On September 20, 2019, the United States Court of Appeals for the Tenth Circuit ruled in Robert Kenney v. Helix TCS, Inc. that the Fair Labor Standards Act (FSLA) applies to workers in the cannabis industry. This is a significant ruling because the Controlled Substances Act (“CSA”) still categorizes marijuana as a Schedule 1 drug.

Defendant Helix TCS, Inc. provides security services for marijuana businesses in Colorado. Plaintiff Robert Kenney worked as a security guard for Helix from 2016 to 2017. In 2017, Kenney filed a suit against Helix alleging that Helix misclassified security guards as exempt employees under the FLSA. He further alleged that he regularly worked more than 40 hours per week but was never paid overtime.

Helix filed a motion to dismiss Kenney’s complaint and argued that the FLSA does not apply to workers in the marijuana industry, because the marijuana industry is in violation of the CSA. The District Court denied Helix’s motion to dismiss and then certified Helix’s interlocutory appeal to the Tenth Circuit.

On appeal, the Tenth Circuit noted that whether the FLSA applied to Mr. Kenney was an issue of statutory interpretation and, therefore, the Court should look to the plain language of the statute. To state a claim for violation of an FLSA provision, an employee must merely show that he:

a) worked more than 40 hours per week and;
b) is either “engaged in commerce or in the production of good or commerce” or “employed in an enterprise engaged in commerce or in the production of goods for commerce.”

Although, the FLSA specifically exempts certain categories of employees from its protections, Helix did not contend that Mr. Kenney fell within one of the exemptions. Instead, Helix contended that the CSA implicitly repealed the FLSA’s overtime mandate for employers in the marijuana industry. 

Key takeaways for Employers in the Marijuana Industry

In rejecting this argument, the court cited Supreme Court precedent that there is a “strong presumption that repeals by implication are disfavored and that Congress will specifically address preexisting law when it wishes to suspend its normal operations in a later statute.” Not only did Congress not explicitly repeal FLSA’s application to the marijuana industry, it actually amended the FLSA after the enactment of the CSA and chose not to exclude employees in the marijuana industry from the FLSA’s protections.

The Tenth Circuit also disagreed that a ruling in favor of Mr. Kenney would conflict with the CSA and, instead, found that such a ruling furthered the remedial purposes of the FLSA. The FLSA was enacted to “promote the health, efficiency, and general well-being of workers and to prevent unfair competition.” The court held that “applying FLSA protections to workers such as Mr. Kenney will not grant these individuals surplus benefit that they cannot easily obtain elsewhere, but the reverse would excuse Helix from FLSA costs and obligations, and thereby allow it to reap additional benefit from its CSA violations.” The court found that this would encourage employers to engage in illegal markets where they are subject to fewer requirements. 

The Tenth Circuit’s decision is a significant decision for the marijuana industry. Businesses in the industry would be wise to assume that the FLSA applies to its employees because the FLSA carries significant penalties, including awards of attorney’s fees.

This article was published by Cannabis Business Executive on Wednesday, November 6, 2019 and is republished with permission.