Licensed marijuana establishments in the state of Michigan face a variety of regulatory compliance issues in their day-to-day operations. Adherence to the numerous regulatory compliance requirements is of paramount importance for any licensed marijuana establishment in order to ensure that their operations are in full compliance.
Non-compliance with regulatory requirements and standards can expose your business to undue financial risk, such as fines and other administrative sanctions, and even potentially jeopardize your license to operate as a marijuana establishment.
With this in mind, this blog addresses the regulatory compliance issues regarding Michigan marijuana business licensees contracting with Independent Contractors to perform on-site services for, and on behalf of, the licensee.
Specifically, we will aim to address the various regulatory compliance obligations of a licensed marijuana facility contracting with an independent contractor to provide periodic, onsite services on its premises. This will be done in an effort to ensure that the facility fully complies with all application rules and regulations.
MRA Classification of Independent Contractors vs. Employees
As an initial matter, it must first be established whether an individual performing work or services for, or on behalf of, the marijuana business licensee in exchange for compensation, is classified as an employee or an independent contractor.
While federal and state employment law govern the classification of such relationships from a purely legal/employment law perspective, the Michigan Marijuana Regulatory Agency’s (MRA) Administrative Rules also provide the definition of what an employee is in the context of a marijuana licensee for the purposes of regulatory compliance.
Pursuant to MRA Rule 420.601(d), an employee is defined, in pertinent part, as:
“a person performing work or services for compensation… Employee does not include individuals providing trade or professional services who are not normally engaged in the operation of a marihuana establishment.”
Again, while federal and state employment law govern the classification of employees vs. independent contractors for legal and tax-withholding purposes (among other areas), the MRA definition of employee is important to understand for regulatory compliance.
If an individual is classified as an employee (as opposed to an independent contractor), then there are certain regulatory requirements that the marijuana licensee must fulfill both prior to and during the employee’s employment with the licensee. If, however, the individual rendering services for or on behalf of a marijuana licensee is not classified as an employee, then the requirements of the licensee differ.
Classification of Visitors and Associated Compliance Requirements
Depending on the nature of the services provided to the marijuana licensee, independent contractors would likely be classified as “visitors” under the MRA rules for purposes of onsite facility security compliance. Specifically, pursuant to MRA Administrative Rule R. 420.602(6),
“… services provided by individuals not normally engaged in the operation of a marihuana business must be reasonably monitored, logged in as a visitor, and escorted through any limited access area.”
From this, it is very likely that the independent contractors in question would be classified as visitors, for purposes of MRA regulatory compliance. Visitor classification carries certain obligations for licensed marijuana establishments under the MRA whenever they allow such independent contractors onsite to perform contracted services.
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Further, pursuant to MRA Administrative Rule 420.602(7), visitors (including independent contractors), are allowed to be on the premises of a marijuana facility and are allowed to enter the building located on the premises, provided that such visitors are:
- Reasonably monitored;
- Logged in as a visitor; and
- Escorted through any limited access areas.
It should be noted that Rule 420.602(7) prohibits general visitors from being escorted to places within the building where, “hazardous materials are used, handled, or stored in the marihuana business.” As mentioned above, depending on the nature of the services rendered, independent contractors would likely be considered professional service visitors under the applicable MRA rules and regulations.
As such, these independent contractors would be allowed to enter the facility of a licensed marijuana facility as long as the three (3) conditions outlined above are satisfied.
Additionally, pursuant to Administrative Rule R 420.203(2)(e):
“Access to a marihuana business’s restricted and limited access areas is restricted to the licensee, employees of the licensee, escorted visitors, and the MRA.”
As such, the independent contractor is allowed access to limited access areas, provided that they are escorted by the marijuana licensee or an employee of the marijuana business and monitored at all times if rendering services in a limited access area.
As can be seen from the above-referenced MRA rules, for purposes of regulatory compliance, a licensed marijuana establishment is allowed to have an independent contractor enter the building. Since the independent contractors are not employees, they are treated as a visitor for purposes of compliance with the MRA rules regarding building safety and security.
As such, the visitor is allowed to enter the licensed facility and perform the contracted services, provided that the contractor is (I) monitored; (II) logged as a visitor, and (III) escorted and monitored the entire time while services are rendered, especially for any services rendered in a limited access area.
It is a “best practice” for the licensee to require an employee continually monitor and be physically present in any room in the building, where the services performed by the Independent Contractor takes place in order to ensure full compliance with the MRA’s Administrative Rules.
Visitor Log Requirements
As mentioned above, visitors must be logged in as a visitor of the licensee prior to being granted entrance into the facility and before commencing any of the contracted work. The visitor log can be in physical or electronic form, but a marijuana licensee must ensure that a record must is made for all visitors who enter the premises.
The log must contain the name of the individual(s) and a date and time of such individual’s arrival, and a description of the reason for their visit to the facility. It is important to note that the MRA requires licensee visitor logs to be kept and preserved as part of the Grower’s business and security records, which the MRA can request upon notice in order to determine compliance.
The visitor logs must be kept as records for a period of five (5) years pursuant to MRA administrative rules, so the Grower’s client must also adhere to this record-keeping requirement, in order to fully comply with the Administrative Rules (in regard to independent contractors who come on site to render services).
Further, it is important to note that the MRA can request such visitor logs at any time, in order to assess the marijuana licensee’s compliance with regulations.
Criminal History Background Checks
Finally, since visitors (included escorted visitors) are not considered employees under the MRA Administrative Rules, the licensed marijuana establishment is NOT required to perform a criminal history background check. Licensees may, nonetheless, choose to perform such criminal history backgrounds checks in an effort to show a firm and serious commitment to regulatory compliance, as illustrated by going above and beyond the requirements.
While criminal history background checks are required for traditional W-2 employees of licensees pursuant to the Administrative Rules, there is no expressed requirement that a licensed marijuana establishment must perform a criminal history background check on independent contractors ,who are classified as visitors.
Even though it is not a per se requirement for licensed marijuana establishments to perform a criminal history background check on visitors, it is nonetheless recommended that a licensee performs a criminal history background check on independent contractors whose services entail (or may entail) coming into contact with marijuana or marijuana product (such as any independently contracted periodic trimming services) in order to establish a best practices approach.
This is also to show a true commitment to compliance by going above and beyond the stated requirements of the MRA Administrative Rules. Performing a criminal history background check also shows that you are committed to ensuring that no unauthorized individual gains access to your highly secured facility. Like the visitor logs, records of such criminal history background checks should be stored and maintained by the licensee for a period of five (5) years.
Overall, independent contractors are allowed to perform onsite services on behalf of a licensed marijuana establishment, provided that the licensee takes and establishes appropriate measures to ensure compliance with the MRA’s Administrative Rules. This is in regard to allowing and tracking non-employee personnel on the premises of their licensed facility.
While contractors are not employees, and therefore not subject to the various requirements regarding the on-boarding and monitoring of employee activities, licensees must still strictly adhere to the various rules and conditions discussed in this blog whenever they contract with independent contractors to perform services onsite at their licensed establishment.
Failure to strictly adhere to the compliance requirements could result in the imposition of fines and other penalties, as well as potentially jeopardize your license to operate as a marijuana establishment. As such, strict adherence to the regulatory compliance requirements is of paramount importance when it comes to independent contractors coming onsite to perform services for your licensed marijuana business.