Oregon Cannabis: Employees and Changes in Ownership
Medical MarijuanaOregonRecreational MarijuanaUncategorized September 28, 2018 MJ Shareholders
You’re new to the Oregon cannabis scene and quickly realize you won’t be able to open a newly licensed cannabis retail store due to the Oregon Liquor Control Commissions (OLCC) pause on issuing new licenses that went into effect on June 15. But what about purchasing an existing retail store from a licensee?
It is possible to purchase a retail marijuana business and receive a license from OLCC. However, no money or control of the store can take place until the OLCC vets the new ownership to ensure compliance with the marijuana rules and statute. Typically, the seller and buyer enter into binding agreements to sell the store (technically, an asset or stock purchase) pending approval from the OLCC of the change in ownership. As we recently wrote, the OLCC recently has increased scrutiny on these applications and can take up to 3-6 months to approve. During that time, your dreams of owning a retail cannabis store are paused. However, based on our recent discussions with the OLCC, there is a legal way to start the transition to the new owner without violating the rules: through employees.
Employees are a key part of any business. Employees keep the day to day operations of business running smoothly. In a retail store, they are the face of the company. It’s important to select people you trust and will work hard for your company. One way to begin control of the new company is to enter into an agreement with the seller to hire certain employees. There are a lot of things to consider when doing this—so it’s important to do it right.
First, it’s probably best to mention this when you first begin sale negotiations. Let the seller know you’d like to immediately “place” employees of your choice, who will be hired by the seller, prior to OLCC approval of the change in ownership. It’s best to be up front with these things rather than watch your deal fall apart later because you failed to mention your intentions.
If the seller agrees, the seller will need to hire the employees. Remember: You the purchaser cannot have a financial interest or control in the company until the OLCC approves. The employees will either need to be hired on a short term employment agreement to terminate when the sale is finalized, or enter into an employment agreement that will be assignable to the new entity once the sale is finalized. This would be a great time to talk with an Oregon cannabis employment attorney to ensure everything is done correctly.
You’ll also want to be super clear with the employees about the arrangement. Again, you don’t want your employment relationship with the individuals to fall apart because you weren’t clear that the employee’s boss or employment status will change once the OLCC application is approved.
Assuming all of that goes smoothly, what kind of employees should you hire? For the transition period, its best to hire those that will exhibit decision making powers such as managers and supervisors. Qualified people in higher up positions tend to be more difficult to find. Get them in early and the transition will be even easier.
You might not be able to run the business the way you want during the period the OLCC is reviewing the change in ownership application, but you may be able to instill employees that can start the transition for you.
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