Are Cannabis Companies Paying Their Contractors?

Are Cannabis Companies Paying Their Contractors?

Fully 36% of the American workforce freelanced in 2021, according to Upwork's 2021 Freelance Forward report, and they generated $1.3 trillion for the economy, a $100 million increase from 2020.

The report noted a shift in hiring with non-temporary roles making up 38% of the positions filled, up from 33.8% the previous year. Educated workers are also in demand with 51% of the workforce staffed by post-grads.

The changing workforce doesn't seem to alter one familiar anecdote in the freelance space: clients are often late or don't pay their contractors.

Payment Concerns

Facing limited options at their disposal, cannabis industry freelancers told Benzinga that they often fear speaking up, risking consequences beyond missed pay.

Approximately 20 freelancers told Benzinga about their experiences with delayed or missing payments. Several offered evidence to support their claims. Most chose not to name the clients and some requested anonymity for themselves as well. Their reasons for requesting anonymity included fearing a negative industry image to sympathy for the company.

Melissa Vitale, founder of cannabis and sexual wellness public relations firm MAVPR, said clients typically begin paying invoices on time.

"Over time, especially around holidays or summer, the timeliness of payment can lapse," Vitale said, also preferring not to name clients though she provided documentation to confirm debts with at least two companies.

Vitale gives clients 14 days to pay invoices, applying a 10% late fee afterward.

"My CPA and lawyer both have invoices with two to three days from the invoice date until the due date," she said.

Jessica Moran, the founder of cannabis PR firm Known Group, has had several companies miss invoice deadlines. She chose not to name any alleged late-paying clients but said the frequency is much higher in cannabis than in other markets.

"There are companies that ghosted us that I am confident just straight up won't ever pay," Moran said.

Some didn't speak publicly, fearing they may upset the late-paying client.

"I don't want to lose out on the possibility of getting the $1500ish I'm owed as of now," said a freelance cannabis content creator.

A freelance writer said they didn't want to reveal personal or client details because they may continue working together. The source was behind on two invoices in mid-September. But within a few days, circumstances changed.

"They paid me over the weekend, then signed me on for a larger contract today," reported the contractor.

One person was willing to name names. Brett Fink, a partner at cannabis branding firm GRTR said he is currently seeking $30,000 in payments from client THC Design. He said the client didn't pay the last two months of a 10-month deal in 2021.

"They decided they didn't want to work with us anymore, cut the contract," said Fink. "Then they stiffed us on payments and reimbursements for stuff we shot."

Fink provided emails between himself and THC Design, including an April email from an accounting manager stating that the company had been dealing with cash flow issues.

A THC Design representative confirmed the working arrangement occurring in 2021. Among its points for not paying included displeasure with the content created.

THC Design said GRTR was tasked with content development, including a short video series to promote a company cultivation book. The company claims to have been unsatisfied, alleging, "We paid them tens of thousands of dollars for services that were wholly unsatisfactory and borderline amateur in quality."

Fink pushed back on the company's stance, alleging the working relationship changed when the original point of contact for the company left. The matter is ongoing as of this article's publication.

What Can A Contractor Do?

Freelancers and contractors have little recourse in most U.S. jurisdictions.

In New York City, the Freelance Isn't Free Act is one of the few measures that ensures contractors receive:

  • Timely payment
  • A contract for any job totaling $800
  • Protection from employer retribution

The bill passed in NYC in 2017 followed by a state bill approved in the Senate and Assembly in June 2022. Both bills aim to provide coverage to New York-based freelancers and out-of-state contractors working with in-state clients.

Minneapolis, Minnesota, provides similar protections to its freelancers. Under the 2021 freelance worker protections ordinance, contractors are entitled to timely pay and a contract.

In Minneapolis, an offending client can be fined up to $3000. In New York City, a freelancer can receive up to double the damages.

In 2022, Los Angeles City Council member Bob Blumenfield announced efforts to bring the Freelance Isn't Free Act to LA. Blumenfield proposed freelancer protection legislation in 2021 as well.

Contractors not covered by such laws are largely on their own. In most cases, the contractors can only continue contacting the client or filing a court action, likely over a breach of contract.

While waiting on possible payment, the contractor is often left on the hook, possibly for additional staff payments. Often, the contractor is left to write off the lost payments as bad debt and perhaps a tax deduction at the end of the year.

In some cases, contractors with employees may find themselves out of payment and paying with their funds to stay up to date. MAVPR's Vitale said she'd never want to see her employees paid late as she has.

"It's business owners like myself who are eating most of the costs of late payments," she said.

Photo by Andrea Piacquadio

 

Posted In: Freelance Isn't Free ActGRTRKnown GroupMAVPRTHC DesignUpworkCannabisNewsLegalExclusivesMarketsInterview

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