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10th Circuit: Marijuana Businesses Still Required to Follow Federal Wage Laws

Hand holding a small marijuana leaf
By Laura Temme, Esq. on November 06, 2019

Just because your business (technically) violates one federal law, doesn't mean you're off the hook for the rest. Helix TCS, Inc., a security company that caters to state-sanctioned marijuana businesses in Colorado, claimed that because its employment activities violated the Controlled Substances Act, it did not need to follow Federal Labor Standards Act rules on overtime.

Well, it was worth a shot.

District Court Says, "Nice Try"

Throughout this case's journey through 10th Circuit courts, Helix stuck to its almost-too-logical argument: Because marijuana is still illegal at the federal level, Helix is engaged in a criminal enterprise and therefore not subject to federal employee protection laws.

The District Court rejected this argument entirely, saying case law was clear that employers are not excused from complying with the FLSA "just because their business practices may violate federal law." This type of severability makes sense - if a business could escape the obligations of all federal laws by breaking one, there would be no one left in compliance.

Court of Appeals Affirms

The 10th Circuit appeals panel affirmed the trial court's decision, denying Helix's motion to dismiss. Again, the court resoundingly disagreed with Helix's logic, stating that engaging in business practices that are federally prohibited does not exempt an employer from following the FLSA. The panel found that the plaintiff, a Helix employee who claims he was denied overtime pay, could pursue his claims in district court.

Unwilling to accept this conclusion, Helix filed a petition for a rehearing en banc. If granted, all 10th Circuit judges will weigh in on the issue (more than likely with the same result). In the meantime, employers operating in cannabusiness are better off complying with federal employment laws, as it seems the courts are not willing to throw all the rules out the window just yet.

For more information on the legal challenges facing marijuana businesses, check out FindLaw's new Cannabis Law section!

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