cannabis marijuana intern
Is your “intern” really an intern?

A simple google search for “Cannabis Intern” turns up around 340,000 results. As an employment attorney, the word “intern” is a major red flag for me — right up there with “independent contractor.”  Why? Because “intern” positions are often misused and many businesses, even sophisticated ones, believe labeling someone an intern means you do not have to pay them.

Employers can—and in certain situations encouraged to—hire interns. Properly classified interns do not have to be paid minimum wage. Employers may have the best intentions hiring an unpaid or low-paid intern. They truly believe the worker will obtain important training and education from the position. That might even be true. But, if a person is providing a service for an employer and is not paid or is paid under minimum-wage, employers could be in a lot of trouble for violation of both state and minimum wage laws.

What makes an intern actually an intern rather than an employee of a company? The U.S. Department of Labor has a seven-part test for determining the status of interns . When evaluating the employment relationship between an employer and an intern a court will consider:

  1. How similar the training is to that which the worker would receive in an educational environment;
  2. The extent to which the training is tied to a formal education program with integrated coursework and academic credit;
  3. The extent to which the program accommodates academic commitments by corresponding to the academic calendar;
  4. The extent to which the internship’s duration is limited to the period of beneficial learning;
  5. The extent to which the internship complements rather than displaces the work of paid employees while providing significant education benefits;
  6. The interns are not necessarily entitled to a job at the conclusion of the training period; and
  7. The employer and the intern understand that the intern is not entitled to compensation for the time spent in training.

No single factor is determinative, but as you can tell there is a common theme of education. Typically, if the worker is receiving some sort of educational credit for the work, they are an intern. If the worker is improperly classified as an intern and has not been receiving pay, then wage and hour laws apply. As previously discussed, failing to pay minimum wage can come with hefty penalties.

If you’re considering hiring an “intern” for your marijuana business, its best to consult with an employment law expert beforehand to provide a legal analysis of whether the position is truly one fit for an intern. After all, even if a state agency considers the “intern” qualified to work in your marijuana business, that doesn’t necessarily mean you can have them work for free.

Oregon safety marijauana
The OSHA model. And a good look for cannabis business.

So, what is Oregon OSHA (“OR OSHA”)?

OR OSHA is the Oregon Occupational Safety and Health Act. This law requires employers to “furnish employment and a place of employment which are safe and healthful for employees.” In other words, employers are required to maintain safe workplaces. This means that employers are required to identify potential workplace hazards, prevent such hazards, and provide safety measures to employees to protect their health and safety, in all situations where hazards are inherent in the job or otherwise unavoidable. Does this law apply to cannabis employers? You bet.

OR OSHA also identifies certain conditions as inherently hazardous or unsafe, and regulates the condition or practice by imposing employer requirements to mitigate the condition or practice (think fall protection when on a ladder). The kind of marijuana business you run will dictate what OR OSHA regulations are triggered.

For example: marijuana producers are subject to the OSHA agricultural rules. These rules require employers to protect employees from things such as machine hazards, mold, electrical hazards, and heat exposure, among other things agricultural employees are subject to.  Marijuana processors must comply with special requirements for employees handling extraction chemicals. Retail operators must ensure employees are safe from slips, trips, and falls. Etc.

In addition to protecting employees from hazards at work, OSHA imposes reporting requirements on employers. Employers must report to OR OSHA within eight hours epodes like the death of an employee or a catastrophe. A catastrophe is defined as two or more employees fatally injured or three or more employees admitted to a hospital or an equivalent medical facility. Employers must report to OR OSHA within 24 hour of any employee being hospitalized, losing an eye or an amputation, or avulsion that results in bone loss. In addition to these reporting requirements, employers with 10 or more employees must record their injuries and illnesses that are a result of the work environment on a form called the OSHA 300 Log. Employers must also summarize the 300 log on a form called an OSHA 300-A.

Somewhat similar to the Oregon Liquor Control Commission (“OLCC”) — which is the state agency that administers marijuana licenses — OR OSHA has the power to investigate employers to determine whether or not they are compliant with OSHA requirements. OR OSHA does not have to provide advance notice of inspections, and the agency may randomly show up at an employer’s place of business to conduct an inspection.

So where might the agency show up? OR OSHA prioritizes inspections at locations that are determined to be the most unsafe. An OR OSHA investigator will investigate the employer’s property to determine if there are any violations. If there are violations, the investigator can issue a citation based on the type of violation. As with OLCC citation powers, the type of penalty associated with the citation depends on how serious the violation is.

OR OSHA safety requirements are comprehensive. The agency encourages employer compliance and has a series of free tools available to employers to assist with that compliance. OR OSHA’s most significant tool is its consultation services. Free of charge, an OSHA consultant will inspect a work site and provide safety, health, and ergonomic hazard assessments, recommendations to control and eliminate hazards, a written program evaluation, industrial hygiene services, training on health and safety topics, and assistance with safety and health programs. In short, a consultant will come out and point out potential OSHA violations and provide a plan to help with compliance.

Pro tip: A consultant is a great and free way to assess your compliance with OSHA prior to an inspector coming to your place of business.

Like with most employer regulations, compliance in the first place is the best way to avoid a hefty civil penalty or litigation. However, citations happen even when the best intentions are in place. This post has only scratched the surface of OSHA requirements. If you have additional questions, give us a call.

marijuana cannabis employment
Treat employees the same, regardless of age.

We have recently been exploring employment laws that only kick in once your cannabis company employs a certain number of employees. In the first part of this series, we discussed California’s sexual harassment policy requirements and last week we discussed federal and state leave requirements. This week we will look at age discrimination laws.

Federal ADEA

Federal and state age discrimination laws vary greatly, so it is important to know both the federal requirements and the state requirements. Both will apply to your cannabis business. The Federal Age Discrimination in Employment Act (ADEA) only applies to employers who employ at least 20 employees. The ADEA only protects employees over the age of 40. Under the ADEA, employers are prohibited from discriminating against employees in any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, benefits, and any other term or condition of employment.

Employment claims under the ADEA typically arise when younger employees are frequently promoted over older employees or when an employee is terminated and replaced by a younger person for the same position. So if your cannabis business has at least 20 employees and some of those employees are over the age of 40, be careful!

State Age Discrimination Laws

Oregon

Oregon’s anti-discrimination statute is one of the broadest in the countries. Unlike the federal ADEA, the Oregon statute applies to any employer who employs at least one person. Further, the Oregon statute protects all employees 18 and over. Like the federal ADEA, the Oregon act prohibits employers from taking adverse employment actions against employees based on their age. Employers are allowed to set bona fide occupational qualifications necessary for the normal operation of the employer’s business. An example of a lawful bona fide occupational qualification would be cannabis companies refusing to hire anyone under 21.

As previously discussed, Oregon recently passed equal pay legislation. The equal pay legislation extends to pay discrepancies based on age. Employees performing substantially similar work must be paid the same, regardless of their age, unless one of the exceptions described in the act is met. Age is likely to play a big role in the equal pay legislation since older employees likely have more experience and earn more than new hires in the same position.

Washington

Washington’s anti-discrimination statute has similar parameters to the federal ADEA. The Washington statute applies only to employers with at least eight employees and prohibits discrimination against employees aged 40 and over. Like the ADEA, all employers, including cannabis employers, are prohibiting from taking an adverse employment action against an employee because of that employees age.

California

California prohibits employers with at least five employees from discriminating against employees aged 40 and over. Like the other states, employers are prohibited from discriminating against employees in any aspect of employment, including, hiring, firing, pay, job assignments, promotions, layoff, training, benefits, and any other term or condition of employment.

Age discrimination lawsuits can come with hefty awards. It is important to know the local and federal statutes and even more important to include an anti-age discrimination statement if your employee handbook. Best bets are to review pay practices, hiring, promoting, and termination practices to ensure you are complying with both federal and state requirements. Often times an outside expert can provide a neutral analysis of your practices and how to improve in weak areas.

Some employment laws are applicable to all businesses, such as minimum wage and hour laws. Other employment laws and regulations only kick in once a business employs a certain number of employees. Last week, we discussed when California’s sexual harassment laws kick in for cannabis employers. Today we will explore the Federal Family Medical Leave Act and its state equivalents.

marijuana employment
50 is the magic number for the FMLA.

Federal Family Medical Leave Act

Although marijuana is a federally controlled substance, cannabis businesses are subject to federal employment laws like any other business. The Family Medical Leave Act (“FMLA”) is one of those laws. The FMLA is a complicated piece of legislation and frequently trips up employers, especially ones without a human resources department.

To determine if FMLA applies, employers need to ask themselves two important questions: 1) Do we have enough employees for FMLA to apply?; and 2) Does FMLA apply to this particular employee?

FMLA only applies to employers who have at least 50 employees in 20 or more work weeks in the current or previous year. If the employer meets this, then FMLA applies as to the employer.

Only eligible employees are entitled to FMLA leave. An eligible employee is an employee who:

  1. Works for a covered employer;
  2. Has worked for the employer for at least 12 months;
  3. Has at least 1,250 hours of service for the employer during the 12-month period immediately preceding the leave; and
  4. Works at a location where the employer has at least 50 employees within 75 miles.

Employees who meet all of those criteria may take up to 12 work weeks of leave in a 12-month period for any of the following reasons:

  • The birth of a child or placement of a child with the employee for adoption or foster care;
  • To care for a spouse, son, daughter, or parent who has a serious health condition;
  • For a serious health condition that makes the employee unable to perform the essential functions of his or her job; or
  • For any qualifying exigency arising out of the fact that a spouse, son, daughter, or parent is a military member on covered active duty or call to covered active duty status.

If an employee is eligible and uses FMLA leave, the employee must be restored to their original job or an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. Like all employers, cannabis employers cannot punish employees for using FMLA leave.

State Family Leave Acts

Many states, including Oregon, Washington, and California, where recreational marijuana has been legalized, have state family leave acts that are substantially similar to the FMLA.

The Oregon Family Leave Act (OFLA) applies to employers with at least 25 or more employees working in the state of Oregon. Oregon employees become eligible for OFLA leave after 180 days of employment if they averaged 25 hours per week during the 180-day period. OFLA allows eligible employees to use OFLA leave for the employees own serious health condition; a family member’s serious health condition; the birth or adoption of a child; the non-serious health condition of a child requiring home care; and bereavement leave for a family member. If an employee qualifies for both FMLA and OFLA leave, the leave runs concurrently, meaning the employee still only gets 12 weeks of protected leave. Employers are not required to pay employees for the leave under either act.

The Washington Family Leave Act (WFLA) mirrors the FMLA. Employers are covered if they employ more than 50 employees in Washington and employees are eligible under the same requirements as FMLA.

The California Family Rights Act (CFRA) allows eligible employees 12 weeks of leave in a 12-month period. CFRA kicks in for employers with at least 20 employees within a 75-mile radius. Similar to FMLA, to be eligible, employees must have worked at least one year and worked at least 1,250 hours for the employer.

Cannabis companies continue to grow and need to be aware of laws like the FMLA and their state equivalent. Cannabis companies should have a leave policy that meets the requirements of the FMLA and the state equivalent in their employee handbook. It’s best to have an expert familiar with the laws draft a leave policy.

california cannabis employee
More employees. More laws.

Cannabis companies are subject to both state and federal employment laws and regulations. Certain employment laws only kick in once your cannabis business employs a certain number of employees. This post will the first in a series to explore when different employment laws take effect, relative to the size of your workforce. Today’s post focuses on California’s Sexual Harassment Requirements.

As we have discussed in the past, sexual harassment policies and trainings are very important for every cannabis business. California’s anti-discrimination and harassment statutes and implementing rules are some of the most comprehensive in the country. California has strict anti-harassment requirements and is one of the few states that requires certain private sector employers provide sexual harassment training for managers and supervisors. The anti-discrimination and harassment statute has different requirements depending on the size of the employee workforce.

California’s Fair Employment and Housing Act (“the Act”) requires all California employers to take reasonable steps to prevent discrimination and harassment from occurring. This requirement means that employers have to: 1) distribute the Department of Fair Employment and Housing’s brochure on sexual harassment (or a writing that complies with statutory requirements); 2) post an anti-discrimination poster and; 3) develop and distribute a written harassment, discrimination, and retaliation prevention policy. The requirements of the anti-harassment and discrimination policy are extensive and specific. In general, the policy must prohibit discrimination and harassment; create a complaint process; create an investigation process; and make clear that employees will not be exposed to retaliation for reporting discrimination or harassment. To put it simply—an expert should draft your anti-harassment policy.

California cannabis businesses that employ at least 50 employees must provide at least two hours of sexual harassment training every two years to each supervisor employee and to all new supervisor employees within six months of the assumption of a supervisory position. The training must be “effective interactive training” and includes: in-person instruction; e-learning; webinars; or a using audio, video, or computer technology with any of those training methods. The trainer must be a qualified trainer which is defined as “attorneys, professors or instructors, HR professionals or harassment prevention consultants.”

The California Department of Fair Employment and Housing enforces the Act and rules. DFEH can impose a civil penalty on any employer that fails to follow the above requirements. Those penalties can range from the moderate to the severe, depending on the violation and attending circumstances. Suffice it to say that you do not want to be caught up in a state-level enforcement action.

Although Act provisions go take effect at the 50 employee threshold, any new cannabis company should have an anti-discrimination and harassment policy in place as soon as it intends to hire its first employee. As cannabis business grow, additional requirements are placed on them. California’s requirements are strict and its best to get in front of these requirements before its too late.

Stay tuned for Part 2 of this series, where I will discuss state and federal family leave requirements for marijuana businesses.

employment cannabis marijuana
Equal pay is not only the right thing to do, it’s required by the law.

Equal pay legislation is sweeping the country. Oregon, Washington, and California all have equal pay legislation on the books that directly affects cannabis businesses. These equal pay laws require employers to pay employees the same amount for substantially similar work and prohibit employers from basing salaries on employee’s sex. Oregon and California’s laws, in specific, prohibit employers from asking applicants about their past salaries. With the cannabis industry growing so quickly, it is only a matter of time before employers start tripping on these new laws.

Following the trend of these state laws, a recent 9th Circuit Court of Appeals decision similarly expanded the federal Equal Pay Act to prohibit employers from basing an employee’s pay on past salaries and likely prohibit employers from asking about past salaries.  This decision applies to businesses, included, licensed cannabis businesses, in California, Washington, Nevada, Arizona, Oregon, Alaska, Hawaii, Idaho, and Montana. The ruling is especially significant in California and Oregon because employers can now be in violation of both the state law prohibiting questions about past salary and the federal Equal Pay Act.

The 9th Circuit’s decision comes from a case called Rizo v. Yovino. The plaintiff, Aileen Rizo, was hired by Fresno County office of Education in 2009. The County set Rizo’s salary at 5% more than she had been receiving at her previous positions. The County did not consider Rizo’s qualifications when setting her salary. A few years later Rizo learned she was making less money than her male colleague who was performing similar work. Rizo brought an Equal Pay Act violation against the County.

In a lengthy decision, the 9th Circuit held that:

“prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.”

The court also stated the decision did not bar an employer learning of a past salary:

“we do not decide whether or under what circumstances past salary may play a role in the course of an individualized salary negotiation. We prefer to reserve all questions relating to individualized negotiations for decision in subsequent cases.”

What does this cryptic language mean? It means that it is probably okay for employers to ask applicants what those applicants expect to be paid, and it likely allows the employer to negotiate a salary based on the applicant’s prior salary if the employee has volunteered this information.

So in light of this ruling, what should employers do? Employers should carefully examine their pay practices. Specifically, employers should work with counsel and conduct a pay audit to determine if there are compensation gaps, the reason for the gaps, and if the gaps are not justifiable under the state and federal equal pay acts, adjust the employees’ wages accordingly. Note that under the federal Equal Pay Act and in light of the 9th Circuit’s Ruling, if you have current employees whose wages are based on previous salaries, you could be found in violation of the Equal Pay Act.

Employers should also carefully review job applications and interview procedures. The safest way to move forward is to eliminate application questions requesting past salary or wage history. Employers should also avoid questions during interviews regarding past salary history. It is okay to ask applicants what they expect to be paid, but avoid questions surrounding their past wages.

Cannabis businesses are in a unique position to get this right. Recreational cannabis is still new, and practices are still being established and refined. For cannabis start-ups, now is the time to ensure the practices you have in place comply with the law. Consult with counsel to provide a plan to pay employees or to review your current practices. For well-established cannabis businesses, it’s never too late to have an audit done or to reevaluate your practices. The more employees you employ, the more important it is to ensure compliance to avoid expensive litigation down the road.

california marijuana cannabis employment
Don’t misclassify your workers!

Independent contractors can come in very handy for a cannabis business. They may be useful for everything from developing product lines to infrastructure build-out. As a legal matter, correctly classifying workers associated with cannabis businesses as either an independent contractor or an employee is extremely important. Misclassifying an employee as an independent contractor can come with hefty civil penalties for failure to pay payroll taxes, unemployment insurance, and other state mandated benefits. Willful misclassification of workers even comes with criminal liability in some states.

California’s Supreme Court recently issued a ruling that will make it much more difficult for companies to classify workers as independent contractors in that state. In Dynamex Operations West Inc., v. The Superior Court of Los Angeles County, delivery drivers that had been classified as independent contractors filed a class action lawsuit against Dynamex for violations of California wage orders and misclassification. The Supreme Court, in a sweeping decision, eliminated the complex, ten-factor test that was used to determine if a worker was an independent contractor or an employee. The Supreme Court in Dynamex set a new, much simpler, standard. Workers are presumed to be employees of the company unless the employer can establish:

  1. “That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  2. That the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.”

Simple, right? The new test requires the employer to prove all three factors, making it more difficult to classify workers as independent contractors and not employees. This places the burden squarely on the business, and it’s a fact-intensive question. Ultimately, whether the business calls the worker a contractor or an employee makes no difference.

California is not the only state to move away from complex multi-factor tests to determine if a worker is an independent contractor or an employee. The Washington legislature is considering a similar rule and Massachusetts and New Jersey are already applying a similar test. In every case, the laws seem to be moving forward with the goal of protecting workers, even if that increases costs for businesses.

The new California rule will be most difficult on new and expanding marijuana companies, which is most of them. Many new companies typically hire independent contractors before they can afford employees. Given the Dynamex decision, California cannabis companies should carefully review their worker relationships to ensure they meet all three parts of the new test. Cannabis companies in other states should also carefully consider whether their independent contractors meet this test as well. As always, it is better to stay in front of these issues rather than fix them after litigation has started. Just ask Dynamex.

Audits are not usually met with open arms. More often than not, these invasive exercises sound awkward and even dangerous for a cannabis business. But that should not be the case! In fact, as in other industries, a preemptive employment practices audit can be a cannabis business’s best friend.

cannabis employment audit
Audits are not always a bad thing.

What is an employment practices audit?  An employment practices audit is simply scrutiny of a company’s employment practices by an outside expert. A successful audit will evaluate a company’s practices for legal compliance, provide recommendations to protect the company from litigation, and assist in the development of a strong human resources department. An audit is a good idea for any cannabis business, but it can be especially useful for start-ups. A good audit will identify weak points in the employer/employee relationship and fix problems before they arise—potentially saving a cannabis business the time, expense and the trouble of litigation.

Wages and Hours

One of the biggest liabilities employers can face in compliance with wage and hour laws. We’ve recently highlighted some of the exposures employer can face for failing to comply with wage and hour laws (here, here, and here). A wage and hour audit will examine your payroll practices to ensure employees are paid at least minimum wage, overtime is correct, and maximum work week hours are observed. A good audit will also determine if employees are accurately classified as exempt from wage and hour requirements, or whether changes are needed.

Pay Equity

Many states are passing equal pay laws—including Oregon and Washington. Equal pay laws require employers to pay similarly situated employees the same rate. An equal pay audit will examine employee job duties and responsibilities, determine if their pay is equal, and if the pay is not equal, provide an employer with a recommendation to comply with the state’s equal pay law. Some states, like Oregon, specifically provide incentives to employers for completing a pay equity audit.

Discrimination, Harassment, and Retaliation

Marijuana employers need to have critical, designated practices in place to address discrimination, harassment, and retaliation in the workplace. In fact, a good training or complaint handling system could reduce discrimination and harassment all together. An audit will examine complaint procedures, investigation procedures and discipline procedures, to ensure employer liability is minimalized. A well executed audit can also provide recommended fixes and trainings to help employees understand the seriousness of harassment and retaliation.

Cannabis Specific Matters

It may seem severe, but a cannabis company runs the risk of losing its license if the acts of its employees violate a state cannabis rule or statute. An audit can examine the practices your company has in place to help employees comply with the state cannabis rules and provide a plan for employee compliance.

Leave Practices

Many states require protected sick leave. In addition to protected sick leave, many businesses are subject to the Family Medical Leave Act or the state equivalent. An employer audit can examine whether employees are given protected sick leave in accordance with the state sick leave laws, and provide protected under FMLA and the state equivalent.

Employee Handbook Review

Employee handbooks are so very important to cannabis businesses. They should be the first place both the employer and the employee look for questions regarding leave, benefits, pay schedules, expectations and disciplinary practices, among other things. A proper audit will examine your employee handbook and determine if the handbook complies with federal and local laws and whether it needs updating (given the rapid evolution of both employment and cannabis laws, we can almost guarantee you that it does). Regardless of whether you do a full audit, an employee handbook should be reviewed by an expert at least once every two years to ensure it still complies with local laws.

Audits are not “one size fits all” and can be tailored to meet your cannabis businesses needs.  Audits can save companies a lot of money in the long run by fixing problems and instilling practices that can prevent employment related litigation before it starts.

There are no shortage of employment laws related to cannabis businesses.

Cannabis businesses, as part of a highly regulated industry, have a lot of rules to follow. In addition to state regulatory rules, cannabis businesses have to follow a multitude of other state and federal laws specific to employment. Among these, the subset of wage and hour laws are particular, fact-specific, and can be some of the most difficult to comply with. Unsurprisingly, even the most sophisticated of cannabis business owners may be unaware of some of the more obscure wage and hour laws.

When it comes to cannabis employment matters, one of the questions I see most frequently relates to final paychecks. Like many states, Oregon has complicated laws surrounding final paychecks. Knowing the requirements and complying with them to a T can save money and expensive litigation. And we have definitely seen a recent uptick in cannabis litigation related to employment (see our posts on recent filings here and here).

To begin, timely payment of final paychecks in Oregon depends on how the employment relationship was separated. If an employer terminates an employee, or the employment relationship is terminated by mutual agreement, the final paycheck is owed at the end of the first business day after the termination. This means that if you plan on terminating someone, have payroll prepared to issue a check immediately.

If, on the other hand, an employee quits with at least 48 hours notice, the final paycheck is owed on the employee’s last day of employment. This may seem harsh, and it can definitely create some logistical headaches, but there is little wiggle room on this statutory requirement.

If an employee quits without 48 hours notice, things are a bit easier on the employer’s side. The final paycheck is due within five business days, or at the next regularly scheduled payday, whichever is sooner. If the employee’s time records are required to calculate the amount owed, and they are unavailable, the employer must pay the employee what it reasonably believes is owed. If the employee later provides the time records, the employer must issue payment for any remaining amount owed within five days of receipt of the time records.

Failure to timely pay a final paycheck comes with strict and hefty penalties. Penalty wages begin from the due date of the final paycheck. Penalty wages are calculated as the employee’s regular hourly rate for eight hours per day until paid or until legal action is commenced.  Penalty wages are tricky and continue even if you have paid the employee their regular wages.  For example, let’s say an employee quits with at least 48 hours notice. She is given her final paycheck three business days after she quits. Penalty wages began to accrue on her final day, but the final paycheck did not include penalty wages. Despite the fact that she was paid her final wages, penalty wages continue to accrue until the penalty wages are paid. Penalty wages continue for 30 days or until legal action is commenced.

Penalty wages only kick in if an employer willfully fails to timely provide a final paycheck. “Willfully” sounds like it requires intent by the employer to avoid paying the wages, but court cases make it clear that much less is required. In fact, Oregon courts only require that some sort of effort by the employer be shown to make the final wage payment. Without this showing, a court will find that the employer has “willfully” fail to pay final wages.

There is only one real way to avoid wage and hour lawsuits for your marijuana business: Ensure that your practices comply with the law. The ending of employment relationship can come with a lot of stress and potential litigation. Learn and comply with wage and hour laws to reduce exposure. If you are unsure if your practices comply, it’s best to have an outside expert like an employment attorney review your practices.

marijuana employment litigation
Wage violations are often litigated, even with executive employees.

Are wage and hour claims against cannabis businesses on the rise in Oregon? It appears so. Last week we highlighted a wage claim filed against CNH Labs by a former employee. That post highlighted some of the consequences cannabis employers can face when they fail to pay employees. But what about liability for failure to pay executive employees, including employees who are still employed by the cannabis company? A wage claim filed by Sara Batterby against HFV Enterprises is a great example of the liability a marijuana company can face against its own president and executive employee.

Ms. Batterby is the president and an executive employee of HFV Enterprises, Inc. (“HFV”) an Oregon corporation formerly known as HiFi Farms, a prominent cannabis producer. Ms. Batterby’s position did not stop her from filing a wage claim against HFV  in Multnomah County. She alleges an employment contract required HFV to pay her $2,000 every two weeks beginning in October 2017. According to the complaint, HFV made one $2,000 payment but has since failed to pay her any wages. Ms. Batterby’s claim requests $46,000 in unpaid wages, 9% interest until the wages are paid, and attorney fees and costs. If this lawsuit goes for any length of time, the attorney fees will likely be much higher than the claim itself.

Ms. Batterby’s wage claim is brought under ORS 652.120, which requires employers to establish regular pay days not less than 35 days apart. Violation of ORS 652.120 is a Class A violation punishable by a fine of up to $2,000 for each violation. This means that each payday HFV missed could be punishable by a $2,000 fine.

Ms. Batterby’s claim is unusual not because she is an executive employee, but because of what it does not allege. For whatever reason, the lawsuit fails to request penalty wages under Oregon’s minimum wage statute, and it fails to bring a breach of contract claim. If this case is not settled quickly, it would not surprise us to see an amended complaint by Ms. Batterby, covering these standard claims.

As we discussed in our coverage of the CNH Labs case, employers are required to pay employees minimum wage. Because Ms. Batterby was not paid anything in violation of the minimum wage statute, she likely has a minimum wage claim. Had she requested penalty wages for the company’s failure to pay her minimum wage, she may have been entitled to an additional 30 days wages as a penalty wage. A month’s wages at $10.25 and hour amounts to something like $2,460.

Ms. Batterby also claims she had an employment contract with HFV Enterprises. She likely could have supplemented her wage claim with a breach of contract claim against HFV Enterprises. A breach of contract claim would provide similar relief to Ms. Batterby, including at least 9% interest on the unpaid amount and possibly more if the employment contract included a provision for interest on unpaid wages, as many employment contracts do.

Employees are an essential part of any successful marijuana business. With employees comes exposure to liability. Wage and hour claims can come from any employee at any level and the penalties will depend on the type of violation, as the HFV and CNH cases have shown. The best way to avoid wage and hour claims is to ensure employees are being paid according to state laws. If you aren’t sure, have an outside expert come in and review your practices, from your cannabis-specific employee handbook on down. And if your company does face a wage and hour claim, it’s best to hire an experienced employment attorney to defend the claims and reduce the exposure.