Cannabis Businesses Overlooked Employment Considerations
By: Andrew P. Cooper, Esq., Hon. Ruth B. Kraft, and Terran Cooper
Don’t Forget, Cannabis Businesses Are Still Businesses: Overlooked Employment Considerations
Working in the cannabis industry is no walk in the park. Despite the plant’s popularity, many cannabis operators struggle to actually turn a profit. The continuing federal illegality of cannabis and resulting tax burden under Section 280E, tight margins, difficulty in banking and securing financing, and rampant unlicensed cannabis operators across the nation mean that cannabis businesses must optimize operations in order to simply stay afloat. In the midst of all this noise, many cannabis businesses forget (or ignore) the fact that they’re still running a business and thus treat their labor and employment practices as afterthoughts, a dangerous practice that can sink their ships while barely out to sea.
Employment Lawsuits in the Cannabis Industry
If recent cases in New York and New Jersey are any indication, employment-focused lawsuits are only just beginning. The first licensed dispensary in New York was sued literally as soon as it opened for business. The suit, filed by Rasheta Bunting against Housing Works, focused on the dispensary website’s lack of accessibility to visually impaired consumers in compliance with the Americans with Disabilities Act. A New Jersey lawsuit, filed by Lisa Keyser against Greenbroz, Inc., alleged that Greenbroz, Inc. committed racial discrimination, created a hostile work environment, and wrongfully terminated her employment in violation of Title VII of the Civil Rights Act.
The licensed cannabis programs of New York and New Jersey are only recently operational and yet are already ripe for lawsuits. Consider, given the continuing illegality of cannabis at the federal level: would a federal court be inclined to protect the rights of employees in that illegal industry?
In two precedential rulings, Aichele v. Blue Elephant Holdings, LLC and Jones v. Blair Wellness Ctr., LLC, federal district courts have ignored underlying federal illegality of the subject businesses operations, holding that, despite the fact an employee may technically be violating federal law by working for a state-legalized cannabis enterprise, that employee is nevertheless entitled to protection under civil rights and anti-discrimination laws. Both the Federal District Court for the District of Oregon in Aichele and that of Maryland in Jones put aside the issue of the underlying businesses’ legality to permit employee plaintiffs to make out their claims. The courts’ analyses lay open the potential for additional cannabis-related employment litigation including collective and/or class actions which would be ruinous to defendant businesses and, potentially, to the industry in general.
Applicable Labor Statutes
What steps can the cannabis industry undertake to avoid such potentially disastrous consequences? Employers must be aware of a myriad of applicable statutes including, but not limited to, the Fair Labor Standards Act, the Occupational Safety and Health Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Acts, the Equal Pay Act, and the Americans with Disabilities Act. The consequences of these laws can be wide-reaching. Title VII of the Civil Rights Act of 1964 alone has been used to prohibit discrimination in a cannabis workplace (as demonstrated by Aichele and Jones) and covers discrimination across nearly all employment decisions, including recruitment, hiring, termination, procedures, and everything in between. In an effort to quickly commence operations, many cannabis employers fail to properly consider the consequences of seemingly small decisions, such as their employee classifications, compensation, and benefits. These seemingly small decisions can be anything but, as a misclassification or mishandling of employee compensation or benefits can lead to a lawsuit under the FLSA (as demonstrated by Kenney v. Helix TCS, Inc.) or prosecution by the Department of Labor. Additionally, discrimination by cannabis businesses will not be ignored by federal agencies, as demonstrated by EEOC v. AMMA Inv. Grp., LLC.
Every state and, indeed, some municipalities also have promulgated their own statutes and regulations which require compliance activities. Some of those laws and ordinances, particularly those involving biometric scanning/privacy, paid sick and safe leave, the use of artificial intelligence in employment decision-making, and pay transparency laws will vary greatly; businesses operating in multiple jurisdictions must ensure compliance across the continuum. Experienced employment counsel can help guide employers in navigating these turbulent and constantly changing waters.
Navigating the Complex Legal Landscape
The overwhelming majority of employers who fall in violation of these laws do not act with the intent to do so. Rather, they have failed to identify applicable laws and to interpret them appropriately. Compliance activities should include the creation of initial checklists, drafting employee handbooks, and engaging in training activities and ongoing audits to gauge potentially non-compliant practices.
The laws currently in place cover the full range of business activities through the entirety of employment commencing with job listings, to the interview and offer processes, compensation and benefits, workplace and cybersecurity, and employee discipline and discharge. The importance of compliance activities embracing all levels of employment from the C-suite down to rank and file cannot be underestimated. Working with attorneys experienced in employment and labor law, as well as the unique considerations associated with cannabis, can help your business stay ahead of the curve.
How Can We Help?
If you're a cannabis industry professional seeking guidance on navigating the legal landscape of cannabis and employment, it's important to consult with experienced cannabis and employment attorneys to ensure that you are informed and compliant with all applicable laws and regulations. Reach out to Falcon Rappaport & Berkman to explore how our professionals can meet your needs across our fully integrated areas of concentration. To contact any of our professionals, please call (212) 203-3255 or submit the contact form below.
 Aichele v. Blue Elephant Holdings, LLC, 3:16–cv–02204–BR, 292 F. Supp. 3d 1104 (D. Or. Nov. 13, 2017).
 Jones v. Blair Wellness Ctr., LLC, No. ADC-21-2606, 2022 U.S. Dist. LEXIS 66919 (D. Md. Apr. 11, 2022).
 Kenney v. Helix TCS, Inc., 284 F. Supp. 3d 1186 (10th Cir. 2018).
 EEOC v. AMMA Inv. Grp., LLC, No. 1:30cv2786 (D. Md. Sept. 24, 2020).
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