Ohio’s cannabis industry may be confronted with a dual compliance challenge. On one front, the Division of Cannabis Control (DCC) recently finalized a new employee training rule, Ohio Administrative Code § 1301:18-3-10, that is set to take effect on January 1, 2026. On the other, dispensaries have been faced with costly wage and hour litigation arising from alleged improper tip pooling practices. For human resource (HR) professionals and business owners, these developments underscore the importance of proactive compliance strategies, robust documentation procedures, and clear internal policies. Critically, these possible changes and developments highlight the importance of paying attention to compliance, given the limited window available before the proposed rule takes effect. This article outlines what operators need to know and how to stay ahead of both regulatory and legal risks.
Wage & Hour Litigation – A Costly Industry Trend
Dispensaries are facing litigation related to improper tip pooling arrangements that stem from the inclusion of managers and supervisors in tip pools, a practice that can violate the Fair Labor Standards Act (FLSA). Several lawsuits have resulted in operators paying hundreds of thousands of dollars in settlements. Fortunately, these cases are avoidable, but they continue to surface—suggesting that improper tip pooling practices remains an important issue of concern. As these lawsuits continue to arise, operators may benefit from reviewing their internal policies to ensure alignment with federal labor standards and to mitigate potential financial and reputational risks.
Recent lawsuits have highlighted a variety of tip pooling practices that have drawn legal scrutiny. In one case, retail workers alleged that tips collected in personal jars were pooled and distributed through payroll, with managers receiving a disproportionate share based on hours worked—even though they rarely engaged in customer-facing duties. Another suit alleged that supervisors were routinely included in mandatory tip pools, resulting in larger payouts for non-tipped staff simply because they logged more hours. In another, employees claimed that their employer diverted tip money to charitable donations without providing receipts or transparency, leaving workers questioning whether the funds were ever used as promised.
HR’s Role in Reversing the Trend
HR teams play an important role in supporting wage and hour compliance. As cannabis operations grow more complex, wage and hour issues are increasingly viewed as a core compliance concern alongside licensing and training requirements. By proactively reviewing policies and procedures, HR professionals can help reduce exposure to potential litigation and contribute to a workplace culture that emphasizes transparency and regulatory alignment. An important first step is excluding managers and supervisors from tip pools, as required under federal law. Under the FLSA’s tip provisions, a “manager or supervisor” is any employee who meets the executive duties test. This includes individuals who regularly direct the work of at least two full-time employees (or their equivalent), have hiring or firing authority, and whose primary duty is managing the enterprise or a recognized department. Importantly, this classification applies regardless of how the employee is paid. Whether the manager or supervisor is paid on a salary or hourly basis is irrelevant for tip pool exclusions.
Even when managers perform tip-producing work, they are strictly prohibited from retaining any portion of other employees’ tips. They may keep tips only when those tips are given directly by customers for services the manager alone provided. For example, a restaurant manager who steps in to serve during peak hours may retain tips from customers they personally serve, but the manager cannot receive tips from a pool or jar that includes contributions based on others’ work.
Beyond tip pooling, cannabis operators should implement robust standard operating procedures (SOPs) for tip handling, conduct regular wage audits, and establish internal grievance procedures to address employee concerns before they escalate. Employers should also publish a clear tip policy, ensure employees receive it at the start of employment, and clarify roles to distinguish supervisory staff from tipped employees. These steps are not just best practices. They are essential safeguards against litigation.
New Training Mandates Under the Rule
Before examining the new training rule set to take effect in 2026, it is important to first understand the scope of Ohio’s existing regulatory framework. Current regulations only cover dispensary employee training, requiring dispensaries to implement a training program, maintain certain records, and ensure staff receives instruction on topics such as inventory tracking, responsible cannabis use, and patient confidentiality. Dispensary employees must also complete 16 hours of continuing education every two years.
The new rule, effective January 1, 2026, expands these requirements across all license types, introduces role-specific mandates (e.g., OSHA training for processors and cultivators, food safety certification, and additional training for security staff), and formalizes expectations for ongoing training, documentation, and supervisory qualifications.
At the start of the rulemaking process, the DCC posted proposed rules for early stakeholder feedback from June 12, 2024 to June 26, 2024. Feedback came from individual licensees, advocacy groups, and from associations representing license holders. During this feedback process, these stakeholders broadly expressed concerns with the DCC’s original proposal requiring OSHA training. Based on the feedback provided, the DCC updated the training rule to require that at least one registered responsible party or other person in a safety supervisory or managerial role completes the thirty-hour OSHA course, or for the licensee to maintain a contract with a third-party OSHA safety consultant approved by the division to provide all registered employees regular trainings and safety audits.
The proposed rule, and others, were then sent to the Common Sense Initiative (CSI) under the Lieutenant Governor’s Office for an additional review prior to being filed with the Joint Committee on Agency Review (JCARR). On April 9, 2025, CSI concluded that the DCC should proceed in filing the proposed rules with JCARR. As part of the JCARR process, DCC held a public hearing on July 16, 2025, for any additional comments on this rule and others. But no additional feedback was provided.
In addition to imposing heightened employee training and qualification requirements, the new rule requires all licensees to establish and oversee an employee training program. The program must ensure that all training is reviewed annually and updated as necessary, and that employees regularly receive training on all applicable materials. Licensees must also submit evidence of ongoing compliance to DCC, establishing an expectation for ongoing education and workforce readiness, not just initial onboarding.
The rule imposes “foundational training” requirements that apply to all employees, regardless of license type or role. This includes training on all applicable written policies and procedures related to the employee’s assigned function; proper documentation and handling of cannabis in the state’s inventory tracking system; preparation for regulatory inspections; badge certificate maintenance; relevant Ohio cannabis laws and regulations; and responsible cannabis use education.
In addition to foundational training, the rule imposes several role-specific mandates. All security personnel must complete Ohio Homeland Security Private Investigators and Security Guard (PISGS) training before accessing surveillance areas or performing security functions. Cultivators and processors must ensure that at least one responsible party or safety supervisor completes the Occupational Safety and Health Administration (OSHA) 30-hour course on an annual basis. The licensee may alternatively engage a third-party OSHA safety consultant approved by the DCC to conduct regular training and safety audits. For processors only, at least one food protection manager must be present during all operating hours when cannabis products are being prepared or packaged. The food certification must be obtained through a program accepted by the Ohio Department of Health or a nationally recognized accrediting agency approved by the DCC.
Dispensary operators are also subject to a detailed set of specific training mandates. For example, employees with access to confidential patient information must receive instruction on confidentiality requirements for handling patient information. Employees dispensing cannabis must receive extensive instruction relating to registration and usage of the state’s drug database; the various forms and methods of cannabis administration; qualifying medical conditions and authorized uses; guidance for patients regarding risks and potential drug interactions; recognition of substance abuse; and protocols for refusing service to individuals who appear impaired or are misusing cannabis.
Overall, these requirements reflect a growing emphasis on patient safety, product knowledge, and ethical dispensing practices. They also signal a shift toward more formalized expectations for dispensary staff that requires greater management oversight.
The Rule & HR’s Role in Ensuring Compliance
While the rule places this obligation on the licensee, the practical responsibility for executing these requirements falls squarely on HR departments. HR professionals are uniquely positioned to lead this effort because they manage the systems, processes, and personnel necessary to ensure compliance. This includes designing and maintaining a training compliance tracking system, integrating required training topics into onboarding and continuing education programs, and coordinating with compliance officers to ensure training content aligns with state law.
HR professionals should begin by conducting a gap analysis of current training programs, identifying roles that require specialized certifications, and developing a compliance calendar to manage annual training updates. Additionally, HR departments must implement robust documentation practices to record training activities, including trainer qualifications, distributed materials, and training dates, as required by the rule. Staffing models may need to be adjusted to ensure that qualified personnel are present during all operating hours, particularly in processing facilities.
HR departments should also take this opportunity to strengthen their SOPs. Clear SOPs for training, promotions, and role transitions help ensure operational readiness and reduce compliance risk. Promoting employees into supervisory roles without assessing readiness or providing structured support can lead to performance issues and regulatory exposure.
As cannabis regulations evolve, the intersection of HR practices and compliance becomes increasingly complex. Wage and hour risks, training mandates, and internal promotion policies all carry significant legal implications.
Special thanks to law clerk Dalton Herren for his contributions to this article. Dalton is not yet admitted to practice in any jurisdiction.
Source: JD Supra
https://www.jdsupra.com/legalnews/compliance-crossroads-preparing-for-9438968/