DEI and the Cannabis Industry: A Comprehensive Guide

By Katie Coleman

As marijuana has been legalized state-by-state in the U.S., the cannabis industry has exploded. Regulations vary by state and cannabis companies are addressing diversity, equity, and inclusion (DEI) in different ways. To illustrate this point, I’ve broken down some state-by-state equity and inclusion cannabis industry regulations and how they help newly regulated states develop their DEI initiatives.

California

• In 2018, the California Cannabis Equity Act was signed into law to provide those most harmed by cannabis prohibition “assistance to enter the multibillion-dollar cannabis industry as entrepreneurs or employees with high-quality, well-paying jobs.”
• California’s Department of Cannabis Regulations has increased technical and financial assistance for equity applicants and has sought amendments to refine the process.

Illinois

• The Cannabis Regulation and Tax Act in Illinois established a “social equity applicant” status. The applicant must be someone with at least 51% business ownership, who has resided in a disproportionately impacted area for at least five years. An applicant could also be someone who has been arrested for or convicted of any offense eligible for expungement under this Act.
• For applicants with a minimum of 10 full-time employees, an applicant with at least 51% of current employees who:
  • Currently reside in a disproportionately impacted area; or
  • Have been arrested for, convicted of, or adjudged to be a ward of the juvenile court for any offense that is eligible for expungement under this Act or member of an impacted family.

Maine

• Bill LD 1957 aims to promote greater diversity in the cannabis industry by repealing prohibitions on the hiring of applicants with past criminal convictions for certain marijuana offenses.

Massachusetts

• The Cannabis Control Commission is required by law to establish procedures that encourage full participation in the industry by people who have been disproportionately harmed by marijuana prohibition and enforcement. They are required to study the participation and adopt diversity licensing goals to provide meaningful participation.
• The Commission’s regulations require license applicants to submit a Diversity Plan outlining the diversity and inclusivity goals, strategies, and measurements the entity plans to follow. The applicant should detail the strategies and programs it will use to effectuate each listed goal, which should include the realistic timeline, metrics they intend to use to assess the progress, and the targeted audience of each program. Applicants will be required to demonstrate progress or success annually starting one year after they are approved for provisional licensure. This information is required to be disclosed on the first and supplemental license renewal applications.

Michigan

• Michigan’s Social Equity Program provides resources and fee reductions to eligible communities (based on marijuana convictions and poverty). Communities with 20% or more living below the federal poverty level qualify and a 40% fee reduction have been added for applicants who have been convicted of a marijuana-related felony.
• Section 8 of the Michigan Regulation & Taxation of Marijuana Act requires the Marijuana Regulatory Agency to develop a plan to promote and encourage participation in the marijuana industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement.

Nevada

• AB341 from the 2021 legislative session requires at least 10 of the first 20 independent consumption lounge licenses to be issued to social equity applicants disproportionately affected by previous criminalization policies.

New Jersey

• The seven medical cannabis operators in New Jersey who have been approved to serve the recreational market will be assessed on diversity in hiring and management, support for community programs, and the percentage of minority-owned vendors or suppliers they contract.
• These operators are required to submit social equity plans, including hiring individuals who were previously convicted of cannabis-related offenses or live in economically disadvantaged areas. This is intended to hold adult-use cannabis businesses to the same hiring and employment standards as any other employer.

New Mexico

• Under The Cannabis Regulation Act in New Mexico, legalization law included language that required “procedures that promote and encourage full participation in the cannabis industry … by representatives of communities that have been disproportionately harmed by rates of arrest through enforcement of cannabis prohibitions.” This includes procedures to encourage diversity among applicants, licensees, and staff.

New York

• Approximately 50% of cannabis business licenses in New York will be issued to social and economic equity applicants, and priority will be given to minority-owned, women-owned, and veteran-owned businesses.
• In January, Governor Hochul announced the plan for a $200 million public-private fund to support social equity applicants with direct capital and startup financing. It noted that the licensing application needed to ensure a plan to hire diversity.

Virginia

• The Cannabis Equity Reinvestment Board is a policy board in the executive branch of Virginia’s state government. Their purpose is to directly address the impact of economic disinvestment, violence, and historical overuse of criminal justice responses.
• They have created a Cannabis Business Equity and Diversity Support Team to identify barriers to inclusion, offer technical assistance, and develop requirements for DEI plans.

Washington

• In 2020, House Bill 2870 created the Marijuana Social Equity program with the goal of helping people of color who have been harmed by the war on drugs, providing the opportunity to be part of the growing marijuana industry.
• This bill also created the Social Equity in Cannabis Task Force consisting of lawmakers, government representatives, and industry experts to help promote diversity in business ownership and retail licenses. In order, to be considered for a retail license an applicant must submit a social equity plan along with other retailer license application requirements.

The future of DEI in the cannabis industry

It’s clear a lot of states have put diversity laws and regulations in place requiring and encouraging cannabis businesses to be inclusive. Yet, despite legalizing recreational marijuana, states like Nevada and New Mexico – mature markets in the timeline of legalization – have yet to put in place social equity provisions.

It’s also obvious that there are still huge challenges in the cannabis industry regarding diverse hiring practices, even in states that promise social equity. Marijuana will be legalized in more and more states, and there will be more regulatory programs that promote diversity.

Below are some of the questions cannabis companies should consider when hiring and managing a diverse workforce:

• Do underrepresented groups fall off the radar at certain hiring stages?
• Are some potential employee groups underrepresented because of job description language or criteria? (This can include job description language that focuses on gender-specific language or focuses on requirements that may not be necessary like weight requirements or physical activity that can deter women or individuals with disabilities from applying.)
• Has the importance of DEI been consistently taught to both management and employees?
• Are you eliminating bias during the interviews and hiring process?
• Do you have a standardized onboarding process to ensure new employees are fully engaged from the moment they accept the job?
• Do you have transparent policies that include equality documentation for hiring, payscale and promotions for all staff?
• Are appropriate accommodations available for all candidates during your hiring and onboarding processes?

All of the above considerations (and others) are important to creating and maintaining an authentically inclusive work environment.