Pot security company says they don’t have to pay overtime or federal benefits
Denver CO November 16 2018 A Colorado company that provides security services to the state’s legal cannabis growers and sellers told the Tenth Circuit on Thursday its employees can’t pursue allegedly unpaid overtime under the Fair Labor Standards Act because their work is inherently illegal under federal law.
During oral arguments before the appellate court, Helix TCS Inc. argued that a collective action brought by the company’s employees can’t go forward under the FLSA because that law only applies to legal businesses — and everything the workers do qualifies as trafficking an illegal drug.
The case, which presents another example of state cannabis legalization clashing with federal laws against the drug, drills down on the “legally ambiguous” space in which the country’s legal cannabis businesses operate, counsel for Helix, Jordan D. Factor of Allen Vellone Wolf Helfrich & Factor PC, told the panel.
Helix itself is a trafficker under federal law, Factor said, and therefore “they do not enjoy any benefits of federal law.”
Lead plaintiff Robert Kenney, who worked for Helix as an armed security guard protecting growers and sellers, sued the company last year claiming he had never been paid overtime despite regularly working more than 40 hours a week. His suit brought claims on behalf of any Helix security guard who was not paid overtime in the past three years.
Helix moved to dismiss, telling U.S. District Judge Christine M. Arguello that in dealing with a substance categorized as a Schedule 1 drug under federal law, Kenney’s work violated the federal Controlled Substances Act and therefore can’t be subject to the FLSA’s protections.
Judge Arguello denied the motion, noting that Helix presented no cases that supported its argument. On the contrary, courts that have considered the question of whether CSA violations impact FLSA protections have said no, she said. And in other cases involving businesses that violate federal laws, like those governing immigration, courts have found that those violations do not preclude the businesses from complying with other federal laws, she said.
But she certified the ruling for immediate appeal, so Helix sent it to the Tenth Circuit.
At Thursday’s arguments, Factor faced questions from the judges over whether Helix pays its taxes and adheres to other federal laws.
Helix has to comply with those laws, Factor said, but the issue with Kenney’s case is that he is trying to establish a right to the overtime wages. While a Department of Labor action against Helix might have a different outcome, Kenney can’t rely on the FLSA to create that right, he said.
Circuit Judge Stephanie Seymour noted that the majority of the country has legal medical cannabis, which would also be illegal under federal law. She asked Factor if Congress could amend the FLSA to address cannabis.
“Congress might need to,” Factor said.
Counsel for Kenney, Lindsay Itkin of Josephson Dunlap LLP, told the panel that the FLSA does not have a requirement that the employees it protects only be engaged in lawful businesses. There is no explicit mention of lawfulness in the statute, and there is nothing in the CSA that repeals the FLSA’s requirements, Itkin said.
But federal trademark laws don’t apply to illegal businesses, Circuit Judge Harris Hartz said.
Trademark laws make explicit mention of illegal businesses, as does the tax code, Itkin said.
“The opportunity has been there for Congress to make an exception [within the FLSA], and it has not done so,” Itkin said.
Itkin asked the judges to think about what the implications of letting Helix out of its FLSA obligations would be. They would be giving a federally illegal business a leg up over legal businesses by allowing them to avoid paying overtime, she said.
“The result … would have you treating illegitimate businesses more leniently than legitimate,” Itkin said.
Circuit Judges Harris Hartz, Stephanie Seymour and Allison Eid sat on the panel for the Tenth Circuit.
Helix is represented by Jordan D. Factor, Jeremy Jonsen and Carissa Sears of Allen Vellone Wolf Helfrich & Factor PC.
Kenney and the proposed class is represented by Richard Jennings Burch of Bruckner Burch PLLC, Andrew Wells Dunlap, Lindsay R. Itkin and Michael Andrew Josephson of Josephson Dunlap LLP.
The case is Kenney v. Helix TCS, case number 18-1105, in the U.S. Court of Appeals for the Tenth Circuit.
