Attorneys for Helix argued that payingKenney and other workers overtime would require a court to findthat Congress intended to "both forbid" under the ControlledSubstances Act "and reward" under the Fair Labor Standards Act "thesame conduct: drug trafficking." (Credit: LiudiHara/Shutterstock)

Employers in the state-licensed cannabis industry must still paytheir workers overtime in compliance with federal labor laws eventhough marijuana remains illegal at the federal level, the U.S.Court of Appeals for the Tenth Circuit said Friday.

A unanimous three-judge panel affirmed a Colorado federaldistrict court ruling allowing the Fair Labor Standards Act claimsof marijuana security worker Robert Kenney to proceed against hisformer employer, Helix TCS Inc.

Kenney has alleged he and other employees regularly worked morethan 40 hours a week, but Helix refused to pay overtime because they worked at Colorado-sanctionedmarijuana outlets, which are considered illegal operationsunder the federal Controlled Substances Act.

"The district court correctly reasoned and case law hasrepeatedly confirmed that employers are not excused from complyingwith federal laws just because their business practices arefederally prohibited," Senior Judge Stephanie KulpSeymour of the U.S. Court of Appeals for the Tenth Circuitwrote in a 12-page opinion.

Seymour continued: "This has been true with respect to the FLSAin multiple contexts, strengthening the conclusion that it remainstrue in this novel context of the marijuana industry. Persuasivecase law endorses the concept that the FLSA is focused onregulating the activity of businesses, in part on behalf of theindividual workers' wellbeing, rather than regulating the legalityof individual workers' activities."

Seymour was joined in the opinion by Judges Harris Hartz andAllison Hartwell Eid of the U.S. Court of Appeals for the TenthCircuit, who joined the appeals bench in 2017.

A closely watched case

The panel offered no findings on the merits of Kenney's specificovertime claims. But the case has been closely watched by the marijuana industry andemployment lawyers advising businesses in the cannabisspace.

Helix TCS bills itself as "the premier operating servicesplatform" in the cannabis industry. The company's brands offertracking and compliance services as well as on-site security.

Attorneys for Helix argued that paying Kenney and other workersovertime would require a court to find that Congress intended to"both forbid" under the Controlled Substances Act "and reward"under the Fair Labor Standards Act "the same conduct: drugtrafficking."

The appellate panel disagreed, however, finding that case law isclear that "employers are not excused from complying with federallaws because of their other federal violations."

"Contrary to Helix's claims, recognizing Mr. Kenney as coveredby the FLSA is in line with both the plain reading and the overallpurposes of that statute, and doing so does not require disavowalof the CSA," Seymour wrote.

Related: 

• New webinar answers important questionsabout covering cannabis
• P&C industry reacts to the passage ofmarijuana banking bill
• Legal questions surrounding hemp and the 2018 FarmBill

This article first appeared on sister-site Law.com.