Marijuana Businesses Must Comply With Federal Wage and Hour Laws
The U.S. Court of Appeals for the Tenth Circuit recently held that employers engaged in commercial cannabis activities must comply with wage and hour requirements under the Fair Labor Standards Act (“FLSA”). Despite marijuana’s prohibition and classification as a Schedule I drug under the federal Controlled Substances Act (“CSA”), employers engaged in recreational and/or medical marijuana sales must nevertheless comply with the FLSA’s overtime, minimum wage, and recordkeeping requirements.FN1
In Kenney v. Helix TCS, Inc, a cannabis company security guard filed a collective action against his employer, claiming that the company willingly failed to compensate its employees for overtime worked by misclassifying them as “exempt” under the FLSA. The employer argued that its employees are not entitled to FLSA protection because Colorado’s recreational marijuana industry is in violation of the CSA. The court reasoned that denying protection to workers in the marijuana industry would encourage employers to engage in illegal markets where they are subject to fewer legal requirements, and further stated that “employers are not excused from complying with federal laws just because their business practices are federally prohibited.” In other words, just because an employer may be violating one federal law does not allow it to violate another.
Takeaway
Employers in the cannabis industry should review their employment practices to ensure compliance with federal minimum wage, overtime, and recordkeeping requirements. Cannabis industry businesses should also consider whether their policies comply with other federal laws such as the anti-discrimination and retaliation provisions of Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act.
FOOTNOTES:
FN1: See Kenney v. Helix TCS, Inc., 18-1105, 2019 WL 4557433, at *5 (10th Cir. Sept. 20, 2019), https://www.ca10.uscourts.gov/opinions/18/18-1105.pdf. The Tenth Circuit Court of Appeals hears appeals from federal courts in Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming.