Last month the 10th Circuit confirmed that the Fair Labor Standard Act (“FLSA”) applies to cannabis industry employees. At issue, the cannabis industry titan Helix TCS Inc. – a publically-traded company providing security, inventory control, and compliance services to the marijuana industry in Colorado. The Company’s former security guards filed a class action lawsuit alleging that they were misclassified as exempt from FLSA overtime obligations.
Weirdly enough, the Company argued that because it engaged in the illegal operation of recreational marijuana in violation of the Federal Controlled Substances Act (CSA) that federal protections do not apply. The Company argued “extending overtime benefits in this case would require the Court to find that Congress intended to both forbid (under the CSA) and reward (under the FLSA) the same conduct: drug trafficking.” The Court quickly smelled smoke and snubbed out the Company’s argument.
In its decision, the Court stated that the FLSA statutory language sets out certain categories of employees that are explicitly exempted from FLSA protections regardless of industry. Moreover, the result of enforcing the FLSA prevents unlawful businesses from procuring an unfair advantage over all other legitimate employers who are required to comply with federal overtime laws. To that end, the Court concluded that the Company’s security guards were not excluded from FLSA protections.
COUNSEL TO MANAGEMENT:
The Court’s decision aligns with a trend of Circuit Court decisions to extend federal laws to the cannabis industry in the areas of bankruptcy, trademark and patent. For California employers this decision has no effect because California has its own wage and hour regulations that exceed the federal standards. However, this decision signals the trend of our federal courts in the emerging conflict between state and federal regulations for recreational marijuana employers.