Pay those employees, non-exempt and otherwise.

I recently wrote about a case in the Tenth Circuit, Kenney v. Helix TCS, Inc., where the Court of Appeals is asked to decide if the Federal Labor Standards act (FLSA) provides wage and hour protection to employees of cannabis businesses. That case hasn’t seen much movement since I wrote about it, but its decision could have a significant impact on a case recently filed in Federal District Court in Oregon.

Michael Garity has filed a state and FLSA wage and hour claim against his former employer, WRD Investments LLC (“WRD Investments”). According to the complaint, Mr. Garity was hired by WRD Investments to provide expertise and labor in support of WRD Investments’ marijuana grow near Junction City, Oregon.

Mr. Garity alleges he was a “non-exempt” employee for WRD Investments. His status as a non-exempt employee would have required WRD Investments to pay Mr. Garity at least minimum wage for all hours worked and overtime rates for all hours worked over 40 hours per week. In the complaint, Mr. Garity alleges that between March 2016 through May 2017 he may have worked approximately 2500 hours without any compensation. He further alleges that he frequently worked over 40 hours per week without overtime pay.

Mr. Garity’s complaints do not stop there. Mr. Garity also alleges that WRD Investments failed to provide him with itemized statement of pay and failed to establishe regular pay days in violation of Oregon laws. The Complaint also states Mr. Garity incurred expenses on behalf of WRD Investments such as using his personal vehicle to conduct WRD Investment business without reimbursement from WRD Investments.

Mr. Garity’s complaint requests actual damages for unpaid minimum wage and overtime compensation plus an equal amount as liquidated damages and reimbursement for business related expenses, penalty wages under Oregon wage and hour laws, and attorney fees and costs. Mr. Garity’s complaint does not lay out a number, but based on my calculations WRD Investments could be on the hook for around $40,000 related to the FLSA claims alone. Should this matter proceed far into litigation, WRD Investments could also be on the hook for attorney fees which could eventually surpass the $40,000 number.

The Kenney case mentioned at the beginning of this post may have significant impact on Mr. Garity’s claims. Mr. Garity’s case is filed in a Ninth Circuit district court and nothing binds a Ninth Circuit court to follow a decision from the Tenth Circuit. However, the Ninth Circuit district court could be persuaded by the Tenth Circuit Court of Appeals decision and decide to follow its precedent. Alternatively, it could choose to ignore the precedent and decide to create its own path. Either way, it will be very interesting to see the legal arguments that are made in Mr. Garity’s case regarding whether the FLSA protects marijuana employees.

Regardless, a good lesson can be gleaned from Mr. Garity’s complaint. First, be sure you are properly classifying your employees as exempt or non-exempt. Second, and perhaps even more importantly, ensure that you are properly paying your employees. If you are ever concerned you are in violation of wage and hour laws, its always a good idea to have a cannabis employment law attorney review your payment procedures. It may cost some money up front but will likely save you much, much more in the long run.

oregon employee medical marijuanaIt’s 2019 and Oregon employees can still be terminated for off-work marijuana use. That includes not just recreational use, but off-work medical use by registered cardholders in the Oregon Health Authority system– even patients with debilitating medical conditions like cancer or epilepsy. This means that Oregon, which has been on the forefront of decriminalization and legalization of marijuana, is no better than the most conservative jurisdictions when it comes to off-work use. What gives?

Back in 2017, the Oregon Senator Floyd Prozanski introduced Senate Bill 301. The bill would have protected employee off-work marijuana use—meaning employers could not terminate an employee for using marijuana outside of working hours, so long as it did not lead to on-the-job impairment. The bill faced opposition from industry groups related to worksite safety and federal law. Accordingly, the bill was amended to protect only off-work use by medical marijuana card holders, but this was still not enough to secure passage.

Never one to be stopped by a little failure, Senator Prozanski is back at it and has proposed a new bill, Legislative Concept 2152. The proposed bill is short and sweet. The relevant portion simply states:

It is an unlawful employment practice for any employer to require, as a condition of employment, that an employee or prospective employee refrain from using a substance that is lawful to use under the laws of this state during nonworking hours except when the restriction relates to a bona fide occupational qualification or the performance of work while impaired.”

However, it seems Senator Prozanski may not have learned any lessons from the 2017 session. The proposed bill does little to address industry concerns related to federal government contractors. Businesses that contract with or receive grants from the federal government are required to comply with the federal Drug-Free Workplace Act. As long as “marijuana” remains a federally controlled substance, these businesses must ensure their employees are drug-free to continue to contract with or receive grants from the federal government. If the Oregon employer does not comply with the federal Drug-Free Workplace Act, they cannot receive the contract or grant. However, if they terminate an employee for off-work marijuana use they would violate the proposed legislation.

Proponents of the proposed bill have stated the bill would not allow employees to use marijuana if a collective bargaining agreement prohibited it. However, a quick glance at the bill demonstrates that it does not clearly address that issue, and seems to continue to ignore the Drug-Free Workplace Act requirements altogether.

Many other states have managed to pass laws that protect employees’ off-work use of marijuana. A careful review of other state laws demonstrates that they specifically address the federal concerns. For example, Arizona’s statute protecting off-work medical marijuana use provides:

Unless a failure to do so would cause an employer to lose a monetary or licensing related benefit under federal law or regulations, an employer may not discriminate against a person in hiring, termination, or imposing any term or condition of employment…based upon…the person’s status as a card holder.”

Legislative concepts are a “draft of an idea for legislation.”  Perhaps there is still time for Senator Prozanski to draft a robust bill that addresses the concerns of businesses that rely on federal contracts and grants, and perhaps 2019 truly will become the year employee off-work use of marijuana is protected in Oregon. Stay tuned.

class action marijuana cannabisMedMen, a popular California cannabis retail company, has been hit with a class action lawsuit from former employees. Class action lawsuits are no joke. These lawsuits involve a few plaintiffs suing on behalf of multiple similarly situated plaintiffs. The claims, money, and other associated costs add up very fast.

In MedMen’s case, two former employees, Chelsea Medlock and Anthony Torres, allege that MedMen failed to pay them for all hours worked, failed to pay overtime wages, failed to provide mandatory meal and rest breaks, and failed to keep accurate records of employees hours worked. Medlock and Torres worsened the blow by bringing the lawsuit as a class action on behalf of all MedMen employees (current and former) from the last four years. If the class is “certified” by the Superior Court of the State of California, where it was filed, the class of plaintiffs could include thousands of employees.

Specifically, Medlock and Torres allege MedMen required them to perform work “off-the-clock” for which they received no pay. Medlock and Torres are seeking minimum wage, liquidated damages, interest and attorney fees for the unpaid time. Although Medlock and Torres have not made specific allegations in the complaint, Starbucks was recently ordered to pay an employee $102.67 for the time the employee spent locking up the store and setting alarms, without compensation. While this amount may seem small, if Medlock and Torres get their class certified, MedMen could be paying out a similar amount or something much greater, to thousands of employees.

Medlock and Torres also allege in their lawsuit that MedMen failed to pay employees required overtime wages. In California, employers must pay overtime rates to non-exempt employees who work in excess of eight hours per day. Medlock and Torres also allege they either were not provided the required meal and rest periods, or were not paid for the meal periods they had to work during. Medlock and Torres have not identified specific dates these alleged violations occurred, but if done over a significant period of time, the back wages and penalities owed will add up quickly.

In addition to their claims relating to their wages, the plaintiffs allege they were not provided accurate wage and hour statements as required by the California Labor Code and failed to provide accurate payroll records. Failure to provide accurate wage and hour statements can result in a penalty of up to $4,000 per employee.

Finally, Medlock and Torres allege that MedMen failed to timely issue final paychecks. Failure to issue final paychecks can result in penalty wages of up to thirty days of pay at the employee regular rate of pay.

In short, Medlock and Torres’s claims are numerous and serious. If they have merit, MedMen will have to pay pack wages and may be hit with treble damages, attorney fees, and interest. Of more important, if the class is certified, MedMen will have to pay those types of damages to potentially every employee they employed in California over the last four years.

Cannabis companies are growing. With growing businesses come more employees. More employees means a higher chance of litigation. For these reasons, if you are ever unsure whether your employment practices are compliant with state and federal law, it is best to have a cannabis employment attorney evaluate and provide advice. You may be able to stave off litigation, or, if you are hit with a lawsuit, you’ll have procedures in place to adequately fight it before it gets too far.

employment law oregon cannabisOwning a cannabis business can present formidable challenges. Adhering to the OLCC rules can be complex in and of itself, but your business must also comply with an array of state and federal employment laws and regulations.

If you are an OLCC licensed cannabis business with employees, Harris Bricken employment lawyer Megan Vaniman will present a free webinar tomorrow, December 12, 2018 at 12pm PST to help you better understand these issues. Throughout the presentation, Megan will discuss how to navigate employment law for cannabis businesses, and provide you with tips and tricks to ensure compliance. Topics Include:

  • What to consider when hiring
  • Oregon’s sick leave requirements
  • Oregon and Portland’s “ban-the-box” ordinance
  • Final pay checks
  • Independent Contractor vs Employee designation

Moderated by Harris Bricken cannabis attorney Vince Sliwoski, Megan will also address audience questions throughout the presentation. Please register by clicking here. For any additional questions regarding the webinar, please contact firm@harrisbricken.com. We hope you can join us!

marijuana montana employmentMedical marijuana is legal in Montana. Unfortunately, that does not prevent local employers from terminating workers for legal, off-work use of marijuana in the state.

In 2010, while already employed by Charter Communications, LLC, Lance Carlson was issued a medical marijuana card under Montana Medical Marijuana Act to treat chronic low back and stomach pain. The medical marijuana card allowed Mr. Carlson to legally use marijuana to treat the conditions. In 2016, Mr. Carlson was involved in a work-related motor-vehicle accident. A urinalysis that followed the accident tested positive for THC. Mr. Carlson was promptly terminated as a result of the drug test.

Mr. Carlson initially brought suit against his former employer in Montana state court, alleging the former employer had wrongfully terminated him in violation of the Discrimination Under the Montana Human Rights Act— specifically, that his employer had discriminated against him because of a disability. The case was removed to Federal District Court. Charter Communications quickly moved for a motion to dismiss arguing that the Montana Marijuana Act allowed them to terminate Mr. Carlson for his medical marijuana use. Mr. Carlson appealed the decision to the Ninth Circuit.

The Ninth Circuit, in an unpublished opinion, upheld the district court’s dismissal. The Ninth Circuit specifically relied on the carve-out of Montana’s medical marijuana act that states employers are allowed to prohibit employees from using marijuana. Mr. Carlson challenged that exact regulation as unconstitutional. However, the Ninth Circuit determined it was constitutional because it was “rationally related to Montana’s legitimate state interest in providing careful regulation of access to an otherwise illegal substance for the limited use by persons for whom there is little or no other effective alternative…”

Given the general trend for acceptance of marijuana, the Ninth Circuit decision is disappointing, even though it is unpublished and therefore sets no legal precedent. However, the problem does not generally lie with the Ninth Circuit, but instead with Montana’s state law. Now is the time to lobby Montana officials to have the Montana Medical Marijuana Act revised to protect employee’s off-work medical marijuana use.

Montana is not alone in allowing employers to terminate employee for their legal off-work use of marijuana. Oregon, similarly, has a statute that does not require employers to accommodate employees’ off-work use of medical marijuana. Way back in 2010, the Oregon Supreme Court ruled that the statute prohibiting disability discrimination in employment does not protect medical marijuana users. Washington’s laws do not require employers to accommodate employee’s medical marijuana use either. Colorado, another state on the forefront of adult use legalization, still allows employers to terminate employees for medical marijuana use, too.

While Oregon and California have struggled to pass legislation protecting employee’s off-work medical marijuana use, other states have managed. These laws typically create a carve-out for employers who contract with the federal government and therefore are required to have a drug-free workplace. Federal legislators also have recently introduced legislation  to protect off-work marijuana use. Currently the bipartisan bill is stalled in the Oversight and Government Reform Committee.

I suspect eventually the states discussed in this blog post will catch up with the changing of the times, but until then, be aware that many states allow employers to terminate employees for their legal use of marijuana—medical or otherwise.

Editor’s Note: This blog post first ran on December 6. We are re-publishing it here because a platform glitch erased the initial publication.

Legalized recreational cannabis businesses are still new in California. As a cannabis business owner, you may be thinking that a great way to protect your confidential information and prevent your employees from leaving would be a non-compete agreement. Think again. Not only are non-competition agreements unenforceable and prohibited in California, but they can come with criminal sanctions if an employer requires an employee to enter into a non-competition agreement as a condition of employment. In other words, don’t even think about entering into non-competition agreements with you California cannabis employees.

Many cannabis companies may try another route to protect their confidential business information and get employees to stick around through “non-solicitation agreements.” Non-solicitation agreements are not as restrictive as non-competition agreements and generally are not prohibited by California law. Non-solicitation agreements typically prohibit employees from taking any actions that will cause any employee, customer, or vendor of the employer to change its relationship with the employer. California courts will carefully scrutinize non-solicitation agreements to ensure they are not overly broad and therefore crossing the line from non-solicitation into non-competition. A recent case from the California Court of Appeals demonstrates that the courts are continuing this tradition and carefully examining non-solicitation agreements and only enforcing them if they are true non-solicitation agreements.

california cannabis nonsolicitation noncompete employeeIn AMN Healthcare Inc v. Aya Healthcare Services Inc, AMN Healthcare required employees to sign a non-solicitation agreement preventing them from soliciting other employees of AMN Healthcare, to leave the service of AMN Healthcare. AMN Healthcare required a recruiter it hired to sign the non-solicitation agreement. The recruiter then went to work for Aya Healthcare, which practiced in the same field as AMN Healthcare. The recruiter, pursuant to the non-solicitation agreement was not allowed to recruit employees from AMN Healthcare. Litigation ensued.

The Court of Appeals determined the broad language of AMN Healthcare’s non-solicitation agreement violated California’s Business and Professions code because it restricted the employee’s ability to freely engage in a lawful profession or trade. Specifically, the recruiter could not freely recruit from AMN Healthcare, her exact professional requirements. While the Court of Appeals decision turned on the recruiter’s specific issue, the Court went further and noted AMN Healthcare primarily employed travel nurses for a period of 13 weeks or less. The AMN Healthcare non-solicitation agreement was to be in effect for at least one year following the end of the employment relationship. The Court found this to be overly restrictive given that most of the nurses were employed for such a short period. Overall, the court determined the non-solicitation agreements ANM Healthcare required employees to sign were unenforceable.

What does this mean for your cannabis company? Non-solicitation agreements can be useful tools to help protect confidential information and protect employees from jumping ship. However, they need to be carefully crafted to be enforceable. There is little point in requiring employees to sign an unenforceable non-solicitation agreement. More importantly, non-solicitation agreements need to be carefully drafted to ensure they are not actually non-competition agreements that could violate the Business and Professions Code, and subject your cannabis company to criminal sanctions. If you are interested in a non-solicitation agreement, it is always best to consult a cannabis employment attorney to draft a strong one that will protect your interests.

FLSA cannabis marijuana employment

As we all know, cannabis remains a federally controlled substance, and therefore illegal at the federal level. However, most states have some form of legalization. I have always advised my cannabis business clients to comply with both state and federal laws when it comes to employment laws. It seems to be the safest bet to ensure cannabis companies are not sued by employees for violating federal laws, and it seems to be the smart move in terms of keeps the feds out of their state legalized cannabis businesses.

Recently, a lawsuit arose in the Tenth Circuit challenging whether the Federal Labor Standards Act (FLSA) was meant to provide wage and hour protection to employees of cannabis businesses. In Kenney v. Helix TCS, Inc., the Tenth Circuit will decide whether the FLSA applies to such businesses. The FLSA sets federal wage and hour requirements and sets the standards for when employers must pay employees overtime wages.

In the litigation at issue, Helix TCS, INC. (“Helix”) provides security services to cannabis businesses. Kenney, an employee of Helix, was classified as an exempt employee, meaning Helix did not pay him overtime pursuant to the requirements of the FLSA. Kenney brought suit against Helix claiming he was misclassified as exempt and should have been paid overtime.

Helix moved to dismiss the case, arguing that Kenney was not entitled to the protections of the FLSA because cannabis was entirely forbidden under the CSA. The district court denied the motion to dismiss but certified the ruling for immediate appeal to the Tenth Circuit Court of Appeals.

On Appeal, Helix contends that its employees are not entitled to the protections of the FLSA. Helix’s main argument is that all participants in state recreational marijuana industries assume the risk that their activities will subject them to federal criminal sanctions and therefore they are not entitled to benefits under federal law, and cannot expect federal court to aid their conduct. Essentially Helix is arguing that the federal government would be assisting employees in drug trafficking if they afforded the employees the protections of the FLSA.

It remains to be seen whether the Tenth Circuit will buy Helix’s argument (and whether any of Helix’s remaining employees will want to stick around, for that matter). Helix clearly has the means to fight Kenney’s allegations. Perhaps Helix’s costs will increase substantially if they must pay all security guards overtime and litigation makes sense for them. However, litigation is extremely expensive, and Helix will have to balance those two issues as it proceeds.

In the meantime, best practices are to ensure your cannabis business is paying employees correctly under both state and federal wage and hour laws. If you pay your employees what they deserve, that alone may save you from a lawsuit. That sounds much better than fighting a wage and hour claim through the federal court of appeals.

oregon cannabis employment law webinar

If you missed our October 11 event on employment law for Oregon cannabis businesses, fret no longer. On December 12, 2018 at 12pm PST, Harris Bricken employment lawyer Megan Vaniman will present the first unit of our lunchtime employment law webinar series. The webinar will last an hour or so.

Megan will discuss how to navigate employment law for cannabis businesses and the employment laws that most affect cannabis businesses in Oregon. Most importantly, she will provide you with a whole host of tips and tricks to ensure solid management and compliance, and take questions along the way. Topics will include:

  • What to consider when hiring
  • Oregon and Portland’s “ban-the-box” ordinance
  • Oregon’s sick leave requirements
  • Final paychecks
  • Independent contractor versus employee designations
  • OLCC issues

With moderator Vince Sliwoski, Megan will address audience questions throughout the presentation. To register, please go here. Should you have any questions, please feel free to reach us at firm@harrisbricken.com.

If your cannabis business is located in Washington or California, don’t worry–we’ve got you covered. Stay tuned for webinars on cannabis employment law in Washington and California in the new year!

oregon cannabis salesperson representative

Outside sales people can be a great tool to sell your cannabis product. They may be invaluable to your company. In Oregon, outside sales people may be exempt from minimum wage and overtime requirements if certain requirements are met. Lately, we’ve seen more and more Oregon marijuana companies start working with outside sales people (sometimes called a “sales representative”, “account representative”, etc.) in order to get a leg up in the highly competitive Oregon industry.

As with any sort of employment-adjacent relationship, working with outside salespersons is covered by administrative rules, in this case through the Bureau of Labor and Industry (BOLI). As such, OAR 839-020-0005(4) defines an “Outside Sales Person” as:

an employee who is customarily and regularly engaged away from the employer’s place of business and the salesperson is employed for the purpose of making sales or obtaining orders or contracts for services or for use of facilities for which a consideration will be paid by the client or customer, and the person’s hours of work spent engaged in activities other than sales does not exceed 30 percent of the hours worked in the workweek by non-exempt employees of the employer.

That’s a mouthful: Let’s look at how that might work in practice. A producer could have an employee that travels to processors, wholesalers, or retail stores to induce them to buy the producer’s product. The employee may provide samples to the prospective buyer in accordance with Oregon Liquor Control Commission (OLCC) rules, and induce them to enter into a contract to purchase the producer’s flower. If the employee is performing this type of work, outside of the producer’s farm a majority of the time, they may legally be qualified as an outside sales person. If so, minimum wage and overtime laws would not apply to the outside sales person.

For practical purposes, this means you would not be required to pay the outside sales person the current Oregon minimum wage of $10.75 per hour, nor would you be required to pay the sales person time and half for when the person works over 40 hours in a week. However, if you employ an outside sales person, you shouldn’t take this as permission to pay them less than the current minimum wage. The exemption exists for outside sales persons because they are typically paid commission wages. Commission wages is typically a percentage of sales. If an outside sales person is unable to enter into enough contracts to obtain minimum wage based on their commission status, the exemption is there to protect employers from having to supplement their wages to ensure they are receiving minimum wage.

Because we are talking cannabis, things are more complicated, of course, especially where a cannabis employer chooses to pay an employee commission wages instead of hourly wages. Under OLCC rules, any employee that receives commission payments is considered a person with a “financial interest” in the business. Persons with a financial interest in a cannabis business must be disclosed to the OLCC, and in certain circumstances, the OLCC may require the person to undergo a background check.

What the take-away from this information? An outside sales person can be a great employee to have as a cannabis business in Oregon. In certain circumstances, you may not be required to pay the employee minimum wage, and instead, create a commission structure for the employee’s wages. However, before this is done, the employee should be disclosed to the OLCC as a person with a financial interest in the business. If you are ever unsure if an employee qualifies as an outside sales person or needs to be disclosed to the OLCC, it’s always best to consult an attorney before making any changes that could have legal consequences. And it’s very important to have the scope of the relationship in writing, in order to protect your business from BOLI and other claims.

This series of posts has been exploring Oregon Bureau of Labor and Industries (BOLI) proposed rules implementing Oregon Equal Pay Act and how it will affect cannabis businesses. Last week, I discussed what “work of a comparable character” means. The week before that, I explored what compensation is. This week, I’ll dive into the systems employers can implement to pay employees doing work of a comparable character different compensation.

The Oregon Equal Pay Act prohibits employers from paying employees performing work of a comparable character different compensation unless the entire compensation differential is based on a bona fide factor related to the position in question. The statute and rules only allow employers to consider certain “bona fide factors.” Employers may pay employees differential wages for work of a comparable character if it’s based on: 1) a seniority system; a merit system; a system that measures earnings by quantity or quality of production; 3) workplace location; 4) travel requirements; 5) education; 6) training; and 7) experience. Let’s unpack these a little bit.oregon marijuana equal pay

A seniority system is defined as a system that recognizes and compensates employees based on length of service with the employer. A seniority system should be applied consistently. Meaning, If Budtender A is hired at $14 per hour and is raised to $16 per hour after two years of employment, Budtender B should receive the same raise after two years of employment.

A merit system provides for variations in pay based upon employee performance as measured through job-related criteria. BOLI has provided an example of “a written performance evaluation plan or policy that measures employee performance using a set numerical or other established rating scale.” An employer should use such performance evaluation to determine employee pay rates.

A system that measures earnings by quantity or quality of production include piece rate work. So for example, you could pay joint-rollers a certain amount for each joint rolled. An employee who rolls more joint would be paid more.

Work place location can be a consideration for differential wages. When determining if workplace location should factor into employee’s wages, the employer should consider: cost of living; desirability of worksite location; access to worksite location; minimum wage zone; or wage and hour zones.

Employers can also consider necessary and regular travel. This does not include consideration of normal travel between home and work.

When considering education, training, and experience, employers should consider substantive knowledge acquired through coursework, experience in the job field or trainings attended.

The rules require employers show a “devised coherent, consistent, verifiable and reasonable method.” This means more than an ad hoc decision to pay one budtender more than another. Instead, employers should have written policies describing how it pays its employees. This will require work—but in the long run could save you from BOLI penalties or a civil lawsuit from an employee (which is happening more and more in the industry as of late).

If you need assistance drafting compensation plans consult an attorney or a certified human resources specialist.