FLSA Applies to Employers in the Marijuana Industry

By Lindsay H. S. Hesketh

A company providing services to the Colorado marijuana industry recently moved to dismiss an employee’s claims under the Fair Labor Standards Act.  The company argued that the court lacked jurisdiction over the claim because marijuana is an unlawful substance under the Controlled Substances Act (“CSA”).  The district court rejected the argument and denied the motion to dismiss.  The Tenth Circuit affirmed.

The company argued that applying the FLSA to employees working in an industry deemed unlawful by other federal law, i.e. the CSA, would render the laws mutually inconsistent.  The company claimed that courts would be forced to find that “Congress intended to both forbid (under the CSA) and reward (under the FLSA) the same conduct: drug trafficking.”  The Tenth Circuit disagreed, relying on the broad purpose of the FLSA to benefit all workers, the lack of any marijuana exclusion under the FLSA, and the potential windfall employers engaged in the marijuana business could obtain if they did not have to comply with the FLSA.  Notably, the Court stressed that case law “has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited.”

Although this case was decided in the context of the marijuana industry, the Court’s decision pointed out that other courts have reached similar conclusions involving businesses engaged in other illegal operations.  Accordingly, companies falling under the FLSA’s definition of “employer” should ensure their compliance with its requirements (period).

Kenney v. Helix TCS, Inc., Case No. 18-1105 (10th Cir. Sept. 20, 2019).