U.S. Court of Appeals Decision Win for Employees in Cannabis Industry

Posted by Margolin & Lawrence on October 8, 2019

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On September 20, 2019, the U.S. Court of Appeals for the Tenth Circuit ruled that employers in the cannabis industry must pay their workers overtime in compliance with federal labor laws. This decision is remarkable given that marijuana remains illegal at the federal level.


The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–219, is a federal law that establishes the minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector, as well as at Federal, State and Local level. However, the FLSA also provides several exemptions, which exempt certain employers from not complying with federal labor laws.


Robert Kenney v. Helix TCS, Inc., involves Helix TCS, Inc. (“H­­­­­­­elix”), a Colorado-based security company and Robert Kenney, the Plai­­ntiff, who worked as a security guard for Helix. Mr. Kenney argued that he and other similarly situated security guards regularly worked more than 40 hours per week. However, Helix classified these workers as exempt employees under the FLSA, and paid them a salary instead of overtime. Mr. Kenney brought suit against Helix under the collective action provisions of the FLSA, see 29 U.S.C. § 216(b). Mr. Kenney argued that Helix misclassified the security guards as exempt employees even though they frequently performed non-exempt job duties. Thus, Helix willfully failed to pay its employees overtime.


Helix moved to dismiss Mr. Kenney’s claim based on the Controlled Substances Act (“CSA”), 21 U.S.C. §801, et seq, arguing that Mr. Kenney’s employment activities are in violation of the CSA and are thus not entitled to FLSA protections. The Tenth Circuit rejected Helix’s argument and held that Mr. Kenney and all similarly situated individuals are not categorically excluded from FLSA protections.


In its opinion, the Court reasoned that “case law has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited.” See, e.g., United States v. Sullivan, 274 U.S. 259, 263 (1927). Further, the Tenth Circuit explained that “[d]enying FLSA protection to workers in the marijuana industry would consequently encourage employers to engage in illegal markets where they are subject to fewer requirements. But together the FLSA and CSA discourage businesses from participating in the marijuana industry by alternatively subjecting them to federal labor obligations and imposing criminal sanctions.”


Finally, the Court also explained that “Congress has actually amended the FLSA many times since the enactment of the CSA without excluding employees working in the marijuana industry, despite specifically exempting other categories of workers.” See 29 U.S.C. § 213.


The Court did not draw any conclusions on the merits of Mr. Kenney’s FLSA claims. However, although small, this decision is a significant win for employees working in the cannabis industry. It serves as a reminder that federal employment laws apply equally to employees in the cannabis industry and will help provide employees in the cannabis industry greater workplace wage protection. This decision will allow Mr. Kenney’s case to proceed at the U.S. District Court, pending a possible appeal.


While this ruling provides that employees in the cannabis industry are protected under federal employment laws, federal employment laws set the minimum requirements that employers must follow. Everyone operating a cannabis business needs to comply not only with federal employment laws, but also state laws, which are often more strict than federal laws. For example, California businesses must pay employees a higher hourly minimum wage ($12/hr) than required under federal law ($7.25/hr), and pay employees overtime wages for all hours worked over 8 per day while federal law requires overtime only for hours that exceed 40 per week. California also has laws relating to meal and rest break policies, and employee expense reimbursement, that are stricter than federal requirements. It is important for cannabis employers to understand the details of both federal and state employment laws, and to consult with attorneys to ensure that their policies comply with all relevant laws in order avoid lawsuits from disgruntled employees.

If you have a cannabis business and want to make sure that you are complying with all the state and federal employment laws, we offer employment training and compliance for all cannabis businesses. If you have any questions or would like to speak with our attorneys to further discuss our compliance services, please feel free to reach us via email (info@margolinlawrence.com) phone (323-653-9700) Or Book an appointment by clicking HERE



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Cannabis Business, Cannabis Business California, Federal Law, cannabis delivery law california, labor, wages, court of appeals, colorado, CSA, employement law, california business law, FLSA, controlled substance act, labor law, minimum wage


This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.