Cannabis Payroll Problems Run Deep

Original piece from PYMNTS.com

Earlier this year, the federal government spiked anxieties for legal marijuana businesses. Attorney General (AG) Jeff Sessions issued a memo that seems to ramp up the White House’s marijuana crackdown, challenging earlier issuance that hinted at a more lenient federal approach to cannabis.

“It is the mission of the Department of Justice to enforce the laws of the United States, and the previous issuance of guidance undermines the rule of law and the ability of our local, state, tribunal and federal law enforcement partners to carry out this mission,” AG Sessions said in the memo, which revoked the Cole Memo — previous guidelines that supported legal marijuana businesses’ operation at the state level.

It caught the Treasury Department, which oversees financial services regulation for the cannabis sector via its FinCEN (Financial Crimes Enforcement Network) branch, off-guard.

Last month, President Donald Trump vowed to support congressional lawmakers’ efforts to protect states that have legalized marijuana. And while reports in The Washington Post said the situation was thus “diffused,” the saga was a disruptive reminder that the regulatory landscape for marijuana companies — often small businesses (SMBs) — remains unclear, in flux and risky.

Those same risks apply for financial service providers too, which have largely left legal marijuana companies to operate entirely on cash. The typical reasoning behind this is that, because banks are regulated by federal law, and because federal law classifies marijuana as illegal, financial institutions (FIs) are unable to provide financial services to marijuana businesses even if they are legal under state law.

But the reality of the FinServ regulatory environment is more complicated, said Keegan Peterson, founder and CEO of Wurk, a company that provides HR services to highly regulated industries, including the cannabis sector.

He recently told PYMNTS that the federal government does not have to legalize marijuana in order for businesses to get banked.

“Those are separate issues,” he said. “They don’t necessarily have to happen together.”

Part of Wurk’s service portfolio includes payroll. Peterson explained that its payroll service varies depending on the customer.

“To be able to qualify for our payroll service, the company has to already be banked,” he said. “We have our banked and our unbanked customers. Our unbanked customers use our system to calculate payroll and taxes — and then they have to remit in cash. We can process payroll and taxes for our banked clients.”

This service is proof that legal marijuana companies can indeed get banked. According to Peterson, the FIs that agree to service these firms are typically state-level banks that are not FDIC-insured. These institutions have figured out how to remain compliant while navigating the risks of the cannabis market — which are vast, added Peterson, and account for why so many marijuana businesses remain unbanked.

Know your customer (KYC) regulations are front and center, he explained.

“Banks are liable for anything that happens within the bank. They have to know your customer — and know your customer’s customer,” he explained. “They need to run compliance. A lot of them do facility checks. They do seed-to-sale reports to make sure dollars were legally earned. There is a whole lot of compliance that goes into being able to bank one of these customers. It’s very labor-intensive.”

All of this means fees are passed on to the cannabis business customer, which Peterson said are typically much higher than they would be for a traditional business, rendering bank services unaffordable even to marijuana businesses that could access them.

Further, financial institutions rarely find it profitable to go through the hassle of servicing these companies, the CEO added. Because this industry is so high-risk, their capital and liquidity requirements are high too. FIs are required to pool cash to back up the liability of servicing a marijuana business, and because of that risk, Peterson explained, banks cannot loan out the money they take from these business customers.

“So, they can’t make money on that money,” he said, adding that FIs can only profit from these companies through high fees. “Because of these intricacies of cannabis, there is a lot less opportunity to get banked. That’s what we see more often than not: There are not enough banks right now to support the need in the industry.”

This, naturally, forces major risks on cash-reliant marijuana companies. The risk of robbery, not only for business owners but for employees getting paid in cash, spikes exponentially for unbanked businesses, Peterson said.

“If someone knows when payday is, employees are very susceptible to getting held up,” he said. “It creates a very unsafe environment.”

Business owners also struggle with cash flow management, accounting, recordkeeping, reconciliation, accounts payable and accounts receivable — the list goes on — all because transactions and reporting have to be done manually.

The current regulatory environment impacts marijuana businesses in other ways than just forcing them to be entirely reliant on cash.

“The challenge of this business is they can’t comply with the law right now,” he said. “We’re imposing laws on people [that] have no ability to conform to them.”

He cited the Affordable Care Act, which requires businesses with more than 50 employees to provide benefit plans.

“If you don’t have a bank account, there is no benefit carrier that’s going to back you. You can’t pay a benefit carrier in cash,” the CEO said, noting that similarly, these businesses cannot pay workers comp insurance providers in cash either.

The muddled, volatile regulatory landscape is a massive challenge for financial service providers, marijuana businesses and companies like Wurk, but Peterson said this industry has to collaborate with lawmakers.

“We have to help educate legislators on what’s going on,” he said. “We have an interesting perspective because we’re helping people get paid.”

Peterson said the Treasury’s reaction to AG Sessions’ memo earlier this year was a positive one that showed (at least some) federal legislators are in favor of reducing companies’ reliance on cash and the risks that come with it. But there are no guarantees when it comes to predicting the regulatory future of cannabis, and service providers have to be flexible, he said.

“It’s hard to say where we’re going to be,” said Peterson. “There doesn’t seem to be a political incentive to legalize [marijuana] for the current administration. I think right now politicians are afraid to make a big move. As soon as we get to the point where lawmakers don’t feel like they are the sole responsible person for legislation, we’ll start seeing things move quickly. But we’re a bit aways from that, unfortunately.”

Read the full article on PYMNTS.com

Wurk Raises $3.2 Million in Funding to Facilitate Further Expansion

Company plans to invest in additional build-out of its cannabis labor management technology.

DENVER, April 11, 2018 /PRNewswire/ — Wurk, the first and only workforce management company for the cannabis industry, today announced that it has raised $3.2 million in a bridge funding round. The funding round included participation from both new and returning investors, including Poseidon Asset Management, which led the round, as well as Phyto Partners, Altitude Investment Partners, Arcview Investor Network and Arcadian Fund.

The company plans to utilize its funding to make key strategic hires and further build-out its cannabis labor management technology. The platform is designed to scale nationally with the growth of the cannabis industry, while incorporating the local laws and regulations unique to each individual state.

“The cannabis industry has made huge strides since Wurk was founded in 2015, making the jump from a fringe economy into a legitimate industry,” said Keegan Peterson, Founder and CEO of Wurk. “As the industry continues to grow, companies in the space need legitimate HR infrastructures to protect what they’ve built, set themselves up for growth and enable future expansion. We’ve worked hard to be the first and only company to provide that infrastructure and look forward to using our latest round of investment to continue to fulfill the industry’s ever-increasing demand.”

“After participating in Wurk’s previous two funding rounds, we are thrilled to have the opportunity to invest in the company yet again,” said Emily Paxhia, Managing Partner at Poseidon Asset Management. “As investors focused on the cannabis space, we regularly see the HR, accounting, and tax challenges that cannabis startups face on a frequent basis. Wurk’s solution helps ease that massive burden on the industry and creates a huge investment opportunity in doing so.”

The company, which helps cannabis companies manage payroll, human resources, timekeeping, scheduling and tax compliance, streamlines operations and minimizes compliance risks in the ever-changing cannabis regulatory environment. The company uses its expertise with local and national agencies to automate the complex paperwork process involved on clients’ behalf.

About Wurk
Wurk exists to help underserved cannabis businesses fortify, comply, and thrive in the face of uncertain regulatory environments. The platform allows employers to protect and streamline their operations while providing an environment where employees are a priority every step of the way. The intuitive, all-in-one solution automates the most complicated and risk-prone processes with recruiting, scheduling, and payroll. For more information visit enjoywurk.com.

Wurk delivers tools to help cannabis industry manage business

A growing startup, Wurk, markets an HR software platform for the cannabis industry that handles the complex payroll, compliance and workforce management needs of the business.

You won’t find a major HR tech vendor that sells software aimed at the fast-growing cannabis industry. A startup called Wurk decided to fill that vacuum.

CEO Keegan Peterson, 32, a young veteran of several HR tech vendors, founded Wurk in 2014 to serve the unusual personnel management needs of cannabis growers, labs, distributors and retailers.

Perhaps understandably, Wurk doesn’t like to release the names of its clients because of the still-turbulent legal and political atmosphere surrounding marijuana legalization.

For example, while marijuana for medical and recreational use is now legal in 30 states and Washington, D.C., federal law still prohibits it. And Attorney General Jeff Sessions in January 2018 rescinded Obama-era rules discouraging U.S. attorneys from enforcing the federal law in states where marijuana is legal.

Even so, business is good for the vendor based in Boulder, Colo., Peterson told SearchHRSoftware.

The U.S. cannabis industry has about 200,000 workers now and is expected to grow to a workforce of some 500,000 by 2020, according to Peterson.

Wurk’s SaaS-delivered software is built to help cannabis businesses navigate the often fiendishly complex and seemingly constantly changing laws affecting their operation and be able to reliably pay their employees.

“The real challenge with payroll is the way companies traditionally move money doesn’t necessarily work for the cannabis industry, so there have to be new systems in place that could support high-risk industries, like cannabis,” Peterson said.

The vast majority of mainstream banks won’t handle money for cannabis businesses, so Wurk’s payroll platform is configured to process payments through “cannabis banks.” An example is Partner Colorado, a former small credit union that has grown into a leading bank for the marijuana industry. (Wurk declined to name the cannabis banks it works with.)

“It’s very unique. We have to write contracts differently. We have to do payroll differently. We have to think of the operations of our clients differently,” Peterson said.

Wurk relies on three law firms it retains to advise the company on compliance issues. In turn, Wurk helps its customers comply with each marijuana-legal state’s particular laws.

Read the full article here.

Built In Colorado’s 50 Startups to Watch in 2018

“2017 was another great year for Colorado tech. We celebrated a massive homegrown IPO, another record-breaking Denver Startup Week, many exciting company and project launches, and tons of venture fundings.

Now, we’re looking ahead and making our predictions about the startups we think will make waves in 2018. In our 50 Startups to Watch in 2018 list, we’ve hand-selected 50 Colorado-based tech companies — all five years old or younger — that are poised for great things in the year ahead.

WURK

The cannabis industry is highly regulated, which means tasks that are relatively simple in other industries can be much more complex. Take HR and payroll, for example. Wurk’s cloud-based platform acts as an entire HR department and helps cannabis businesses navigate the ins and outs of recruiting, hiring, scheduling and paying employees. The startup raised a $2 million seed round in April 2017, and with the recent implementation of recreational marijuana in California, Wurk is likely to see accelerated growth in 2018.”

Read the full article here.

Wurk’s $3M Seed Round to Fund Key Hires and Geographic Expansion

“Workforce Compliance Platform Adds Funding and Executive Leadership to Service Growing Industry

Denver, Colorado— April 11, 2017— Wurk – a workforce compliance platform built for the highly-regulated cannabis industry – has raised $2 Million to its seed round to fund key executive hires and expand more quickly into the newly opened, legal cannabis markets. The additional funding brings Wurk’s total seed round to $3 million. Poseidon Asset Management led the extended round, with participation from Phyto Partners, Salveo Capital and The Arcview Investor Network.”

Read the full post here.

Wurk Raises Additional $2M to Meet Cannabis Compliance Needs

Workforce Compliance Platform Adds Funding and Executive Leadership to Service Growing Industry

Denver, Colorado— April 12, 2017Wurk – a workforce compliance platform built for the highly-regulated cannabis industry – has raised $2 Million to its seed round to fund key executive hires and expand more quickly into the newly opened, legal cannabis markets. The additional funding brings Wurk’s total seed round to $3 million. Poseidon Asset Management led the extended round, with participation from Phyto Partners, Salveo Capital and The Arcview Investor Network.

 

With the expansion of the cannabis industry into newly legal states and the federal administration’s push for compliance, Wurk fills an urgent need to support the regulations and rapid growth of the cannabis workforce. The firm’s experience navigating the difficulties of the Federal “Schedule I Substance” designation, as well as a growing patchwork of State and Local regulations, helps cannabis companies provide the necessary HR and Payroll infrastructure to take care of their employees and stay compliant with government regulations. Wurk’s Workforce Compliance technology supports operators in 12 states with solutions like 280E reporting, state-specific employee onboarding, and payroll management as part of a full suite platform.

 

“With eight new markets emerging in November, including the passing of Prop 64 in California and the new administration’s focus on compliance, we knew we would need to scale the business quicker to meet this demand,” said Keegan Peterson, Wurk’s CEO. “We are a service based organization. The more businesses we can reach, the more people we can help. Our new funding gives us the ability to scale our business in a way that helps us keep up with the demands of this evolving and growing marketplace.”

 

As part of the company’s expansion, Wurk has hired Matt Kelly as Chief Financial Officer and Jay Meyers as Chief Revenue Officer. Kelly brings considerable experience in finance and hyper growth management to the company, while Meyers has a strong background in HR technology with specific focus on highly regulated industries. Both will report directly to Peterson and bring strong leadership and experience to the company.

 

“Investing in Wurk has been extremely rewarding. We have seen positive responses from operators, as they move onto Wurk’s platform to streamline their compliance processes,” said Emily Paxhia, managing partner at Poseidon Asset Management. “Closing this recent raise provides them with the capital to grow their business and market share through strategic hires, expanding on their already strong team. Additionally, their plans to scale and to reach more companies will make for a stronger industry across the board. Success of a company always comes down to the people involved, and Wurk makes it easy for companies to support and empower their people.”

 

About Wurk

Wurk is a Workforce Compliance Platform specifically designed for the highly regulated cannabis industry. Our platform automates the processes associated with hiring, managing and paying employees, greatly reducing costs for employers, and making administrative tasks easier, less error-prone and quicker for employees. The Wurk platform includes tools to manage compliance with industry-specific regulations like Federal income tax code section 280E and state-specific requirements for employee registration and badging. Wurk provides an ecosystem of industry experts specializing in 280E tax law, accounting, human resources, cannabis corporate law, and banking. Learn more

www.enjoywurk.com

Cannabis Payroll And Compliance Firm ‘Wurk’ Bags Another $2M In Seed Round

“Around the country, cannabis businesses face a fair mountain of red tape in trying to comply with different state and federal laws. A Colorado startup wants to help keep the legal industry rolling (and doing what it does best) by providing a one-stop shop for businesses’ compliance and payroll needs, and it’s already raking in the green.

The cannabis workforce compliance platform Wurk announced today that it has raised $2 million more in an extended seed round to help develop its growing operation in pot country and beyond, bringing its raised total to $3 million. In a press release, the company noted it would use the funds for “key executive hires” and to ramp up its expansion into new legal cannabis markets. The extended round was led by Poseidon Asset Management, with Phyto Partners, Salveo Capital and The Arcview Investor Network also participating.”  Read the full post here.

Denver payroll services firm aimed at marijuana business raises $2M

“A Denver payroll and business compliance startup that targets the marijuana industry said it’s raised $2 million in new funding.

Wurk said the latest round of funding was led by Poseidon Asset Management, with participation from Phyto Partners, Salveo Capital and The Arcview Investor Network.”  Read the full post here.

Funding Snapshot: Wurk Adds $2M Seed

WSJ Pro, covered Wurk’s news regarding adding $2 Million Seed for Cannabis Industry Workforce Compliance.  Read the post here.

Extract: Cannabis sales hit $6.7B in 2016

Extract’s Emily Gray Brosious published her article about the cannabis industry’s massive year in 2016 and the uncertainty ahead. She connected with Keegan about job growth in the industry and quoted him several times at the beginning and ending of the article. 

“With well over 100,000 jobs in the industry as of last year, this number will continue to grow as markets continue to mature and expand,” said Keegan.

Read the entire article here.