4 Reasons Why Non-Competes in Cannabis Are a Really Bad Idea
Talent poaching has led cannabis companies to resort to non-competes. But there's a better way.
A non-compete agreement is a contract that prohibits an employee from working for or becoming a competitor for a specific period of time. In a highly competitive market with highly sought-after talent, cannabis companies have been using non-competes to prevent other companies from poaching their talent.
While these companies are just trying to protect themselves, I believe their use of non-competes is unethical, non-enforceable, and damaging to company culture.
Here's why cannabis companies should avoid non-competes:
1. People who love where they work aren't actively looking for employment elsewhere
Cannabis companies fear the repercussions of employees leaving the company—and with good reason. It's possible that the ex-employee may divulge sensitive information or that the company won't find a suitable replacement, which could slow their growth momentum and possibly lose revenue. But there's a better to avoid these scenarios without forcing employees to stay.
Cannabis companies need to create an engaged workforce where employees actually want to work. People who love where they work aren't actively looking for work elsewhere. There's an incredible opportunity to build an engaged cannabis workforce – to pay them fairly, have employee ownership, and create a world-class culture. Instead of scaring employees into staying, create an environment where employees love to work, want to stay, and can thrive.
2. Non-competes have the opposite effect
Presenting a non-compete to a new employee creates a fearful work environment. It has the potential to develop a nasty work culture 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.
3. 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 in an industry that is not federally 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.
4. 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 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. If a company decides to move forward with litigation in the current legal environment, where does that go to be enforced? What's the jurisdiction if the employee moves 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. While I've seen companies send nasty, threatening legal letters, I've never seen a plant-touching cannabis company move to litigation.
Alternatives to non-competes
While the intention behind a non-compete is valid, there are other ways to ethically protect cannabis businesses and increase employee retention while 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 (how to compensate cultivation teams.
We're all building this industry and have a chance to create the best entry-to-work for the planet. Plus, the industry grows a plant that can help people. We're in this together, and there are better ways to protect your company than a non-compete. Let's help people find work that fulfills them, support their families, move their careers forward, and work in this exciting, hyper-growth industry.