eventually find out one way or another.

If so, your company may risk paying a substantial fine for breaking the rules by hiring a “managerial employee” to work at the facility without prior approval by the State of Michigan. Additionally, your license could be in jeopardy for providing the MRA with false and misleading information about your facility.