Kenney v. Helix TCS, Inc.: Leveling the Playing Field in the Marijuana Industry and Beyond

Are employers in the marijuana industry excused from complying with federal law because their business practices are federally prohibited? In the recent case of Robert Kenney v. Helix TCS, Inc.[i], the U.S. Court of Appeals for the Tenth Circuit answered that question with an unequivocal “no.”

The plaintiff in that case, Robert Kenney, was a former security guard for the defendant, Helix TCS, Inc., a private company that provides security services to businesses in Colorado’s state-sanctioned marijuana industry. Kenney alleged that he regularly worked more than 40 hours per week, but Helix refused to pay him overtime in violation of the Fair Labor Standards Act (FLSA). Helix moved to dismiss Kenney’s complaint on the ground that the FLSA does not apply to workers such as  Kenney because Colorado’s marijuana market is a violation of the Controlled Substances Act , which still classifies marijuana as a Schedule I illegal drug. The district court denied Helix’s motion to dismiss and then certified Helix’s interlocutory appeal of that order.

On appeal, Helix noted that individual states’ decisions to legalize marijuana for medical and recreational use have not prevented citizens from being imprisoned or suffering forfeiture of property for marijuana-related offenses at the federal level. Helix argued that continuing to impose criminal sanctions on individuals for marijuana-related offenses under federal law, while simultaneously holding that federal law provides those individuals with minimum wages for the same conduct, would be an “absurd” result. Helix contrasted the purpose of the FLSA, which it identified as ensuring the free flow of commerce and the orderly and fair marketing of goods, and the purpose of the CSA, which it identified as eliminating commercial transactions of marijuana all together. Helix argued, “Congress did not seek to level the same playing field that it tried to demolish.”

The Tenth Circuit disagreed with Helix’s reasoning. In an opinion by Senior Judge Stephanie K. Seymour, the court explained that employers have not typically been excused from complying with federal law simply based on their other federal violations. Take, for example, the fact that Al Capone was convicted in 1931 for failing to pay taxes on illegally-acquired income. The court noted that the FLSA specifically excludes a number of employees from its protections, but employees in the marijuana industry are not identified. The court then went on to explain that the FLSA is not intended to level the playing field withinthe marijuana market but rather beyond it. In other words, employers in the marijuana industry should not gain an unfair advantage over other employers who are required to comply with federal law. The court explained that depriving workers in the marijuana industry of the FLSA’s protections would encourage employers to engage in illegal markets so that they would be subject to fewer federal requirements. The Tenth Circuit rejected Helix’s interpretation of the federal statutes and affirmed the district court’s denial of its motion to dismiss.

This case presents a recent illustration of the uneasy relationship between the increasing legalization of marijuana at the state level and the federal government’s continued criminalization of same. With medical marijuana currently legalized in 33 states and recreational marijuana legalized in 11 states and the District of Columbia, cannabis has become a multibillion dollar industry. As the industry continues to grow, we can no doubt expect to see more legal challenges that highlight the complex interplay between federal and state law in this rapidly developing area. At least for now, the Tenth Circuit has made it clear that if you operate a marijuana-related business in a legal state, you should expect to comply with the same federal laws as all other businesses.

[i] No. 18-1105, 2019 WL 4557433 (10th Cir. Sept. 20, 2019)

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