Yes, Cannabis Businesses Are Required to Comply with Other Federal Law

Friends,

Once again, a cannabis-related business has tried and failed to convince a court it need not follow other federal law because it violates the Controlled Substances Act (the “CSA”). On September 20, 2019, the United States Court of Appeals for the Tenth Circuit in Denver held that employers operating in the cannabis industry must follow Fair Labor Standards Act (the “FLSA”) just like any other employer.

In Kenney v. Helix TCS, Inc., Helix TCS, Inc., (“Helix”) which provides security services for businesses in Colorado’s state-licensed marijuana industry, moved to dismiss the claims of a former employee who alleged that the company misclassified him and other employees as exempt from the FLSA’s overtime obligations. Helix argued that because Kenney’s employment violated the CSA, Kenney was not entitled to protections under the FLSA.

The court, sometimes in forceful language, stated that “case law is clear that employers are not excused from complying with federal laws because of their other federal violations.” If that were the case, the court said, there was no reason for an illegal business to, for example, pay taxes (à la Al Capone). Helix should not, the court said, be excused from its obligations under the FLSA and reap an additional benefit by violating the CSA.

The court’s opinion should not be surprising or alarming. It highlights what advocates have been arguing for decades: cannabis and those who work in the cannabis industry should be treated like any other industry. It also should act as a warning to those businesses who continue to flout, sometimes quite loudly, that they need not follow the laws the rest of are required to, and usually do, follow (even if we disagree mightily).

The attorneys at McAllister Garfield have for many years assisted the cannabis industry in building a compliant industry. If you have questions or need advice to ensure compliance with not only cannabis regulations, but the myriad of state and federal laws that any business must comply with, and the various laws that cannabis businesses often run afoul of, please contact McAllister Garfield.

Sincerely,

Dan Garfield