CONFUSING LEGAL STATUS
Employers are accustomed to navigating conflicting local, state, and federal laws. These laws affect where and how they do business. Other laws, like those regulating marijuana, also affect where they do business. As of November 7, 2018, recreational marijuana is legal in 10 states, and medical marijuana is legal in 33. Nevertheless, marijuana is still illegal under federal law and classified as a Schedule I drug. Its confusing legal status leaves owners of marijuana shops and related businesses unclear how to run an establishment that isn’t sanctioned by the federal government. Depending on its size and gross revenue, a business may be required to comply with several federal laws, including the Family and Medical Leave Act, the Affordable Care Act, the Americans with Disabilities Act, and the Fair Labor Standards Act. These federal laws mandate basic protections for American workers. It begs the question, if marijuana is illegal on a federal level, are federal laws applicable to a marijuana business? One business in Colorado says they aren’t.
WHAT ABOUT OVERTIME?
Helix TCS, Inc. provides security, inventory control, and compliance services to the marijuana industry in Colorado. A former security guard filed a class action lawsuit in the United States District Court for the District of Colorado alleging that Helix failed to pay its employees overtime wages due under the Fair Labor Standards Act (FLSA). The FLSA establishes minimum wage, overtime pay, recordkeeping, and child labor standards. It requires businesses to pay employees at least minimum wage and, aside from those properly exempted, overtime wages at 1.5 times the regular rate of pay for any time worked in excess of 40 hours in a given workweek. To be properly exempt from overtime, salaried employees must meet both the job duties and salary tests. The plaintiff alleges that he and the other security guards were misclassified as salary exempt employees. He argues that he routinely worked more than 40 hours per week and is owed overtime. Helix responded to the suit arguing that the federal court lacks the authority to decide the case because “[t]he protections of federal law … are simply unavailable to an individual or business choosing to participate in an industry that is criminalized under federal law.” Kenney v. Helix TCS, Inc., 284 F. Supp. 3d 1186, 1189 (D. Colo. 2018), motion to certify appeal granted, (D. Colo. Jan. 23, 2018). The District Court rejected this novel argument.
The District Court cited numerous cases holding that employers are required to comply with federal law even when their businesses are unlawful. The judge cited a nearly identical case in Oregon in which that court found a marijuana-testing laboratory liable under the FLSA. She also pointed to two other cases holding illegal businesses liable under federal law, one for failing to pay taxes and the other for employing undocumented workers. She denied Helix’s motion to dismiss the case.
Now the decision is before the Tenth Circuit. Helix’s attorney argued on appeal that any employee working in the marijuana industry is a drug trafficker and, therefore, not entitled to federal protections. So far, it’s unclear how the Tenth Circuit will rule. If federal laws can regulate some aspects of these businesses, is the federal government sanctioning a drug enterprise? With two-thirds of the nation participating in the marijuana industry, the repercussions of this decision are significant.