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Working through the haze: Governments need to help small businesses prepare for legalization

While it has been a rushed process, it does appear that recreational cannabis will see plenty of red tape. That's a cost entrepreneurs can't afford


By Dan Kelly

Published in the Financial Post June 20, 2018

As Parliament puts the final touches on Canada’s legislative framework around recreational cannabis, the spotlight shifts to provincial governments.

The process has many moving parts, and touches on a range of government departments, with several significant fiscal, social and health considerations. While there are opportunities in some jurisdictions for entrepreneurs to get directly involved in the new cannabis market, for other small businesses, interactions with recreational cannabis will be as employers and taxpayers.

As legalization approaches, here are a few things small businesses need governments to focus on:

Safety at work

While much of the political and media attention has been on law enforcement and keeping cannabis out of the hands of minors, small business owners across the country are just as concerned about how cannabis is going to be treated in the workplace.

So far, governments have been vague on the impacts of legalization on workplaces, preferring instead to state that it’s no different from the treatment of alcohol or other drugs, including prescriptions. But given that governments have raised concerns about safety of drivers due to cannabis, employers are right to be worried about safety at work.

At CFIB we are already getting questions from business owners: what if an employee smokes off site during a break? Or eats a pot brownie at lunch, delaying the effect? How do employers balance scent-related sensitivities among employees? What are an employer’s obligations around accommodating medicinal use?

Given the role of provinces in setting standards for occupational health and safety, it is entirely reasonable for small business owners to expect their governments to provide guidance and advice around what is safe and acceptable use of cannabis with workplace safety in mind.

Learn from the mistakes of alcohol

As any business that deals in the alcohol industry can tell you, there are significant barriers to the alcohol trade between provinces. These barriers come from years of parochialism and political considerations. Sadly, it doesn’t appear that we have learned many lessons and again have created a patchy, inconsistent approach to recreational cannabis sales across the country. We are very concerned that as provinces rush to regulate and sell cannabis, they are recreating the same types of barriers that exist around alcohol and have been so difficult to dismantle.

We are continuing to push governments to use a co-ordinated approach, as much as possible, to minimize cannabis-related red tape and trade barriers. Even unintentional barriers add costs for businesses and consumers, which will only benefit the underground economy.

Staying out of the red ink and the black market

Setting up an entirely new retail and distribution network is going to cost money. And many provinces have decided to set up public-sector cannabis monopolies instead of allowing a role for a regulated private sector. This means taxpayers will ultimately bear the full brunt of the cost – prime retail space, inflated public sector salaries and maintaining the supply chain. To date, we have yet to see a single cost analysis from any provincial government – a trend that is becoming far too common on rushed policies.

Governments should not be naïve to think that they won’t face competition, especially in the early years of legalization. There is a thriving black market for cannabis currently meeting consumer demands. If legal products don’t deliver the cost and service expectations of customers, the underground market will continue to thrive. A government-run monopoly selling cannabis will not be a licence to print money and may end up facilitating the continuation of the underground market.

In provinces allowing a role for private-sector retail, care is needed to ensure this is done right. If taxes or regulated prices are set too high, the black market will continue to flourish. If the regulatory regime is too restrictive, legitimate operators will never gain a proper foothold. It is also important to ensure that the bar isn’t set so high that cannabis retail becomes dominated exclusively by larger players. Allowing a role for participation by smaller firms is a better route to long-term success.

To be sure, the legalization of recreational cannabis is a huge, multi-faceted regulatory undertaking for governments, but fast-tracking the regulatory process can’t become an excuse for not doing a thorough and thoughtful job. This includes being mindful of how we are using tax dollars and ensuring the needs of entrepreneurs and employers are considered.

Dan Kelly is president of the Canadian Federation of Independent Business and lead spokesman and advocate for the views of CFIB’s 110,000 small- and medium-sized member businesses across Canada.

June 20, 2018

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