This is part of a regular series of MJBizDaily interviews with major THC industry players. To be considered for an interview, contact editorial@mjbizdaily.com.
Hemp companies are facing an existential crisis ahead of December, when the Farm Bill loophole closes and most of the $38.7 billion market becomes illegal under federal law.
But hemp operators of a certain size risk also severe penalties and fines if they miss an additional Oct. 12 deadline, warns Marc Rodriguez, co-founder and CEO of national cannabis payroll and human resources firm Green Leaf Business Solutions.
Unless Congress and President Donald Trump act, Dec. 11 is when a federal redefinition of hemp takes effect. Finished products with more than 0.4 milligrams of THC per container become Schedule 1 controlled substances. And as many as 225,000 people could be out of work.
Operators are busy selling through existing inventory and creating compliant, non-hemp product lines. But if they have more than 100 employees and plan to downsize or go out of business, they must also comply with the federal Worker Adjustment and Retraining Notification Act, Rodriguez told MJBizDaily during a recent interview.
The WARN Act requires large employers to provide workers 60 calendar days of advance written notice before a “plant closing” or “mass layoff.”
That means big hemp companies planning layoffs or who know they’ll be out of business because of the federal hemp ban must notify workers by Oct. 12 to stay compliant with federal labor law.
“From an employment standpoint, they need to put all this in place and notify their employees by Oct. 12,” said Rodriguez, who will speak at MJBizCon 2026 at the Las Vegas Convention Center in December.
What do hemp businesses need to do before December?
It’s unclear how many hemp operators must comply with WARN Act rules.
But “(t)here are certainly hemp manufacturers, distributors and larger operators that meet that size threshold,” Rodriguez said.
“The bigger question for each company is whether the specific layoffs or closures they’re planning would trigger WARN.”
A layoff triggers WARN Act coverage if 50 or more workers lose jobs at a single site. If 50 to 499 workers lose their jobs, but that figure is less than 33% of the active workforce at that site, the WARN Act is not triggered.
“For those larger employers, those are the ones that have the biggest risk,” Rodriguez said.
Does the WARN Act apply to hemp THC operators?
For violators, the penalties add up fast:
- Employers who skip the required notice can be liable for back pay and benefits for the violation period, up to 60 days.
- Employees can sue individually, as a class or through a union.
- On top of damages, courts can award attorney’s fees.
And state laws can layer additional requirements on top of the federal rule.
Rodriguez sees the risk of class-action lawsuits.
“This will be one of those things that there might be some predatory litigation that happens if Is aren’t dotted and Ts aren’t crossed,” he said.
What if a hemp business fails before December?
Rodriguez drew a line between a business that fails on its own and one shut down by regulation.
“If a company unexpectedly loses its largest customer and suddenly has to eliminate 100 jobs, there may be an argument that the event wasn’t reasonably foreseeable 60 days earlier,” he said.
“That’s different from knowing a regulatory change is coming, knowing the effective date and knowing that the change is likely to force you to shut down or significantly reduce your workforce.”
Some businesses may have submitted notices under the original Nov. 12 deadline, before a budget deal between Congress and President Donald Trump gave operators another 29 days.
Companies that already submitted notices for the original Nov. 12 date must refresh those notices and restart the process as of Oct. 12.
“What the government is looking for is employers making their best effort to notify employees of what’s coming,” Rodriguez said.
“It’s setting the expectation for the employee in a fair and reasonable way.”
Can hemp THC companies stay legal after December?
Rodriguez expects a rush of last-minute questions from hemp operators.
“Over the next few weeks, we’ll probably have some inquiries – last-minute shotgun-type of affairs,” he said.
Some may be tempted to convert W-2 employees to 1099 contractors to cut costs and survive the quarter.
Such a move is a “compliance nuclear bomb waiting to go off,” Rodriguez said.
“If you switch them, you’re asking for a litigation nightmare and a regulation nightmare.”
Reclassifying an employee as an independent contractor means skipping payroll taxes and shifting the tax burden onto the worker. That’s considered “misclassification,” and regulators don’t take it lightly.
“Subverting the law is how it’s viewed,” Rodriguez said.
Hemp employers with 401(k) plans face a separate issue. While workers funds’ stay safe whether the business survives or not, the company side is messier.
Each plan has its own rules. Termination can trigger a forced distribution, meaning an employee receives a check and owes taxes.
In other cases, workers can roll the money into a new plan with a new employer, depending on how the plan is written, Rodriguez said.
How will the future of hemp play out?
Rodriguez doesn’t sugarcoat the outlook.
If the hemp ban takes effect, workers will lose jobs.
Although he couldn’t offer a figure, he expects the number to be large in an industry that employs about 225,000 people who earn $8.9 billion in annual wages, according to Whitney Economics.
Skills in manufacturing, sales, cultivation and distribution transfer to the regulated marijuana market, but Rodriguez doesn’t expect workers from hemp businesses to find new jobs there quickly.
Regulated cannabis employment is declining, and automation keeps shrinking headcount needs.
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“As time and technology advance, there’s less and less people needed to run operations than there were five to 10 years ago,” he said.
But the Dec. 11 federal redefinition won’t be the end of the tension between state-regulated cannabis businesses and the hemp THC industry.
Ultimately, he said, Congress will have to create a framework that captures both.
“We can’t really have multiple frameworks for how we’re going to regulate this – we need one framework,” he said.
“Regulation is how the plant gets to more people.”
Conversations like this will continue at MJBizCon, where cannabis executives, investors and policymakers gather to examine the trends shaping the industry’s future. Register for the conference here.
Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.
