Federal Wage Overtime Law: Cannabis Employees Not Protected?

In 2017, a security guard working in the cannabis industry, protecting growers and sellers, sued his Colorado employer on behalf of himself and all other security guards working for the company in the last three years claiming he was never paid for overtime, though he regularly worked more than 40 hours a week. The employer brought a motion to dismiss the employee’s claim, arguing he was not subject to Fair Labor Standards Act (FLSA) protections for overtime because he was working for a company that deals with a substance considered an illegal drug under federal law. The company further argued the employee’s work violated the federal Controlled Substances Act (CSA) and, therefore, he cannot receive any protections under the FLSA.

The company’s motion to dismiss was denied by the U.S. District Court for a number of reasons, including lack of support in case law and because other courts have held FLSA protections are not impacted by a CSA violation. Moreover, the court made a comparison of the illegal nature of the cannabis industry under federal law to businesses that violate federal immigration laws to show that those businesses in violation of federal immigration laws are still required to comply with other federal laws – so the employer here should be required to follow FLSA overtime laws.

The employer appealed to the Tenth Circuit Court and oral arguments were held on November 15, 2018. Attorneys for the company argued that its security guards, and all employees for that matter, should not be allowed to pursue claims of unpaid overtime under the FLSA due to the inherently illegal nature of their work under federal law.

SECURITY GUARDS = DRUG TRAFFICKERS?

While the company argues that FLSA protections only apply to legal businesses and that the work the employees do qualifies as trafficking an illegal drug under federal law, counsel for the employees told the court there is no requirement within the FLSA that employees must be engaged in lawful businesses to obtain protections. In fact, Congress has had the opportunity to ban certain employees from protections under the FLSA, but has chosen not do so. Counsel for the employees also argued the implications of allowing a federally illegal business out of its FLSA obligations would essentially be giving it a benefit over legal businesses and result in treating illegitimate businesses more leniently than legitimate ones.

Although the Tenth Circuit has taken this matter under advisement and will not issue a finding for months, the lower court ruling and the appellate oral arguments highlight a gray area of federal protections for a business or industry that is legal under state laws, but is still considered illegal under federal laws. This case also presents an interesting topic for businesses to consider, especially those in cannabis or immigration, when it comes to deciphering the reach of federal protections for employees engaged in illegal work under federal law. If the court allows a federally illegal business to skirt federally mandated protections for its employees, it may open up a new door for businesses to argue its own business or industry is not covered under the FLSA or other federal protections.

If you have questions regarding this recent case or would like to discuss specific questions you may have about your own business and its requirements to adhere to federal or state laws, please contact your Thompson Coe attorney at (651) 389-5000 or at myHRgenius@thompsoncoe.com. You can also find additional information and tips for your company and HR professionals at https://thehrgenius.com/.

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