Cannabis organizations ought to demonstrate they have the capability to be legally compliant as a situation to issuance of their state and neighborhood licenses. That compliant moment is only a glimpse of the business’s life, but it can’t be a fleeting point, as periodic inspections can make or break your company.
Based on the license form, the cannabis company can be inspected at any time by the Bureau of Cannabis Manage (BCC), the California Division of Meals and Agriculture (CDFA) or the California Division of Public Overall health (CDPH). Cal. Code Regs. tit. 16, § 5800. Inspections by one particular or far more of these licensing agencies can happen unexpectedly and frequently, which implies the company ought to strive to retain compliance at all instances to keep away from any operational stoppages, expenditures connected with resolving notices to comply and other citations, and in the end failure.
The cannabis sector shifted from operating beneath the loose laws of the Compassionate Use Act to a detailed set of regulations beneath the Medicinal and Adult-Use Cannabis Regulation and Security Act (the “Regulations”), requiring compliance all through the complete provide chain. Following the comparatively new and detailed Regulations is understandably tough, and that difficulty is compounded with the struggle to navigate the Regulation’s ambiguities.
To mitigate the compliance troubles, cannabis organizations are necessary to adopt and comply with “standard operating procedures” (SOPs), a term applied in the Regulations. Cal. Code Regs. tit. 16, § 5700. Some SOPs are treated as mere paperwork that is submitted and ignored, or as impediments that fail to mesh with actual operations.
Alternatively, SOPs ought to be constructed to let effective implementation and concurrent continual improvement of the SOPs. Under is an instance of a compliance technique:
Even though the instance technique elements are shown separately, the elements are carried out concurrently. The cyclical technique continually improves the SOPs and the connected processes. Also, the staff ought to be educated on the SOPs to strengthen the interlocking of the SOPs and operational processes, with a monitoring technique in spot to make sure adherence.
- Study and Test Existing Processes for Feasibility
If there is a starting and finish to the above compliance technique, this is it. The corporation processes ought to initially operate. As soon as a approach performs, it ought to be continually tested and evaluated for feasibility and adjusted as improved strategies to achieve tasks, new conditions or wants are identified.
- Draft SOPs Compliant with Law and Cohesive with Existing Processes
Effectively drafted SOPs ought to, (1) contain, and call for compliance with, the processes necessary by law, (two) retain flexibility to let for conditions not contemplated by the Regulations or cannabis organizations, (three) be customized to match the one of a kind elements of every cannabis company and assist guide the processes to attain the most effective and successful outcome, and (four) be comparatively simple and quick to comprehend.
- Refine Processes to Match SOPs
Sometimes, the SOPs can accommodate the one of a kind elements of the present processes of the company even so, if the products in the SOPs that are necessary by law (as opposed to a discretionary item) are inconsistent with the present processes, the processes ought to be modified to meet legal needs. In order to optimize SOP effectiveness and expedite the implementation of a strong compliance technique, it is important that throughout the initially 3 stages above, the staff carrying out the processes operate closely with counsel in drafting and revising the SOPs.
- Educate Workers on SOPs
The value of keeping compliance with state and neighborhood law as a cannabis company can’t be stressed sufficient. Falling out of compliance can outcome in fines, imposition of necessary corrective measures, license suspension or revocation, and removal of any prospective state protection from federal enforcement. The foregoing enforcement actions could finish a company and all of the jobs it designed.
Management ought to emphasize that no single individual in the company is accountable for all compliance absolutely everyone in the company has compliance duty to some degree. Thus, staff ought to be consistently educated and reminded of the value of compliance—their job is dependent upon it. At minimum, the education ought to be performed (1) upon any legislative transform affecting the SOPs, (two) as portion of any internal SOP update, (three) as portion of the employee onboarding approach, and (four) on a normal schedule (we suggest at least just about every six months).
- Implement Systems to Monitor Compliance with SOPs
Audits by licensing agencies are occurring with far more regularity. The far more vigilant the compliance, the significantly less likelihood the cannabis corporation has of failing an audit. Compliance monitoring systems can contain internal audits in preparation for inspections. We suggest internal audits be performed month-to-month, with every audit focusing on a certain aspect of the company.
In addition, a reporting technique ought to be implemented that causes any irregularity to be identified and brought to the consideration of management. The report ought to rapidly funnel up to counsel or the compliance manager to make sure it is addressed properly and as rapidly as achievable. Lingering difficulties produce conditions that can be cited by the inspecting governmental agency.
In sum, the cannabis compliance technique ought to be created as a foundation upon which a corporation can develop with the objective of getting a “living” technique. Continual improvement, and the capability to adapt to altering laws and processes, ought to be constructed-in. Each and every cannabis company will encounter adverse compliance difficulties throughout its life these organizations with appropriate systems will mitigate the adverse compliance effects and continue to thrive.
Republished from Orange County Organization Journal with permission of Stuart Kane LLP.