Previously we wrote about equity compensation for cannabis employees from the perspective of companies. We have been dealing with more and more companies adding equity to their overall compensation scheme, so now is a good time to revisit it from the employee perspective. For an overview of the types of equity compensation available, see here.
Equity compensation for cannabis employees: potential employment tax issues
Many companies assume that there are federal exemptions for startups that allow them to compensate early-stage cannabis employees solely in equity, but that is not the case. Minimum wage and overtime laws still apply, and the value of stock and stock options is not included in determining whether an employee is receiving at least the minimum wage. This means that the employer is still responsible for remitting the employer’s side FICA/FUTA and state employer taxes. The employer is also an agent for the federal and state government and is responsible for collecting the employee’s side of federal and state employment taxes, including requiring the employee to indicate what level of withholding the employer should be applying to the employee’s wages.
Equity compensation for cannabis employees: determining compensation valuation
Beyond these general wage issues, there is the