Hemp and CBD Remain Risky Businesses in Uncertain Legal and Gig Climate

By and | October 30, 2019

Executives at Kirby Co.’s home office noticed an odd trend: Its door-to-door vacuum-cleaner salespeople were increasingly involved in the same side gig — pitching CBD oil.

Kirby, whose parent company is owned by Warren Buffett’s Berkshire Hathaway Inc., didn’t like the idea that its contractors were getting sidetracked by selling the unproven remedies made from hemp, a cousin of marijuana.

So Kirby fired them.

“I was devastated,” said Abe Sharqawi, 48, who was a Kirby contractor for almost three decades. He said the company claims it let him go partly because he was distracted by work at a CBD shop his daughter opened. “My plan was to do another 15 years with the company.”

A Maine family farm that grows hemp is in limbo after losing its lender and its insurance provider.

Kirby says it’s simply a question of salespeople fulfilling their contracts, but the situation reveals a wider issue in the growing gig economy: How much control companies should have over the actions of workers who aren’t technically employees.

The conflict comes as cannabis laws ease after decades of prohibition, creating a patchwork of rules that vary by state and are tricky for businesses to navigate. Even as pot pushes into the mainstream in places like Michigan, Colorado and California, stigmas and bans persist, even for hemp, in other parts of the country. The U.S. Department of Agriculture is expected to address hemp’s legal status as soon as this week.

“The issue with CBD is still relatively new,” said Bruce Douglas, an attorney with Ogletree Deakins who works with employers on labor issues and has no connection to the Kirby cases. “It’s not unusual for employers to want to ensure that their employees don’t bring disrepute on the business.”

Hemp was federally legalized in December as part of the latest farm bill, but some states still have laws banning it. And though CBD sold legitimately in the U.S. is made from hemp and not marijuana, doubt about its legal status remains a hurdle for farmers, truckers, law enforcement and employers such as the century-old Kirby.

Kush Doppelganger

It doesn’t help that hemp looks just like marijuana. They’re both cannabis. But unlike its party-hearty twin, hemp is known for hundreds of industrial uses. For example, its stalks can make rope, paper and insulation; its seeds go into animal feed, flour and beer; and its oil can treat pain, insomnia, anxiety and acne, enthusiasts say. Its primary difference with marijuana is that it doesn’t produce a high. Hemp that contains less than 0.3% of THC, the psychoactive chemical responsible for getting baked, is legal under the farm bill.

Americans spent $1.8 billion on CBD products in 2018, an amount that could grow to $20 billion if the government expands its approval to include CBD as a food additive, according to BDS Analytics.

Activists have spent decades agitating for hemp’s legalization. This year, more than 480,000 acres of hemp are licensed for cultivation in the U.S., up from roughly 112,000 in 2018, according to New Frontier Data, a cannabis-research company.

Ball of Confusion

In the meantime, confusion reigns.

In South Carolina, a farmer was arrested and 10 acres of his hemp crop destroyed after police alleged he planted it in an unregistered location. He said he’d hoped hemp could make up for the income lost to agricultural tariffs.

In Maine, a 180-acre family farm that grows hemp is in limbo after losing its lender and its insurance provider.

In California, police warned farmers not to sell hemp at roadside stands, adding that any sale of the plant for smoking made it by definition marijuana and not hemp — even though hemp can be a tobacco substitute.

Drivers in Idaho and South Dakota have been arrested for transporting hemp. People in pain reject CBD remedies because they fear flunking drug tests. And thieves mistaking hemp for marijuana have ripped up plants all over the country.

Involvement with CBD, named for its active ingredient, cannabidiol, is a no-go zone for Kirby contractors. The company has filed two lawsuits against five former salespeople, including its ex-president, Raymond “Bud” Miley, who joined businesses that sold the oils.

“Kirby independent distributors must use their best efforts selling Kirby products while operating legally and ethically,” the vacuum-cleaner company said in an email response to questions. An October 2018 policy prohibits salespeople “from being involved or invested in any business that causes them to not fulfill their obligation of using their best efforts.”

Family Included

Contractors’ relatives were included in the policy “so that independent distributors would not try to skirt enforcement by putting business endeavors in the name of a family member.” The company added: “Kirby does not get involved with the business of a spouse or family member unless the operation of that business (which can be any business) detracts from that person’s ability to abide by the terms of their contract with Kirby, which we believe was the situation.”

The salespeople have fought back. Sharqawi’s lawyer said he submitted a complaint to a Florida state agency in December, and another former worker sued the company in August.

But why would Kirby staff go from the anachronism of door-to-door vacuum-cleaner sales to peddling a fad so new its legal status remains unsettled?

Ringing doorbells to pitch vacuums can be difficult. Selling CBD is easier, Sharqawi said.

“People should be able to invest in whatever legal company they want to invest in,” said Sharqawi’s attorney, Caryn Groedel. “This industry is booming. Why not get in on it?”

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