A non-compete agreement is a contract that prohibits an employee from working for or becoming a competitor for a specific period of time. Cannabis companies have been using non-competes because of the increase in talent poaching. There are big first-mover companies with a workforce of people who actually know what they’re doing in this new industry. In the biggest growth industry, this talent is highly sought after.
While cannabis companies are just trying to protect themselves and stay ahead of the competition, non-competes are unethical, non-enforceable, and can do damage to company culture. (Instead, here’s how to retain cannabis employees)
While I’ve seen companies send nasty, threatening legal letters, I’ve never seen a plant-touching cannabis company actually move to litigation.
Why cannabis companies should not have non-competes
People who love where they work aren’t actively looking for employment elsewhere
Cannabis companies have a fear of the repercussions of employees leaving the company. It’s possible that if an employee leaves then the employee may work for a competitor and divulge sensitive information. Or the company won’t find a replacement which could slow its growth momentum and possibly loss of revenue. While these are possible scenarios, there’s a better way that does not involve scaring employees into staying.
Cannabis companies need to create an engaged workforce and a place where employees actually want to work. People who love where they work, aren’t actively looking for work elsewhere. There’s an incredible opportunity, right now, to build an engaged cannabis workforce – to pay them fairly, to have employee ownership, and to create a world-class culture. Instead of scaring employees into staying, create an environment in which employees, love to work, want to stay, and are able to thrive.
Non-competes in cannabis work in opposition to the goal
Presenting a non-compete to a new employee creates a fearful work environment before the employee even begins working at the company. It has the potential to create a nasty cultural element within that organization.
For example, if current employees know that a former employee was sued when they left, does that help build the right work culture? Cannabis companies are better off paying the employee what their market value is, even if that’s not what they’re expecting to pay. And if the employee still doesn’t want to be there anymore, don’t force them to stay. Let them move on and clear the space for someone who wants to be there. There’s plenty of talent to go around.
Employees are taking a risk working in cannabis and should have the right to move their careers forward
People who choose to work in cannabis are taking their talents into an emerging market that’s building a workforce – a workforce in an industry that is not federally recognized as legal. The current status of legality brings numerous complex dynamics – including personal risks. For example:
- It may be harder to get a bank loan
- The stigma may affect the relationships with people in their lives – family, friends, and children
- The stigma may affect future professional relationships and opportunities
If there’s an opportunity for an employee to move their career forward, and make a better life for themselves and their family, there should not be a non-compete preventing them from doing so. Employees need to have the option to take their talents elsewhere Especially when you consider the risk they’ve taken to enter the industry, it’s just the right and ethical thing to do.
Non-competes are not enforceable
Cannabis companies are spending a lot of money paying lawyers to draft up threatening non-competes. They often use language that’s restricting the employees from effectively managing their own careers. In California, they’re non-enforceable (1). Under the new statute in Colorado, an employer who asks an employee – one who has no access to trade secrets – to sign a non-compete agreement may be subject to criminal liability (3). Why spend money on scaring employees with a non-compete when it’s not even enforceable in most states?
We’re at the fringes of employment law in cannabis – a technically federally illegal industry. In the current legal environment, if a company decides to move forward with litigation, where does that go to be enforced? What’s the jurisdiction if the employee were to move to a new state? Is this a real course of action that companies are willing to pursue?
Of the hundreds of people that FlowerHire has placed, many of them have signed non-competes at some point during their cannabis careers. While I’ve seen companies send nasty, threatening legal letters, I’ve never seen a plant-touching cannabis company actually move to litigation.
Ways you can ethically protect your cannabis company and increase retention
While the intention behind a non-compete is valid, there are other ways to ethically protect cannabis businesses and increase employee retention, while also cultivating a healthy and supportive workplace. For example:
- Create a workplace that people want to work in
- Create a replacement strategy for your key personnel
- Create an actual workforce strategy
- Create an employee retention strategy in cannabis
- Find ways to support internal mobility in cannabis
- Talk to your lawyer about other, more ethical ways to protect your cannabis company
- Pay people what they should be compensated
There are better ways to protect your company than a non-compete
We’re all building this industry and have a chance to build the best entry-to-work for the planet. Plus, the industry grows a plant that can actually help people. We’re in this together. Let’s help people find work that fulfills them, support their families, moves their careers forward, and work in this exciting, hyper-growth industry.
Cannabis Marketing Salary Guide