The Carrot and the Stick

The last two articles in our series discussed some of the benefits of designing a progressive, comprehensive environment, health and safety (EHS) program in the cannabis industry.

We described the “carrot” of increased business growth due to being an industry leader and implementing a top shelf EHS program. In turn, compliance costs are reduced allowing for reinvestment in the business.  However, the “stick” may be waiting for those who choose to ignore EHS regulations and safety practices.  Consider these excerpts from recently published articles:

• Josephine County, Oregon – Local employers have been fined over $800,000 for safety violations at a hemp processing facility.[1]
• In New Mexico, the federal Occupational Safety and Health Administration (OSHA) fined a medical marijuana dispensary $13,500 after a hash-oil explosion so powerful that it separated the roof from the wall and sent two employees to the hospital.[2]
• California’s occupational safety and health agency (Cal/OSHA) fined a cannabis manufacturer $50,470 after an explosion badly burned a worker who was using propane to extract oil.
  • Serious violations cited in the incident include failures to:
  • Protect employees working near flammable vapors
  • Identify hazards,
  • Supply personal protective equipment, and
  • Maintain equipment in a safe operating condition[3]

These few examples show a wide range of enforcement, from marijuana to hemp, and from processing to dispensary. For those who plan to lay low, ride the storm out, or beg forgiveness rather than ask permission, be aware that costs for violations only get higher with each passing day out of compliance.  With the passage of the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015[4], government agencies are required to raise civil penalties annually to match the rate of inflation.[5]For a willful violation, in which an employer knowingly failed to comply with an OSHA standard or demonstrated a plain indifference for employee safety, the minimum penalty increased in 2020 to $9,639.[6]  Clean Air Act administrative penalties can be assessed up to $37,000 per day, per violation for non-compliance.[7]Willful non-compliance is also subject to criminal enforcement.

While these penalty numbers may be considered extreme, the examples above indicate the cannabis industry is not immune to significant financial penalties and that agencies are enforcing the regulations the industry is required to meet.

Note that the examples above cover a broad range of states and operations. Most states where marijuana is legal offer no safety and health guidance for the industry,[8]which may be a contributing factor to the number of enforcement actions being taken. States such as Colorado, California, Michigan, Oregon, and Washington  offer safety and health guidance. Nonetheless, health and safety protections are often found to be inadequate.

Further, as Politico notes, “labor unions complain that state governments are moving too swiftly to license producers, outpacing the states’ ability to inspect production facilities for potential safety violations.”[9]The limited ability of the states to respond, however, does not result in leniency being provided when non-compliance is discovered.  At the Oregon hemp processing location, for example, owners of the facility were personally fined up to $165,000 each for violations identified in the operation.

Whether the owners are aware or not, these regulations have long been in place to guide other industries, and they do apply to the cannabis industry.  Lack of knowledge, or misinterpretation, does not protect an operator from fines, or in some cases, prosecution.  In a recent statement, Cal/OSHA Chief Juliann Sum encouraged the industry to take steps to protect workers.

“To prevent injuries and mitigate risk, employers in the cannabis industry must establish and implement an effective Injury and Illness Prevention Program, provide effective training to their employees and comply with safety and health standards,” Sum said.[10]

Avoid the “stick” of fines and penalties.  Follow the “carrot” to a program which protects your most valuable resources, establishes safe operating procedures, complies with EHS regulations, and improves the sustainability of your business.

Gerald Hincka is a Senior Consultant with EHS Support, LLC. He has more than 30 years of experience, specializing in the diagnosis, strategic evaluation and complete solution of environment-related business problems for clients around the world.

 Maureen B. Hodson is a Portland, Oregon-based compliance specialist with over 15 years of experience advising clients on a wide range of environmental matters, including regulatory compliance in the areas of waste, air, and water and assessment of environmental risks in connection with complex business transactions in a wide variety of industries. Maureen holds a JD and Masters in Environmental Law from Vermont Law School.

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[1]KOBI 5 News, Murphy Oregon, “Local Hemp Processors Fined over $800K for Willful Safety Violations,” by Newsroom staff. November 5, 2019 https://kobi5.com/news/local-hemp-processors-fined-over-800k-for-willful-safety-violations-114523/

[2]Politico, “New Problem for Legal Weed: Exploding Pot Factories,” by Rebecca Rainey, February 18, 2019 https://www.politico.com/story/2019/02/18/marijuana-factories-explosions-safety-issues-1155850

[3]EHS Daily Advisor, “Explosion and Injury at Marijuana Processor leads to Citation,” by Guy Burdick, January 7, 2019  https://ehsdailyadvisor.blr.com/2019/01/explosion-and-injury-at-marijuana-processor-leads-to-citation/

[4]https://www.federalregister.gov/documents/2016/06/27/2016-14973/federal-civil-penalties-inflation-adjustment-of-2015

[5]Lion Technology News “EPA Raises Civil Penalties for 2020”, January 18, 2020  https://www.lion.com/lion-news/january-2020-(1)/epa-increases-civil-penalties-for-2020

[6]https://www.govinfo.gov/content/pkg/FR-2020-01-15/html/2020-00486.htm

[7]https://www.epa.gov/enforcement/clean-air-act-caa-and-federal-facilities

[8]Politico, ‘New Problem for Legal Weed: Exploding Pot Factories’, by Rebecca Rainey, February 18, 2019 https://www.politico.com/story/2019/02/18/marijuana-factories-explosions-safety-issues-1155850

[9]Id.