Business

Does Federal Law Apply to Cannabiz? Labor Case Appeals to Supreme Court

By Hilary Corrigan May 29, 2020
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A Colorado business providing security and transport services to the marijuana industry wants the U.S. Supreme Court to review whether cannabis workers can sue their employers under federal labor law.

The petition last month from Colorado-based Helix TCS Inc. argues the court has never decided whether those working in state-legal, but federally illegal, marijuana businesses have rights under the Fair Labor Standards Act (FLSA). The move comes after Robert Kenney, a former Helix security guard, sued the company in 2017 alleging it failed to pay him overtime.

“Mr. Kenney does not have a right to sue under federal law for federally mandated overtime wages because he chose to work in an industry that’s illegal” under federal law, Helix attorney Jordan Factor with Allen Vellone Wolf Helfrich & Factor P.C. told WeedWeek.

The Supreme Court should find that “an individual perpetrating a federal drug crime is not entitled to federally mandated compensation for their efforts,” Helix’s petition argues. Helix provides various services to the industry but does not “touch the plant.”

Helix had previously sought to dismiss the case. A decision from the U.S. Court of Appeals for the Tenth Circuit last year affirmed an earlier Colorado district court’s rejection of the dismissal request. It found that employers are not excused from following federal rules just because their businesses are federally illegal. It also ruled Kenney and employees like him are not excluded from FLSA protections.

Helix argues that the circuit court’s ruling last year deepens confusion, conflict and lack of uniformity between state and federal law, regarding federal rights and protections for those in the marijuana industry.

“Given the spate of states legalizing marijuana, the conflict, confusion, and lack of uniformity between federal and state law is only getting worse,” the petition to the high court states. “The issues presented in this case are critical because a decision from this Court will—unless and until Congress lifts the prohibition on marijuana trafficking—define the relationship and increasing conflict between federal law and the growing number of state statutes legalizing and regulating marijuana.”

“You don’t get to pick and choose”

Kenney’s attorneys argue the case is a simple FLSA dispute, unchanged by the federal Controlled Substances Act.

“Helix claims its violation of one federal law exempts it from complying with another. Just…wow,” a 2018 filing from Kenney’s legal team states. “Such a finding would not only result in lawlessness but would also run afoul of the remedial purpose of the FLSA and Congress’ intent to protect both employees from unfair labor practices and employers from unfair competition practices.”

These companies still have to pay taxes, Lindsay Itkin, an attorney with Josephson Dunlap LLP, which represents Kenney, said this week. During prohibition, bars still had to pay their bartenders overtime, she pointed out. And illegal immigrants violate federal immigration laws by working, yet companies still have to pay them overtime.

“You don’t just get to say, ‘I don’t want to follow that federal law because it’s costing me money,’” Itkin said. “You don’t get to pick and choose.” It’s especially important for workers to maintain their rights in an industry that is striving for legitimacy, she said.

The Supreme Court hears a very limited number of cases requested of them. Itkin said her team is discussing options now, including about responses to the petition.

“I would be surprised if they took the case on, but we are more than happy to keep fighting for our client’s rights,” Itkin said.

If the Supreme Court declines, then the case would start-up in district court in Colorado, she said. The earlier district and circuit court rulings have addressed the dismissal request, so the discovery work and arguments over the merits of the case itself have not yet gotten underway.

There are six plaintiffs, including Kenney, although the number could grow if more people have a claim against Helix, Itkin said.

Federal protection question

Helix took the Supreme Court route because it believes that until marijuana is federally legal and can enjoy all the benefits other businesses enjoy under federal law, it should not have to defend a lawsuit in federal court under federal law brought by an employee “who went into the industry with his eyes wide open,” said Factor, Helix’s attorney.

Everyone working in this industry knows they forego federal protection and federal benefits because it’s an illegal industry, he said. Kenney worked as a security guard, with a firearm, at grow facilities, dispensaries, and in vehicles transporting marijuana and cash.

“People have gotten very long prison sentences for doing the same thing,” Factor said.

According to Factor, Kenney had been paid overtime when he worked as a guard. But when he was promoted to supervisor, he took part in a program that let him choose to get stock in the company instead of overtime. That’s the period that’s under contention.

Helix is asking the Supreme Court to rule cannabis industry employees can’t sue their employers under federal law. Marijuana is legal under state law and state law provides ample protection, Factor said. If the Supreme Court does not take the case and it goes to trial instead, Helix would show that it has complied with federal employment law, Factor said.

“The Supreme Court has never heard a case like this,” Factor said. He argues it would give the court the opportunity to provide much-needed direction and clarity to the industry on the rights it has under federal law, while marijuana remains federally illegal. And that’s important to do as more states legalize and confusion grows over federal and state law conflicts.

If the court acts on it, that may “prompt Congress to finally pass legislation in this area,” Factor said. “Helix would welcome the day that marijuana is no longer illegal under federal law.”

Unintended consequences?

Griffen Thorne, an attorney at Harris Bricken, is not involved in the case but has watched it and written about it at the firm’s Canna Law Blog. If the Supreme Court did take it, he expects it would uphold the circuit court ruling.

“It’s a real hard sell, I think,” Thorne said of the petition’s argument. “In my view, it’s just like paying taxes.”

He also wonders if some negative unintended consequences could result from a high court review. He pointed to the court’s conservative majority, plus an Administration that has taken some actions that have not been favorable to the industry. A strongly written opinion hammering home that cannabis is illegal could scare investors and participants from the industry, if they fear the federal government may step up its enforcement, he said.