Controlled Substances Act does not shield marijuana businesses from FLSA or other claims

An employee of a marijuana dispensary in Colorado filed a claim in federal court alleging that he was not paid overtime in violation of the federal Fair Labor Standards Act (FLSA). The dispensary attempted to dismiss the case by arguing that its business is illegal under federal law and, therefore, typical legal protections are unavailable to its employees. The district court rejected this argument. Relying on a prohibition era case, the court explained that employers are not excused from complying with federal laws, including the FLSA, simply because their business practices may violate federal law. Thus, despite its admission that it is an illegal enterprise under federal law, the dispensary is still subject to the suit and must incur the expense of litigation. Moreover, as an employer the dispensary carries the burden of establishing that the employee was not entitled to overtime. If it cannot meet that burden, then the employee is entitled to his back pay, an equal amount of liquidated damages, and his attorney’s fees and costs.

The takeaway is that the Controlled Substances Act may not shield dispensaries and other marijuana businesses from the FLSA or other claims from their employees. Therefore, such businesses must ensure that their policies and practices comply with both federal and state employment laws.

Please read the full text of the opinion here.

For more information on developments in this area, please get in touch with Melissa Ferrara at mferrara@reedsmith.com or the Reed Smith lawyer with whom you normally work.

NY State of Mind: New State and City Laws (Part 2) – Expansion of NYC Sick Leave Law

This is the second in a series of blog posts concerning recent employment law developments in New York State and City:

In early November, NYC Mayor Bill de Blasio signed into law a bill expanding the City’s paid sick leave law, most notably to include “safe time” for victims of domestic violence, sexual assault, and certain other offenses.

As we previously reported, NYC adopted the Earned Sick Time Act (ESTA) in April 2014. The law requires most businesses to provide employees with up to 40 hours of paid sick time per calendar year, with such time typically accruing at a rate of one hour for every 30 hours worked. In the years following the ESTA’s implementation, the City has published informal guidance and administrative rules in an effort to clarify and, in some instances, expand the scope of the law.

Under the amendment signed by Mayor de Blasio – which modifies the name of the ESTA to the Earned Safe and Sick Time Act (ESSTA) – employers will now be required to permit employees to use accrued time off for absences related to “safe time.” This means that an employee may take accrued time off when the employee or a family member has been the victim of a family offense matter, sexual offense, stalking, or human trafficking, and the leave is for one of the following reasons:

  • to obtain services from a domestic violence shelter, rape crisis center, or other shelter or services program for relief from a family offense matter, sexual offense, stalking, or human trafficking;
  • to participate in safety planning, temporarily or permanently relocate, or take other actions to increase the safety of the employee or employee’s family members from future family offense matters, sexual offenses, stalking, or human trafficking;
  • to meet with a civil attorney or other social service provider to obtain information and advice on, and prepare for or participate in any criminal or civil proceeding, including but not limited to matters related to a family offense matter, sexual offense, stalking, human trafficking, custody, visitation, matrimonial issues, orders of protection, immigration, housing, discrimination in employment, housing or consumer credit;
  • to file a complaint or domestic incident report with law enforcement;
  • to meet with a district attorney’s office;
  • to enroll children in a new school; or
  • to take other actions necessary to maintain, improve, or restore the physical, psychological, or economic health or safety of the employee or the employee’s family member or to protect those who associate or work with the employee.

As with sick time under the ESTA, the ESSTA would allow employers to require reasonable documentation that the use of safe time was for a permitted purpose when an employee has been absent for more than three consecutive work days. According to the ESSTA, “documentation signed by an employee, agent, or volunteer of a victim services organization, an attorney, a member of the clergy, or a medical or other professional service provider from whom the employee or that employee’s family member has sought assistance in addressing family offense matters, sex offenses, stalking, or human trafficking and their effects; a police or court record; or a notarized letter from the employee explaining the need for such time shall be considered reasonable documentation.” Further, the ESSTA bars employers from requiring that such documentation specify the details of the family offense matter, sexual offense, stalking, or human trafficking.

New and Expanded Definitions

Along with expanding the permissible uses of accrued time off under the ESTA, the ESSTA also expands and adds a number of important definitions to the law. Perhaps most notably, it expands the definition of family member – as it relates to both sick and safe time – to include “any [] individual related by blood to the employee … and any [] individual whose close association with the employee is the equivalent of a family relationship.” The phrase “equivalent of a family relationship” is not defined.

Moreover, as it relates to the use of safe time, the ESSTA provides the following definitions:

  • Family offense matter: an act or threat of an act that may constitute disorderly conduct, harassment in the first degree, harassment in the second degree, aggravated harassment in the second degree, sexual misconduct, forcible touching, sexual abuse in the third degree, sexual abuse in the second degree as set forth in subdivision 1 of section 130.60 of the New York penal law, stalking in the first degree, stalking in the second degree, stalking in the third degree, stalking in the fourth degree, criminal mischief, menacing in the second degree, menacing in the third degree, reckless endangerment, strangulation in the first degree, strangulation in the second degree, criminal obstruction of breathing or blood circulation, assault in the second degree, assault in the third degree, an attempted assault, identity theft in the first degree, identity theft in the second degree, identity theft in the third degree, grand larceny in the fourth degree, grand larceny in the third degree or coercion in the second degree as set forth in subdivisions 1, 2 and 3 of section 135.60 of the penal law between spouses or former spouses, or between parent and child or between members of the same family or household.
  • Human trafficking: an act or threat of an act that may constitute sex trafficking, as defined in section 230.34 of the penal law, or labor trafficking, as defined in section 135.35 and 135.36 of the penal law.
  • Sexual offense: an act or threat of an act that may constitute a violation of article 130 of the penal law.
  • Stalking: an act or threat of an act that may constitute a violation of section 120.45, 120.50, 120.55, or 120.60 of the penal law.

Notice Requirements

The ESSTA takes effect on May 5, 2018. For all employees hired on or after that date, employers will need to provide such employees with a notice of the right to safe and sick time (just as employers are currently required to provide new hires with notices concerning sick time). Additionally, by June 4, 2018, employers must provide all existing employees with a new notice concerning safe time. Sample notices are expected to be published by the City before the law’s effective date.

Although the law does not take effect for several months, employers should consult with counsel now and begin reviewing their policies and procedures, to ensure a smooth transition once the ESSTA takes effect.

A New Path Forward: Changing the #MeToo Culture

On January 9, 2018, Reed Smith attorney Miriam Edelstein co-presented a panel discussion on the impact of the #MeToo movement in the workplace at the January meeting of the Labor and Employment Relations Association (LERA), Philadelphia chapter. LERA is comprised of professionals across the employment law field, both management- and employee-side attorneys, as well as arbitrators, mediators and HR professionals.

Edelstein’s presentation discussed the changes – or more accurately lack thereof – she has noted in the employment law landscape with respect to sexual harassment claims, not only over the last year as the #MeToo movement has swept across the world, but more significantly over the past many years. Despite robust and updated anti-harassment policies and their dissemination by employers, the number of legal claims has remained stagnant, and from the global conversations taking place in the media and across social media platforms, the pervasiveness of harassment far exceeds the fractional number of such accounts that result in litigation.

A few proposals are floating around legislatures and internally at companies to do away with confidentiality and non-disclosure agreements when it comes to dealing with sexual harassment claims, as well as limiting the use of private arbitration and mediation to handle such matters. The goal of these proposals appears to be to try to counter a culture of silence around these issues, with the hope that more exposure will have a positive impact in reducing the occurrence of harassment. Continue Reading

NY State of Mind: New State and City Laws (Part 1) – NYC’s Salary History Ban


This is the first in a series of blog posts concerning recent employment law developments in New York State and City:

On October 31, 2017, NYC’s salary history ban took effect (Int. 1253-2016). With limited exception, this law bars employers of all sizes from inquiring or requesting information – through any means, including searches of public records, background checks, and requests to prior/current employers – about a job applicant’s salary history, or relying on such information in setting compensation for a particular applicant.  The ban extends to virtually all wages, benefits, bonuses, commissions earned, retirement plans, profit percentages, auto allowances, and other compensation.  Nor can employers make disclosure of such information a voluntary option (e.g., on a job application).

Notably, the law applies not only to applicants for employment, but also to applicants for independent contractor work who themselves have no employees. It does not, however, apply to applicants for internal transfer or promotion within their current employer.

If an employer inadvertently uncovers information about an applicant’s salary history by, for example, searching publicly available information about the applicant, the employer may not rely on that information in determining what to offer the applicant in salary, benefits, and other compensation. On the other hand, if the applicant voluntarily and without prompting discloses his or her salary history, the employer may in fact consider such information in determining compensation terms.

Moreover, although the law bans all salary history inquiries, it does permit employers to inquire into an applicant’s compensation expectations or demands. The law also permits employers to make statements about the anticipated salary, salary range, bonus, and benefits for a particular position.

Geographic Scope

As to the geographic scope of the law’s coverage, the NYC Commission on Human Rights (NYCCHR), the local agency that enforces the law, has said that a violation of the Act can occur if the impact of the unlawful discriminatory practice is felt in New York City. More particularly, the NYCCHR has stated that “[i]f an unlawful discriminatory practice, including an inquiry about salary history, occurs during an in-person conversation in New York City, there will likely be jurisdiction because the impact of the unlawful discriminatory practice is felt in New York City.  If an unlawful discriminatory practice occurs outside of New York City, there could be jurisdiction if the impact of the unlawful discriminatory practice is felt in New York City.  Entities should apply the same jurisdictional analysis in this context that they would involving other areas of the City Human Rights Law (e.g., in the employment context, residency in New York City alone, without more, is generally not enough to establish impact in New York City).” Continue Reading

New Requirements For City Contractors and Subs Under Philadelphia’s Whistleblower Law

On November 13, 2017, Mayor Kenney signed an Executive Order providing additional protections for whistleblowers, as well as specific requirements for city agencies, contractor, and subcontractors in addressing complaints, aimed at encouraging discovery, investigation and remediation of waste and corruption in city affairs.

The Executive Order protects city employees, as well as employees of city contractors and subcontractors, from retaliation or the threat of retaliation by city employees, contractors and subcontractors, by providing a direct path of administrative investigation and remedy for potential whistleblowers under the jurisdiction of the city’s inspector general.

The Executive Order defines “employee” to include both paid and unpaid persons performing work for any city agency, department, commission or contractor, extending the protections to volunteer workers in addition to compensated personnel. Continue Reading

California’s Employment Law Class of 2017: The Summarized Laws and Recommendations for Compliance

Note: All bills become effective January 1, 2018 unless stated otherwise.

AB 168 – Ban on Salary History Inquiries

NEW LAW: Effective January 1, 2018, California employers cannot ask a job applicant about his or her prior salary or seek out an applicant’s salary history through a third party. Employers may consider prior salary information that an applicant voluntarily discloses (but don’t forget that under Labor Code Section 1197.5, employees may not use an applicant’s salary history alone to justify a pay disparity). Furthermore, employers will now be required to provide a pay scale for a position whenever a job applicant inquires.

The intent of this law is to narrow the gender wage gap by preventing employers from basing offers on prior salary information and, thus, perpetuating historical lower pay for female employees. In that regard, California has followed a recent trend of “salary history ban” legislation; San Francisco banned salary history questions earlier this year and other jurisdictions, including New York City, Philadelphia, Puerto Rico, Delaware, Oregon, and Massachusetts, have all adopted similar laws.

REED SMITH RECOMMENDS: All recruiters and interviewers should be informed of the ban on salary history inquiries, and any job application materials or interview scripts which ask for such information should be revised immediately. Employers may still ask an applicant how much he or she would like to be paid or expects to be paid, which will provide a sense of the employment market and an applicant’s salary expectations without violating this new law. Employers should also prepare basic informational forms providing the pay scale for open positions or positions that may become open within the next few years so that this information is readily available if requested by job applicants. Finally, given the pay scale requirement of AB 168 and the potential liability facing employers for any gender wage gap following the passage of California’s Fair Pay Act in 2016, employers should seriously consider conducting a compensation audit to internally evaluate whether any gender-based wage discrepancies exist. Continue Reading

Third Circuit Affirms Bright-Line FLSA Rule on Short Breaks, and Rejects Employer’s ‘Good-Faith’ Absent Disclosure of Legal Advice

On October 13, 2017, the Court of Appeals for the Third Circuit held that short breaks during the work day of 20 minutes or fewer are compensable as a “bright-line rule” under the Fair Labor Standards Act (“FLSA”).  The case, DOL v. American Future Systems, et al., arose out of the employer’s policy of withholding compensation for any breaks in excess of 90 seconds. Under the employer’s “flexible” break policy, employees were permitted to log out of their computer at their workstation at any time, for any reason, for any length of time, as often as they wished.  If they remained logged off for more than 90 seconds, however, they would not be paid for any part of the time they remained logged off. In other words, even if employees logged out to use the restroom or get a cup of water, they would not be paid if they could not make it back to their computer and log back in within 90 seconds. 

The Department of Labor (“DOL”) filed suit against the company, alleging a violation of the FLSA based on the DOL’s interpretation of its own regulation regarding short rest periods, 29 C.F.R. § 785.18.  That regulation provides that “[r]est periods of short duration, running from 5 minutes to about 20 minutes, are common in industry. They promote the efficiency of the employee and are customarily paid for as working time. They must be counted as hours worked.”  The District Court granted summary judgment to the DOL, upholding the regulation and awarding grant of liquidated damages.  The District Court specifically rejected the company’s assertion that its flexible, unpaid break policy was implemented in a good faith attempt to comply with the FLSA.  American Future Systems appealed the decision, arguing that an individualized assessment of the purpose behind each break – specifically, whether the break was more for the employee’s benefit or the employer’s benefit – should govern whether the break is compensable or not, and that because it sought legal advice prior to implementing its rule, it acted in good faith and should not be liable for liquidated damages. Continue Reading

DOL’s Overtime Rule Invalidated

Recently, a Texas federal judge struck down an Obama administration Department of Labor rule that doubled the salary employees must make to be considered exempt from overtime pay.  The rule’s invalidation should provide immediate relief to employers concerned about additional overtime pay, or increased salaries that the Obama administration’s overtime rule would have required.

In 2016, after years of consideration, the Obama administration issued the long-anticipated DOL rule that increased the minimum salary for exempt workers (workers exempt from receiving overtime pay) from $23,600 to just more than $47,000, and the minimum salary for workers who qualify for the “highly compensated” exemption from $100,000 to about $134,000.  Late last year, U.S. District Judge Amos Mazzant issued a preliminary injunction that blocked the rule from coming into effect.  Judge Mazzant granted summary judgment in favor of certain business groups that had challenged the Obama administration’s rule.  Judge Mazzant reasoned that the significant salary increase would render the analysis of employees’ duties, functions, and tasks meaningless, and exclude from the exemption many employees who perform primarily exempt duties. Continue Reading

Third Circuit Finds No ADA Violation Where Employee Deemed Unfit for Duty

On Tuesday August 15, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal of a claim for disability discrimination, where the plaintiff was deemed psychologically unfit for duty and subsequently had his employment terminated. The Third Circuit’s decision provides guidance for employers regarding the extent of their obligations to accommodate employees under the Americans with Disabilities Act (“ADA”).

In McNelis v. Pennsylvania Power & Light Co., No. 16-3883 (3d Cir., Aug. 15, 2017), the plaintiff, an armed security guard for a nuclear power plant, sued his former employer for disability discrimination following his termination.  McNelis had experienced mental health problems, including extreme paranoia.  His behavior prompted a fitness-for-duty evaluation by an independent psychologist, which was required under PPL policy, as well as under regulations promulgated by the Nuclear Regulatory Commission.  The psychologist determined that McNelis was unfit for duty, and his employment was terminated shortly thereafter. Continue Reading

NYC Proposes Ban on Non-Competes

New York City, which for years has been a trailblazer in employee-friendly workplace legislation, is at it again. Late last month, the NYC Council proposed a bill that would prohibit non-compete agreements for low-wage workers.  The bill would also bar non-competes for all other employees, if the potential that the employee might be asked to sign a non-compete is not disclosed, in writing, at the beginning of the hiring process.  As is often the case with NYC employment legislation, this is a first-of-its-kind bill.

More particularly, the bill states, quite simply, that “[n]o employer shall enter into a covenant not to compete with any low-wage employee of such employer.” The term “covenant not to compete” is, in turn, defined as any agreement “between an employee and an employer that restricts such employee from performing 1) work for an employer not a party to such agreement for a specified period of time; 2) work in a specified geographical area for an employer not a party to such agreement; or 3) work for an employer not a party to such agreement that is similar to such employee’s work for the employer who is a party to the agreement.”

As noted above, the proposed restriction would only apply to “low wage employees.” According to the bill, a “low wage employee” is any employee who is not a “manual worker,” “railroad worker,” or “commission salesman,” as those terms are defined under Article 6 of the New York Labor Law.  The prohibition would also not apply to an individual employed in a bona fide executive, administrative, or professional capacity earning more than $900/week. Continue Reading

LexBlog