Workers’ Compensation for the Cannabis Industry: Cultivation, Manufacturing, Retail, and More
Workers' compensation for the cannabis industry provides medical and wage benefits to employees who get injured or ill due to job-related activities. This coverage is required by law and helps you follow state rules, avoid fines, and prevent lawsuits. Common injuries in this industry include slips, falls, exposure to pesticides, and accidents with equipment.
The cannabis industry is broad, with many different jobs and rules. To get the right workers' comp coverage, you need to know your main job code and how it affects your coverage.
Why do Cannabis Businesses need Workers’ Comp?
Cannabis workers’ comp is required for your business to:
Protect your employees
Protect your business
Comply with state laws
Avoid fines and lawsuits
The good news is that as more states legalize recreational cannabis use, the available insurance solutions and financial services are starting to expand and offer something for just about everyone.
What does Cannabis Workers’ Comp cover?
Workers’ compensation for cannabis employees is the same as it is for other industries. This coverage provides medical and wage benefits to people who become ill or get injured on the job.
Workers’ compensation insurance is mandated at the state level, so cannabis companies will want to make sure they follow the laws outlined in their state regarding coverage.
Cannabis workers’ compensation provides nearly endless coverage for medical expenses. It also provides compensation for lost wages if someone cannot work due to an injury or illness that’s part of a workers’ comp claim.
One of the best things that you can do is to work with a dedicated cannabis insurance company that understands the unique demands of this industry.
Types of Businesses in the Cannabis Industry
There are several businesses involved in the cannabis production and sale journey. These include farms and cultivation facilities, processing plants, retail and wholesale dispensaries, and so much more.
Every business has a role and needs to play its part accordingly. That starts with making sure that you have the right cannabis insurance.
The coverage needed will vary from one business to the next. For example, what’s included in CBD business insurance will be a bit different than those who seek out recreational cannabis dispensary insurance.
The most common business types listed in this industry include:
- Cultivation
- Laboratory testing
- Manufacturing and processing
- Distribution
- Dispensaries
- Packaging
- Accessories
- Construction (to build new cannabis operations)
- Technology (for POS, processing, etc.)
The last four on the list are more ancillary than directly related to cannabis processing, but they are relevant because they involve working in the industry. Those who are looking to specialize in a field with a lot of potential can come to the cannabis space and find seemingly limitless room for growth.
Common injuries among cannabis workers
In the cannabis industry, there are many potential workers' comp claims you could face. Injuries are most common in cultivation, manufacturing, and lab testing, with fewer injuries in retail dispensaries.
Here are some examples:
Slips and falls: These can happen anywhere, especially where floors get wet
Equipment or machine injuries: Common in places using heavy machinery like greenhouses and labs
Burns and cooking injuries: Can happen during the extraction process
Repetitive motion injuries: From tasks like trimming plants or rolling products
Exposure to Mold, pesticide, and other exposures: Particularly in cultivation and greenhouses
Cuts and Lacerations: From handling plants and equipment
Heat Stress: Especially when working in greenhouses
Driving Injuries: From transporting products
Understanding and assessing your risks is the first step to making sure that you get the right insurance for your business. With an increasing number of cannabis insurance companies to choose from, that shouldn’t be too difficult.
Class Codes: Assignments and Exceptions
Workers’ compensation uses class codes to help categorize businesses for easy reference. These are usually four-digit codes that are issued by the National Council on Compensation Insurance (NCCI).
Each code has a description of exactly what type of work the employee does and a corresponding risk rate. In order to ensure that your cannabis business gets the right rates and is properly protected, you’ll need to have the right code(s).
The class codes pertaining to the cannabis industry are listed below:
- 0035 – Farming, including drivers
- 4825 – Processing of cannabis into CBD or other products
- 8832 – Doctor’s offices that dispense marijuana
- 8045 – Retail dispensaries
- 8047 – Wholesale dispensaries
- 0037 – Field hemp farming
What’s more important than the classifications, of course, are the exceptions and clarifications. Often, people misclassify their business because they don’t realize that the details of the codes have so many particulars.
Retail vs. Pharmacy
In most cases, a standard marijuana retail store will be classified under the retail code listed above. In some states, however, where it’s listed as a “dispensing pharmacy,” it may be classified as code 8017 instead. This is an important distinction in the cannabis industry.
On that same note, some cannabis processors often choose code 4611, which is the code for mixing compounds to make medicine. However, when CBD and THC are involved, they’re always classified under the 4825 code.
Gummies, oils, concentrates, and all other edibles fall under this classification.
Doctor’s Offices
The classification for doctor’s offices that dispense is listed above. However, it’s important to note that in states where medical marijuana is legal, a “prescribing provider” is considered a regular doctor’s office and will need to be classified accordingly.
It’s the difference between whether the doctor dispenses or merely writes recommendations for cannabis patients.
Delivery
For operations that need to deliver (outside of farms coded 0035), there needs to be a classification for drivers. This is code 7380, which can be used for drivers that are delivering between dispensaries and other facilities, or doing any delivery work related to the cannabis business.
Code 0927 also includes drivers, but delivery to patient homes is not a desired choice in the eyes of insurance.
Armed Security
This one is less about classification codes and more about how you set up your business. If you are going to have armed security in your cannabis facility, whether it’s a dispensary, a cultivation facility, or even a grow operation, they will need to be subcontracted.
Marijuana businesses that employ armed staff directly may struggle to find insurance coverage.
These are just a few of the exceptions and classification issues that usually arise. It’s best to familiarize yourself with all aspects of the insurance laws in your state so that you don’t leave your business vulnerable.
Another option is to work with a dedicated cannabis insurance agent that can help you get the coverage that you need.
Save Money with Smart Tips
The biggest hurdle for any business that is buying insurance comes in doing so without breaking the budget. Fortunately, there are some tips to ensure that your cannabis business is properly insured and that you get the best rates on coverage.
- Make sure employees are properly classified in your cannabis business.
- Make sure that you don’t underestimate payroll, or you’ll have to pay the difference.
- Report every incident to the insurance company right away. That way, if it becomes a bigger issue later, it’s on record.
- Make sure that there’s a clear claims process for workers’ comp claims and make sure employees are familiar with it.
- Work with a dedicated cannabis insurance company that can deliver the solutions you need for this unique industry.
Insuring your cannabis business is essential to safe, legal operation within your state. You can usually get certificates of insurance a lot quicker than you think, so even if you waited until the last minute, it’s not too late.
How to choose between Cannabis Insurance Companies
With your new understanding of cannabis insurance, and especially workers’ compensation for the cannabis industry, it’s time for you to find your new insurance provider. The market is still rather limited, but there are companies that have the experience and knowledge that you need.
Look for a team of people who will review your application and take it through the underwriting process. Online tools and AI quote generators don’t deliver the level of personalized service you need with this insurance. Choose a provider that understands the intricate and unique nature of the cannabis industry and that knows how to provide the ideal insurance solutions.
Skip the fly-by-night companies and find insurers who understand cannabis and its unique insurance needs.
The Bottom Line
Protecting your workers is essential to the successful and safe operation of your business. Although the cannabis industry is newer, it isn’t exempt from insurance requirements, including workers’ compensation for cannabis. Make sure that you understand this coverage, including what kind and how much you need to have, and that you have a trusted insurance partner on your side to help you along the way.
When you work with Kickstand Insurance, you’ll get access to a team of experts who can review your insurance quote, help you determine what type of coverage you need, and make sure that you’re protected from lawsuits and other potential risks that come from being uninsured or underinsured. We’ll even help you find discounts and savings so that you can cover all your employees without breaking the bank. Contact us now to learn more.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
Having employees in more than one state is becoming more common, especially with the rise in remote work. If you have employees in multiple states, your workers’ comp may not cover them. To ensure proper protection, you need to purchase workers’ comp for out-of-state employees.
