FLSA COVERS WORKERS IN THE CANNABIS INDUSTRY EVEN THOUGH EMPLOYMENT ACTIVITIES VIOLATE CONTROLLED SUBSTANCES ACT
The Tenth Circuit Court of Appeals recently issued a decision that should catch the attention of every cannabis business operating in Colorado and beyond. In Kenney v. Helix TCS, Inc., the court held that the Fair Labor Standards Act (FLSA) applies to employees working in the cannabis industry, despite the fact that such employment may violate the federal Controlled Substances Act (CSA).
This decision confirms that businesses operating in legal marijuana markets are not exempt from federal wage and hour laws. Cannabis employers should reassess how they classify and compensate workers, and employees may have valid claims for unpaid overtime or minimum wages.
Jump to: Tenth Circuit Ruling | Is Paying Cannabis Employees Legal? | Colorado Cannabis Employment Requirements | Employee Rights | Legal Compliance | Cannabis FLSA FAQs
Tenth Circuit Ruling: FLSA Applies to Cannabis Workers
The Plaintiff, Robert Kenney, filed suit against his former employer, Helix TCS, Inc., alleging that the company misclassified him and similarly situated employees as exempt from the FLSA’s overtime provisions.
Helix moved to dismiss the claim, arguing that Mr. Kenney’s work in the cannabis industry, which remains illegal under the CSA, disqualified him from the protections of the FLSA. The U.S. District Court denied the motion, and the Tenth Circuit affirmed, setting a precedent with wide-ranging implications.
Mr. Kenney’s job duties — including monitoring security cameras, patrolling premises, documenting incidents, and enforcing regulatory policies — were found to fall squarely within the protections afforded by the FLSA.
Is Paying Cannabis Employees Legal Under the FLSA?
In its analysis, the Tenth Circuit emphasized the plain language of 29 U.S.C. § 207(a)(1), which requires overtime pay for employees who work more than 40 hours per week and are “employed in an enterprise engaged in commerce.” The FLSA defines “employee” broadly, and courts have long interpreted its provisions expansively and remedially.
Helix did not dispute that Mr. Kenney worked overtime or that he was not within a statutory exemption. Instead, the company relied on an “implied repeal” theory — claiming that the CSA overrode the FLSA’s wage provisions when it comes to cannabis-related employment. The Court rejected this argument, noting that:
- Implied repeals are strongly disfavored in federal statutory interpretation.
- A business’s noncompliance with one federal law (CSA) does not exempt it from another (FLSA).
- The Supreme Court has recognized the FLSA’s “striking breadth” and purpose as a worker-protective statute.
Accordingly, the court held that employees in the cannabis industry are not categorically excluded from FLSA protections simply because their work may implicate the CSA.
Learn more about the Fair Labor Standards Act
Colorado Cannabis Company Employment Requirements
The key takeaway is clear: Cannabis businesses must comply with federal wage and hour laws.
This includes obligations to:
- Pay nonexempt employees time-and-a-half for overtime hours
- Maintain proper time records
- Avoid improper classifications of employees as exempt or as independent contractors
The Tenth Circuit’s reasoning suggests the FLSA’s minimum wage provisions also apply. Businesses that assume federal labor laws don’t apply due to the CSA may face costly litigation and back pay liability.
At Baird Quinn LLC, we help cannabis companies:
- Conduct internal compliance audits
- Correct misclassification issues
- Defend against wage and hour claims before litigation escalates
Rights of Cannabis Industry Employees
If you work in the cannabis industry and haven’t been paid overtime or minimum wage, you still have rights under the FLSA.
Employees should:
- Keep detailed records of hours worked
- Speak with counsel if they suspect they’ve been misclassified
- Know that federal law protects their right to fair pay, even in a federally prohibited industry
Our firm advises workers on how to pursue their claims while protecting their rights, including collective actions under the FLSA.
Legal Compliance Isn’t Optional: Get Trusted Advice
The cannabis industry remains a legal gray area in many respects — but federal wage laws are not one of them. The Helix decision makes clear that cannabis companies must comply with the FLSA, or face liability.
Whether you’re a business looking to avoid compliance pitfalls or an employee exploring your rights, Baird Quinn LLC is here to help. Contact us today to schedule a consultation.
Frequently Asked Questions: Cannabis Employees & FLSA
Is paying cannabis employees legal under federal law?
Yes. While the manufacturing, distribution, and sale of marijuana remains illegal under the federal Controlled Substances Act (CSA), federal courts (including the Tenth Circuit) have ruled that this does not exempt cannabis businesses from complying with the Fair Labor Standards Act (FLSA). Employers must still pay minimum wage and overtime.
What are the Colorado cannabis company employment requirements for overtime?
Cannabis companies in Colorado must adhere to both the FLSA and the Colorado Overtime and Minimum Pay Standards (COMPS) Order. Non-exempt employees working in dispensaries, grow operations, or cannabis security must be paid time-and-a-half for any hours worked over 40 in a workweek or over 12 in a single workday.
Can a marijuana dispensary classify workers as independent contractors?
Only if the workers meet strict federal and state tests for independent contractor status. Many cannabis businesses unlawfully misclassify budtenders, trimmers, or security guards as independent contractors to avoid paying payroll taxes and overtime. If an employer controls the worker’s schedule and duties, they must be classified as a W-2 employee.