Fourteen former employees of 305 Farms have initiated a federal lawsuit against the West Michigan cannabis company, alleging that they were not paid thousands of dollars in wages and that deductions for benefits were taken without being provided.
Robert Lusk, the attorney representing the former employees, filed the lawsuit on Tuesday in the U.S. District Court for the Western District of Michigan. He stated, "Apparently, they ran out of money and thought it was appropriate to withhold wages until they got themselves reorganized."
Jan Verleur, a partner in The Verleur Group, a Miami-based venture capital firm controlling 305 Brands, acknowledged that the company fell behind on employee payments following a "catastrophic harvest failure." This failure was reportedly due to a defective HVAC system at their cultivation facility in Lawrence, located about 30 miles west of Kalamazoo. Verleur emphasized that the company is collaborating with the Michigan Department of Labor and Economic Growth to resolve the unpaid wages issue and anticipates making the final $35,000 in payments later this month.
"Our intention is to ensure that anyone who was employed with us is compensated," Verleur stated.
The state Department of Labor and Economic Growth did not respond to requests for information regarding the case.
Lusk noted that the deadline for his clients to receive their wages had already passed.
305 Farms began operations in March 2022, with plans to become Michigan's largest single-site indoor cannabis cultivation campus, licensed to grow up to 80,000 plants. However, General Manager D.J. Howley explained that the company was misled about the HVAC system specifications, leading to significant operational issues.
According to Howley, the company spent much of the past year diagnosing and attempting to rectify the HVAC problems. Verleur reported a loss of $1.7 million in potential revenue between November and February, contributing to a significant staff reduction.
In February, the company held several meetings to inform employees about the financial difficulties. Jacqueline Morgan, a security guard, chose to stay despite the delayed payments because she believed in the company's future. "We were all given the opportunity to seek other employment or take a leave of absence. Once everything was resolved, we could return without any issues, at the same pay and benefits," Morgan said.
Verleur noted that the company's financial situation has improved in recent months. "We've been paying down debts and making corrections. We are also in the process of recapitalizing, both through equity and exploring mortgage options on the farm to support our growth trajectory," he said, highlighting the $45 million invested by shareholders. "We are here to stay."
However, Lusk criticized the company's handling of the situation. "Their approach seems to assume that one of their choices is to do something illegal, which is not paying people for the work they do. It's just not an option," Lusk asserted.
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