Monday, November 19, 2018
A marijuana testing facility recently argued that the federal ban on marijuana allowed the company to escape obligations under the Fair Labor Standards Act (FLSA). In Greenwood v. Green Leaf Lab LLC (Greenwood) the District Court of Oregon did not agree and cited the protective purpose of the FLSA due to the absence of on-point precedent. The District Court of Oregon in Portland (District Court) found that the FLSA did apply to employees in state-legal marijuana companies.
Greenwood was brought to court by a courier who transported marijuana samples for the defendant (Plaintiff). The defendant operates a marijuana testing facility in Portland (Defendant). Defendant classified Plaintiff as an independent contractor, despite controlling all aspects of his work. Plaintiff complained that due to his employee misclassification, he made significantly less than minimum wage. Plaintiff questioned his status as an independent contractor, and Defendent started to pay him an hourly wage. Plaintiff was fired a month later, and Defendant gave no explanation except that the business was "going in another direction."
Plaintiff brought Defendant to court, claiming Defendant violated provisions of the FLSA and Oregon wage and hour statutes. Defendant moved to dismiss the FLSA claims because it believed the claims were barred by the federal Controlled Substances Act (CSA). The District Court corrected the motion as a motion for failure to state a claim under FRCP 12(b)(6).
Defendant essentially argued that Plaintiff could not "invoke the power of a federal statute to enforce an alleged employment relationship that was based entirely on an occupation that is federally illegal." Plaintiff responded that marijuana's legality was not relevant to his claims under the FLSA because the two did not inherently conflict.
The District Court recited that “Dismissal is proper when the complaint does not make out a cognizable legal theory or does not allege sufficient facts to support a cognizable legal theory.” The District court also recognized that, "As to the specific issue raised here, the parties have not cited, and I have not found, any judicial decision addressing whether the FLSA covers employees working for state-sanctioned medical marijuana businesses."
Because the District Court had no precedent to rely on statutory interpretation of the FLSA guided its decision:
In resolving this issue of statutory interpretation I start with the premise that the FLSA is a remedial statute “to be construed liberally in favor of employees; exemptions are narrowly construed against employers." Haro v. City of Los Angeles, 745 F.3d 1249, 1256 (9th Cir. 2014). "The FLSA requires that employers comply with minimum labor standards to promote “the health, efficiency, and general well-being of workers." 29 U.S.C. § 202(a).
The District Court concluded that, due to the remedial nature of the FLSA, any possible violations of the CSA should not bar state-legal marijuana company employees from protection. The District Court reasoned that it was not comfortable "categorically excluding" workers in the medical marijuana industry when there is no express exclusion in the FLSA.
Further, the court found a legal advice memorandum written for the National Labor Relations Board (Wellness Memo) persuasive. The Wellness Memo concluded that the National Labor Relations Board had jurisdiction over labor disputes in the medical marijuana business despite federal illegality. In relevant part the wellness memo provides:
[I]t is appropriate for the Board to assert jurisdiction here even though the Employer's enterprise violates federal laws. DOJ . . . has indicated that it will not prosecute medical marijuana companies such as the Employer . . . This federal policy. . . creates a situation in which the medical marijuana industry is . . . employing thousands of people, some of whom are represented by labor unions . . . despite the industry's illegality. Moreover, another federal agency, OSHA, has exercised jurisdiction over employers in the medical marijuana industry, including the Employer, notwithstanding that such enterprises violate federal law. . . . Just because the Employer is violating one federal law, does not give it licence to violate another.
The court echoed the statement that an employer violating a law should not have a licence to violate another. It further cited the Ogden Memorandum "authorizing the medical use of marijuana" as evidence that the federal government was moving toward tolerance and that the CSA and FLSA did not inherently conflict.
Ultimately, the District Court denied Defendants motion to dismiss on these grounds. It did not make any decisions about the merits of Plaintiffs FLSA claims, and the case was eventually settled.
Greenwood is a victory for employees in the legal marijuana industry because it suggests the federal government is not going to be completely hands-off in the marijuana industry and may offer other protections over time. The Greenwood decision has already been cited in two other district court decisions (Kenney v. Helix TCS, Inc, and Tarr v. USF Reddaway, Inc.), which suggests its holding will continue to be applied. The cases that cited the opinion were in Oregon and Colorado, so we will have to wait to see if other districts continue to apply the Greenwood court's ruling.