Tenth Circuit Rules That FLSA Applies to Companies in Cannabis Industry

by | Jan 17, 2020 | Colorado Employment Law Blog


Last week, the Tenth Circuit Court of Appeals ruled that the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq, covers workers in the cannabis industry and requires the payment of overtime for hours worked in excess of 40 per workweek by nonexempt employees.

In Kenney v. Helix TCS, Inc., the Plaintiff, Robert Kenney, a former employee of Defendant Helix TCS, Inc. (“Helix”), asserted that Helix misclassified him and similarly situated workers as exempt from the FLSA’s overtime obligations. Helix moved to dismiss Mr. Kenney’s claim based on the Controlled Substance Act (“CSA”), 21 U.S.C. §801, et seq, arguing that Mr. Kenney’s employment activities are in violation of the CSA and are thus not entitled to FLSA protections. The district court denied Helix’s motion to dismiss.

The Tenth Circuit Court of Appeals affirmed the district court’s denial of Helix’s motion to dismiss. The Court acknowledged that Helix provides security, inventory control, and compliance services to the marijuana industry in Colorado. Mr. Kenney’s job duties at Helix included monitoring security cameras, patrolling assigned locations, investigating and documenting all facility-related incidents, and enforcing client, local, state, and federal policies and regulations.

The Tenth Circuit evaluated Helix’s assertion that the FLSA does not apply to workers in the marijuana industry as a matter of statutory interpretation. The Court began its analysis by reviewing the plain language of the FLSA. To state a claim for a violation of this FLSA provision under the statute, the Court recognized that a plaintiff merely must show that he is an employee who (a) worked more than forty hours per week, and (b) is either “engaged in commerce or in the production of goods for commerce” or “employed in an enterprise engaged in commerce or in the production of goods for commerce.” 29 U.S.C. § 207(a)(1). The Court then recognized that the FLSA exempts certain categories of employees from FLSA protections, regardless of whether they meet these requirements which did not include workers in the cannabis industry.

Helix did not dispute that Mr. Kenney worked more than 40 hours per week. Nor did Helix claim that Mr. Kenney fit within one of the FLSA’s enumerated exemptions to FLSA coverage. Instead, it argued that the CSA implicitly repealed the FLSA overtime requirement for companies in the cannabis industry. The Tenth Circuit rejected this argument, recognizing: (1) “implied repeal” arguments are greatly disfavored, (2) employers are generally not excused from complying with federal laws because of their other federal law violations, and (3) the United State Supreme Court has emphasized the “striking breadth” of the FLSA’s definition of employee, which is purposefully expansive to maximize the full reach of the FLSA. Further, recognizing that the FLSA is a remedial scheme for the benefit of workers, the Court rejected Helix’s assertion that the purposes of the FLSA conflict with those of the CSA. Thus, the Court held that Mr. Kenney and similarly situated employees are not categorically excluded from the FLSA protections.

The Tenth Circuit’s decision in Helix confirms that companies in the cannabis industry are required to comply with the overtime obligations imposed by the FLSA, even though their business remains unlawful under the CSA.  The court’s reasoning suggests that the court’s holding will extend to the minimum wage provisions of the FLSA.  Thus, employees working in the cannabis industry are entitled to both minimum wage and overtime pay for hours worked in excess of 40 in a workweek unless an FLSA exemption applies to that employee. Companies must keep in mind that they bear the burden of showing the applicability of any such exemption.