Labor & Employment Law Daily FLSA overtime requirements may apply to marijuana industry workers
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Tuesday, September 24, 2019

FLSA overtime requirements may apply to marijuana industry workers

By Wayne D. Garris Jr., J.D.

A security services provider to legal marijuana businesses in Colorado argued that it didn’t have to pay overtime because the sale of marijuana is illegal under federal law.

Affirming the denial of an employer’s motion to dismiss, the Tenth Circuit held that workers in the marijuana industry are not categorically excluded from the protections of the Fair Labor Standards Act. Although the sale of marijuana is banned under the federal Controlled Substances Act, the court stated that one employer’s possible violation of federal law does not excuse its compliance with other requirements. Declining to address the merits of the FLSA claim, the appeals court affirmed the district court’s holding that the employee was FLSA non-exempt (Kenney v. Helix TCS, Inc., September 20, 2019, Seymour, S.).

The employee worked as a security guard for state-sanctioned marijuana businesses in Colorado. He filed suit alleging that his employer misclassified him and similarly situated workers as exempt from the FLSA’s overtime provisions, claiming that he and other security guards regularly worked over 40 hours per week. His employer moved to dismiss arguing that the Controlled Substances Act outlawed the employee’s employment and consequently the employees were not entitled to FLSA protection. The district court denied the motion, and the employer appealed.

Implicit repeal. Although the employer asserted that its argument was based on reading the CSA and FLSA “in harmony with each other,” the court took this to mean the employer suggested that it interpret the CSA as implicitly repealing the FLSA’s overtime requirements for employers in the marijuana industry. Implicit repeal arguments are generally disfavored, as courts typically presume that Congress knows pre-existing law when it enacts new law.

Legislative intent. In the employer’s view, the purposes of the two statutes weighed in its favor. The FLSA was enacted to ensure “the orderly and fair marketing of goods in commerce;” the CSA was enacted to eliminate “commercial transactions of marijuana in the interstate market in their entirety.” For the court to find that the employee was protected by the FLSA, the employer argued, it would have to find that Congress intended to both forbid, and reward, drug trafficking.

Two wrongs don’t make a right. The court was unpersuaded by this legislative intent argument. Citing the Supreme Court’s decision in United States v. Sullivan, it noted that an employer’s violation of one federal law does not excuse it from complying with other federal laws. Applied here, the employer’s possible violation of the CSA does not excuse it from paying overtime wages. Holding that an employee in the marijuana industry is entitled to overtime wages does not contradict the purpose of the CSA.

History of FLSA amendments. The court went on to explain that the FLSA’s definition of “employee” is purposefully broad, and when Congress wanted to exempt certain categories of workers from that definition, it had done so explicitly. Notably, Congress has amended the FLSA numerous times after the enactment of the CSA but has yet to exclude employees in the marijuana industry.

FLSA promotes the CSA. Nor does the purpose of the FLSA conflict with CSA, said the court, undercutting the employer’s argument. The employer’s approach failed to acknowledge that the FLSA was enacted to promote “the health, efficiency, and general well-being of workers” in various industries and was a remedial scheme for the benefit of all workers. In fact, denying FLSA protections to workers in the marijuana industry would encourage employers to enter into illegal markets in order to avoid being subject to federal labor laws. Reading the statutes together (as opposed to implicit repeal) would discourage employers from entering illegal industries in which they would be subject to criminal prosecution in addition to federal labor and employment laws.

Greenwood. The FLSA is focused on regulating the activity of businesses, in part on behalf of the individual workers’ wellbeing, the appeals court reiterated, rather than regulating the legality of individual workers’ activities. Both the employee and the court cited the Oregon district court decision Greenwood v. Green Leaf Lab LLC, in which that court, relying on an advice memo written for the NLRB, held that a potential CSA violation is not relevant to whether employees in the marijuana industry are protected by the FLSA. Yet the employer failed to respond to the Greenwood argument.

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