A Practical Guide to Employee Terminations for New York Cannabis Business Owners
New York has some of the most employee-protective labor laws in the country. If you are a new cannabis operator who has never navigated a termination here before, this guide will walk you through the process in order, so you know exactly what to do, by when, and why it matters.
New York is an at-will employment state, which means you can generally end employment at any time for any lawful reason. “Lawful” is doing a lot of work in that sentence, and we will cover what it means in practice. First, a note: this is practical guidance, not legal advice. For terminations involving potential discrimination claims, protected activity, or complex severance arrangements, consult an employment attorney before you act.
Before the Meeting: Get Prepared
Before you sit down with the employee, confirm the following.
- Your documentation supports the decision. Pull the employee’s file. If you are terminating for conduct or performance, the record of prior warnings, conversations, and policy violations should be there before the meeting. If it is not, you are in a weaker position than you need to be. New York does not require progressive discipline by law, but undocumented terminations are harder to defend.
- The reason is lawful. The New York State Human Rights Law (NYSHRL) is one of the broadest in the country. It applies to employers with four or more employees and prohibits termination based on race, color, religion, sex, age, national origin, disability, sexual orientation, gender identity, marital status, pregnancy, military status, familial status, domestic violence victim status, prior arrest or conviction records, and many more protected characteristics. New York City adds an even longer list under the NYC Human Rights Law. Make sure the documented reason for your decision has nothing to do with any of these.
- No protected activity is in the picture. Has the employee recently filed a wage complaint, reported a safety issue, applied for paid family leave, or raised a discrimination concern? New York’s whistleblower protections under Labor Law §740 are broad and were expanded in 2022 to cover any employee who reasonably believes a law, rule, or regulation is being violated. These are not reasons to abandon a legitimate termination, but they are reasons to ensure that your reason for termination is well documented and is completely independent and defensible.
- A special note on cannabis and MRTA. You are running a cannabis business. Your employees likely use cannabis off-duty. Under New York’s Marijuana Regulation and Taxation Act, Labor Law §201-d prohibits you from firing someone for lawful off-duty recreational cannabis use that happens away from your premises, outside of work hours, and without using your equipment or property. If cannabis use is a factor in your termination decision, it must be based on observable, documented impairment during work hours, not on a positive test result or the smell of cannabis. If an employee is a certified medical cannabis patient, they are also considered “disabled” under the NYSHRL, which triggers accommodation obligations before you can act.
- Calculate the final paycheck. New York Labor Law §191 requires the final paycheck to be paid to the separated employee by the next regular payday. This applies whether the employee was fired, laid off, or resigned. The check must include all earned wages through the last day of work. It must also include any accrued vacation or PTO that your written policy requires you to pay out. New York law does not mandate PTO payout on its own, but if your handbook or employment contract promises it, it becomes a legal obligation. If your policy explicitly forfeits unused time, that must also be written down clearly. When in doubt, pay it.
- Prepare your paperwork. Have the following ready before the meeting: a termination letter, Form IA 12.3 (Record of Employment), and the written termination notice required under §195(6). We will cover what each of these needs to say below.
- Have a second person present. Do not conduct a termination meeting alone. Bring a manager, co-owner, or HR representative to serve as a witness.
The Termination Meeting
Keep it brief, factual, and professional.
- State the decision clearly within the first minute. The employee should understand immediately that this is a termination meeting, not a performance review. Lead with the news directly. Prolonging the bad news is unkind and unprofessional.
- State the reason simply. Use one or two sentences to explain the basis for the decision. You don’t need to deliver a detailed narrative or rehash the full history. Reference prior warnings if relevant.
- Do not debate or negotiate the decision. Acknowledge that the employee may see it differently without reopening the conversation. The decision is final.
- Cover the logistics. Let the employee know when their final paycheck will arrive, what happens with their benefits, and how to return company property.
- Collect the OCM employee ID badge. Every New York cannabis employee is issued an ID badge by your dispensary. Collect it at the termination meeting. You are responsible for that badge, and it shouldn’t remain with a former employee.
- Have the employee sign the termination paperwork. The signature confirms receipt, not agreement. If the employee refuses, note that on the document with your witness present.
- Revoke system access immediately. Before or immediately after the meeting, revoke access to your POS system, inventory software, security codes, and any other business systems. Do not wait until the end of the day.
After the Meeting: Time-Sensitive Obligations
New York has several mandatory post-termination steps, and some of them have tight deadlines.
- Issue the final paycheck by the next regular payday. This is a hard deadline under New York Labor Law §191. If you miss it, the employee can file a claim with the New York State Department of Labor, and under Labor Law §198, a court can award liquidated damages equal to the unpaid amount, meaning the employee collects double the wages owed, plus attorney’s fees. There is no grace period. Get this done.
- Provide the written termination notice within five business days. New York Labor Law §195(6) requires you to notify the employee in writing of (1) the exact date of termination and (2) the exact date that each employee benefit is being canceled, including health insurance, accrued time off, and any other applicable benefits. From a practical standpoint, it’s best to provide this at the termination meeting and have the employee sign a copy.
- Provide Form IA 12.3 at the time of separation. This is the New York State Department of Labor’s Record of Employment form, and as of November 2023, it is required for all separating employees, not just those who are terminated. That includes voluntary resignations, temporary layoffs, and hour reductions. The form notifies the employee of their right to file for unemployment insurance and provides your employer information. Do not skip it, even if you believe the employee is not eligible for unemployment. You can find Form IA 12.3 here.
- Provide COBRA or NY mini-COBRA notice. If you offer group health insurance and have 20 or more employees, federal COBRA applies. If you have fewer than 20 employees, New York’s own mini-COBRA law applies instead, and you must notify separated employees of their right to continue coverage. This notice must be provided within 14 days of separation.
- Update the OCM staffing plan within five business days. Under OCM regulations, your Employee in Charge must update the dispensary staffing plan within five business days of any change in an employee’s employment status. A termination is a change. Do not let this slip.
- Retain the personnel file. Keep all records related to this employee, including everything that supported the termination decision. New York requires employers to retain employment records for at least six years. When in doubt, keep them longer. These records are your evidence if a dispute arises later.
A Summary of Every Required Step
To make this easy to reference, here is the full checklist in order.
Before the meeting:
- Confirm documentation supports the decision
- Verify the reason is lawful under NYSHRL and federal law
- Check for any recent protected activity
- Review MRTA off-duty cannabis use protections if relevant
- Calculate the final paycheck, including any required PTO payout
- Prepare termination letter, Form IA 12.3, and §195(6) notice
- Arrange for a second person to be present
During the meeting:
- State the decision clearly and early
- Briefly state the reason
- Cover final pay and benefits logistics
- Collect OCM employee ID badge
- Get a signature on the termination paperwork
After the meeting:
- Revoke all system access
- Issue the final paycheck by the next regular payday
- Provide written §195(6) notice within 5 business days (ideally at meeting)
- Provide Form IA 12.3 at the time of separation
- Provide COBRA or NY mini-COBRA notice within 14 days
- Update the OCM staffing plan within 5 business days
- Retain personnel file for a minimum of 6 years
Why Documentation Is Everything Here
New York employees have strong legal protections and meaningful avenues to pursue claims, including the Division of Human Rights, the New York State Department of Labor, and the courts. An employer with clear, consistent documentation, a well-applied progressive discipline policy, and a paper trail that shows the termination was based on a legitimate, documented reason is in a significantly better position than one who made the right call but wrote nothing down.
If your documentation system is not yet where it needs to be, building it is the single highest-return HR investment you can make before your next hire. KushHR’s New York Cannabis Employee Handbook template and our Performance Management & Termination Documentation templates are designed to generate exactly the records that protect you in situations like this.
FAQ
Does New York require me to give a reason for terminating an employee?
Not as a general rule. New York is an at-will state, and you do not have to provide a reason. However, if you do give a reason, it must be consistent with your documentation and cannot be a pretext for an unlawful motive. In practice, having a clear, documented reason always serves you better than saying nothing.
What happens if I pay the final paycheck late in New York?
It is a serious consequence. Under Labor Law §198, a court can award liquidated damages equal to the unpaid wages, effectively doubling what you owe. Willful violations are also a misdemeanor, carrying fines up to $20,000 and the possibility of imprisonment for repeat offenders. Pay on time.
Do I have to pay out unused vacation when I terminate someone in New York?
Only if your written policy or employment contract says so. New York law does not mandate PTO payout by itself. But if your handbook promises it and you do not pay it, that becomes a wage violation. If your handbook does not mention it, an employee may argue for it. Review your policy before any termination and pay what you promised.
Can I fire someone for using cannabis outside of work?
Generally, no. New York Labor Law §201-d, as amended by the MRTA, prohibits terminating someone for lawful off-duty recreational cannabis use that happens off your premises and outside of work hours. If the employee is a certified medical cannabis patient, they may also have disability protections under the NYSHRL. You can take action for observable impairment during work hours, but that requires documented, specific behavioral observations, not a smell or a positive test result alone.
Does Form IA 12.3 only apply to terminations?
No. As of November 2023, it applies to all separations, including voluntary resignations, temporary layoffs, and any reduction in hours that may make the employee eligible for unemployment benefits. You must provide it to every employee who separates, regardless of why they are leaving or whether you think they qualify for unemployment.
When do I need to update the OCM staffing plan after a termination?
Within five business days of the separation. Your Employee in Charge is responsible for maintaining an up-to-date staffing plan, and a termination triggers a required update. Build this step into your offboarding process so it does not get missed.