Legal Considerations for Canadian Dispensary Operators

Harrison Jordan
June 6, 2024

Operating a cannabis dispensary in Canada presents a significant challenge due to the constantly shifting regulatory environment. Compliance is paramount, and staying ahead of legal requirements is critical for maintaining operations. Lawyers focused on the cannabis industry dedicate extensive time to guiding dispensary operators through this legal maze, ensuring that their planning and operations remain compliant while also being practical and efficient.

Beyond the foundational legal concerns, established Canadian dispensary operators must navigate specific issues related to HR and payroll, which are crucial for sustaining a successful business. This article delves into the key legal issues facing these operators, offering insights and solutions tailored to the cannabis industry.

Legal and Regulatory Compliance

Staying compliant is a never-ending process. To maintain a valid license, dispensary operators have to renew them regularly and potentially have them audited by provincial governing bodies. Operators also have to stay alert for changing rules and regulations that could impact their business — both positively and negatively. For instance, amendments to cannabis laws or shifts in provincial policies can introduce new compliance requirements or offer new opportunities. Furthermore, compliance extends beyond licensing; it encompasses product testing, labeling, advertising restrictions, and security protocols.

Ensuring that all aspects of the operation meet the stringent standards set by regulators is critical to avoiding fines, suspensions, or the loss of your license. Continuous education and legal support are essential for navigating these complexities and adapting to the dynamic regulatory landscape.

Managing Inventory and Record-Keeping

Compliance crucially depends on accuracy in inventory management. Cannabis goods must be tracked scrupulously through each stage, from their procurement until the point of sale. Inventory levels, purchase orders, and sales transactions require meticulous record-keeping. Provincial entities and Health Canada demand regular reporting; inconsistencies can mean visits by inspectors, audits, and potential fines — both federally and provincial. Use a dependable inventory management system to streamline this process and remain compliant. Typically, your POS system is also a robust inventory management system.

A budtender is standing in a front of a shelf with many jars of cannabis.

Training and Certification for Employees

It is imperative for all personnel in the dispensary to be extensively informed and well-exposed to the regulations surrounding the sale of cannabis. This could be done by imparting regular training programs to keep their staff up-to-date with any change in regulations. Each province generally requires cannabis store workers to pass a training program, however, this is a bare minimum: your staff should be trained on standard operating procedures, specifically when it comes to requesting and verifying identification. 

Management of Payroll

To avoid legal issues, it is crucial to have a robust payroll system. This includes the assurance of accurate wage payments, compliance with minimum wage laws, and adherence to regulations about payroll taxes. To streamline and automate everything payroll-related, consider implementing payroll software specifically designed for the cannabis industry, like KayaPush.

Benefits of an automated payroll software include: 

  • Automated pay and tax calculations
  • Automated tax remittances
  • Real-time reporting for accounting purposes
  • Facial recognition tools for fast and easy time tracking
  • Overtime alerts
  • Up-to-date labor laws and compliance, including tax forms

Having an HR partner to help you keep up with payroll and taxes will ensure you stay compliant with minimal effort. 

A screenshot from KayaPush's payroll software indicating employee pay and deductions.

Adherence to Labour Laws and Regulations

You must comply with all labor laws within your province and Canada-wide. This means following rules about scheduling work hours, overtime pay, rest periods, employee terminations, and health and safety. You are also responsible for knowing and following rules about workplace safety and anti-discrimination equality to protect your team. A good source for health and safety requirements and resources for retailers across the country is the Canadian Centre for Occupational Health and Safety.

Security and Safety

Security and surveillance are essential elements that protect communities and individuals by detecting and preventing crime.

Cannabis dispensaries must prioritize security. Regulations vary province by province but generally demand robust security features like video surveillance cameras, secured storage rooms, and restricted entry controls. Regular reviews of security procedures and equipment are necessary to comply with regulations and prevent theft and security breaches.

Marketing and Advertising Limitations

When advertising cannabis products, you are in a highly regulated environment. Health Canada imposes many rigid rules to ensure that you cannot market your product to minors and to prevent marketing that may encourage over-consumption. Promotions must be fact-based and not make any health claims. You must also follow the Cannabis Act’s promotional restrictions, which dictates that promotions do not appeal to youth, and that cannabis, accessories, and their packaging are not able to be viewed by youth. If you do not comply, you can face large fines and damage your dispensary’s reputation.

A dispensary owner is reviewing her marketing plan on her laptop.

Ensure Your Finances Are in Order

Financial compliance refers to maintaining transparent and accurate financial records. These records include detailed records of all financial transactions, financial statements (income statement, balance sheet), and tax filings. Dispensary operators should seek to work with financial professionals experienced in the cannabis industry to guarantee that all financial practices meet regulatory standards.

Final Thoughts

Running a Canadian cannabis dispensary is a complex and ever-evolving endeavor. The regulatory obligations to abide by all laws and regulations, manage inventory, oversee HR and payroll, and ensure security is complex and involves many intricate parts. To survive and thrive in this highly regulated industry, compliance and best practices must be core elements of your business plan. Comprehensive cannabis legal support is essential for navigating these challenges. Success in Canada’s competitive dispensary market hinges on maintaining compliance and strategically moving forward.

Harrison Jordan is the founder and managing lawyer of Substance Law, a Canadian law firm for regulated substances and industries, including cannabis.

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June 2024


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