Colorado marijuana companies are subject to federal labor laws despite being illegal, court rules
Aneesh Nair | Published September 23, 2019 12:38:13 PM | Laws & Regulations

Colorado marijuana companies are subject to federal labor laws despite being illegal, court rules

A U.S. appeals court has ruled workers in Colorado’s marijuana industry are subject to overtime pay rules and other federal labor protections even if the industry itself is federally illegal.

The case at issue deals with Robert Kenney, a former employee at Helix TCS, a company that provides security and other services to marijuana companies in Colorado. In 2017, Kenney sued Helix in U.S. District Court for refusing to pay him overtime when he was regularly worked more than 40 hours a week as a security guard for Helix’s marijuana industry clients, an alleged violation of the U.S. Fair Labor Standards Act.

Helix’s attorneys moved to dismiss the case on the grounds that a federal court had no jurisdiction to hear the case “because Colorado’s recreational marijuana industry is in violation of the Controlled Substances Act,” per case documents. The district court rejected that motion but a panel of judges for the U.S. Court of Appeals for the Tenth Circuit was tapped to review that denial.

On Friday, that panel upheld the lower court’s ruling.

“The district court correctly reasoned and case law has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited,” Senior Judge Stephanie Seymour wrote.

Seymour went on to reason that denying employees in the marijuana industry federal labor protections would give their employers an unfair advantage and encourage other employers to engage in illegal activity to get around regulations.

It’s clear Colorado lawmakers already feel this way, according to Kristi Kelly, executive director of the Marijuana Industry Group, the state’s most prominent industry trade organization. When the legislature passed a new marijuana regulation sunset bill this year, it included a provision dictating companies comply with federal labor rules, Kelly said.

While she can’t speak for third-party companies like Helix, Kelly said, “Typically what we see is businesses are exceeding federal requirements.”

The suit will now head back to the district court. Rex Burch, one of the attorneys representing Robert Kenney in the case, said he’s heard from people in the marijuana industry that the court rulings add legitimacy to what they do.

“They’re not special and, in my experience, most marijuana businesses aren’t looking to be special,” Burch said. “They’re running like when you open up a business that sells anything.”

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