Employee Poaching Controversy Heats Up Among Top US Cannabis Companies

In a legal battle between two of America's biggest cannabis companies, Cresco Labs Inc CRLBF has accused competitor Green Thumb Industries Inc GTBIF of illicitly recruiting its high-level personnel.

As reported by Chicago Sun-Times, both firms, based in Chicago's River North (IL), have been at loggerheads since Illinois started issuing licenses for medical marijuana in 2014.

See Also: Teamsters 'Disappointed, But Not Surprised' File More Charges Against Cannabis Retailer Green Thumb Industries

What Happened: Cresco filed a lawsuit on Wednesday in Cook County court, alleging that a top-level employee was poached by GTI, in violation of a non-compete clause. Cresco contends that this employee, a former chemist and director of technical services named Christopher Tonge, was induced by another ex-Cresco employee, Matt Ingram, currently GTI's senior vice president of operations.

Tonge's role was central to Cresco, as he developed a unique process for extracting cannabis oil from marijuana plants, which the company claims both increased revenue and facilitated significant cost savings. This distinctive procedure, which led to two patent applications co-invented by Tonge, is seen as a substantial asset for Cresco. However, his employment agreement barred him from working for a substantially similar company within a year.

See Also: Green Thumb Industries Reports Q1 2023 Financials: Revenue Up 2% YoY To $249M, Adjusted EBITDA?

About The Lawsuit: Responding to the lawsuit, a GTI spokesperson refuted the claims and criticized Cresco for misusing its resources. The spokesperson said the litigation is “aimed at preventing a former non-executive Cresco employee from finding a suitable career in the cannabis industry.”

“Instead of investing to retain current employees or support former employees through their transition following a recent sizable layoff, Cresco is spending money on lawyers to monitor and sue its former employees for finding new jobs.”

The lawsuit also notes that Ingram has been reaching out to other Cresco workers, urging them to resign and join GTI, despite being aware of their non-compete obligations. Cresco CEO, Charlie Bachtell, had warned his counterpart at GTI, Ben Kovler, about Ingram's hiring attempts.

See Also: Cresco Labs Q1 Revenue Declines 9.4% YoY, What About Adjusted EBITDA?

Cresco, through its subsidiary JDRC Managed Services LLC, has filed the lawsuit against Tonge, Ingram and GTI-Clinic Illinois Holdings LLC. The company is seeking an injunction enforcing Tonge's non-compete clause, along with damages and other relief.

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Photo: Courtesy Of Sasun Bughdaryan On Unsplash