Why Your High-Growth Cannabis Company Needs EPL Insurance

Jul 28, 2023


The past several years have been defining ones for the cannabis industry. Aside from new states legalizing, other markets — financial services, technology, etc. — have risen to support cannabis companies. These dynamics, combined with the societal shift toward acceptance, have created an influx of new entrants into the cannabis industry.


However, high-growth cannabis companies face unique challenges, including how to manage employment-related issues. With an uptick in litigation surrounding these problems, let’s talk about how employment practices liability (EPL) insurance serves as a must-have solution for rapidly-growing cannabis companies. 

Risks Rapidly Growing Cannabis Companies Face 

Many people think businesses snowballing toward profitability have it all. But the truth is that expanding has pros and cons. Here are some of the most common risks cannabis companies must navigate when growing fast.   

Employment-Related Issues 

Many small businesses and startups don’t have an employee handbook, leaving them with employment-related issues to work out. While no federal or state laws require an employer to have an employee handbook, there are regulations about notifying employees of specific workplace rights. Unfortunately, lawsuits tend to surface when a company’s written by-laws or foundational standards are nonexistent. 

Uncertain Company Culture 

Growing typically means changing; however, every growing entity needs guidance to maintain those strong core values. Some startups and small businesses overlook this, expecting new hires to fall into the groove with the long-timers. While this pitfall isn’t reserved for the cannabis industry, the implications of uncertain company culture can devastate businesses in the space.   

Employee Burnout 

Managers and key employees carry a massive load, often leading to burnout and frustration. Unfortunately, workplace stress is a valid reason for employees to file lawsuits. Despite how much new cannabis businesses thrive on ambitions, a healthy balance must be struck. After all, there’s a limit to how much employees can hustle.



Leading a cannabis company is a tough gig, especially with the challenges of complying with local, state, and federal regulations — few of which align. It’s no surprise that employees sometimes feel insecure about the financial stability of cannabis businesses. The cash-only industry must work harder than others to raise capital and navigate financial solutions. Unfortunately, when sales rise but profits fall, employees wonder why. Mismanagement is a frequent claim against employers in any industry, let alone one with multiple financial challenges.

Understanding Employment Practices Liability Insurance 

Employment-related issues or even lawsuits don’t have to stop cannabis companies in their tracks. Instead, employment practices liability (EPL) insurance can respond to many of these problems. EPL insurance provides the following:


  • Protection for cannabis companies against costly defense fees
  • Support in the management of unavoidable risks of having employees
  • Protection against increasing legal settlements


For example, EPL insurance defends and pays a judgment or settlement against company management if they’re named in an employment-related claim. Defense fees add up quickly until the suit is dismissed, even if the allegation is baseless. 


Situations surrounding the hiring and firing process, code of conduct, workplace standard, etc., all fall under the blanket of EPL insurance. Plus, insurers can typically provide varying levels of coverage to tailor an insurance plan for the most effective strategy. 

What EPL Insurance Covers 

  • Wrongful Termination occurs when an employee’s termination breaches one or more terms of a contract or breaks a rule of employment law.
  • Discrimination is the unfavorable treatment of an employee, such as failure to promote, based upon sex, race, age, or disability.
  • Sexual Misconduct or Harassment involves unwanted sexual advances or obscene remarks to an employee.
  • Defamation of Character happens when a false statement is written or spoken about an employee with the intention of harming their reputation.
  • Invasion of Privacy is when an employee alleges that an employer unreasonably searches their private space or conducts surveillance in areas where employees expect privacy, such as a dressing room or bathroom.

What EPL Insurance Does Not Cover

  • Bodily injury
  • Contractual liability and breach of employment contract claims
  • Criminal and fraudulent acts
  • Violation of employment laws and other regulations

How EPL Insurance Supports Business Growth

It’s no surprise that employment-related claims have been on the rise for several years, especially with a global pandemic fresh in our minds. According to Fisher Phillips, more than 5,400 pandemic-related lawsuits have been filed against employers. Moreover, US government regulations funnel employees to respond with legal cases. It doesn’t take a massive workforce to face a genuine risk of an employee filing a lawsuit.  

Rapid Expansion

It’s not uncommon for high-growth cannabis companies to hire ten or more employees in one month. However, private companies are subject to regulatory statutes once they employ 10-15 workers. So, in reality, a two-person duo could be susceptible to an employment-related lawsuit in a matter of days after a hiring decision. It happens that fast — especially with more powerful ways for employers and candidates to connect, like via the EZHire Cannabis platform.

Valuable Resources

Fortunately, many carriers we partner with provide valuable add-ons, such as resourceful handbook development links or employment-related complaint hotlines. These add-ons complement an HR department and often save employers thousands of dollars on up-front HR costs. Plus, avoiding high-dollars claims is another significant savings to enjoy.  

Industry Empowerment

Growing a cannabis company from a mere dream to a 50-person-strong team (or more!) is exciting. Those of us in the industry understand fully well what it means to power the growth of the cannabis industry. Still, high-growth cannabis companies must understand the “growing pains” they might face and navigate them savvily.  


AlphaRoot is a tech-enabled commercial insurance broker calibrated to the cannabis industry. However, we don’t merely broker insurance; we curate powerful cannabis risk management solutions. Licensed in all 50 states, our team has partnered with many high-growth cannabis companies. And we’re always happy to talk with you about your risk management needs. Feel free to reach out to us by emailing info@alpharoot.com or calling 646-854-1093.


About the Author:

Brendan O'Connor has 5+ years of risk management experience with AlphaRoot's parent company, Founder Shield, before taking on the role of Managing Director, Customer Success with AlphaRoot. He is dedicated to educating both clients and insurance providers on the risks that operators face in the Cannabis space and assisting both parties in finding common ground on a solution. In his free time, catch Brendan at a live music venue or exploring NYC's diverse culinary scene.




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