We often look to the federal judiciary as the gold standard of American jurisprudence. State courts frequently find federal opinions persuasive. Confirmation hearings for federal judges are televised. Indeed, the federal judiciary is even enshrined in Article III of the U.S. Constitution. And while we can expect that opinions issued by federal judges interpreting statutes and laws may differ somewhat across the nation’s districts and circuits, lawyers, businesses, and the public at large have come to expect—and rely upon—a degree of consistency in the federal judiciary’s decisions. However, when it comes to the rapidly evolving cannabis industry, the federal judiciary has been anything but consistent.
For example, federal courts have ruled that Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits cannabis employers from discriminating against employees. Additionally, federal agencies will hold cannabis employers accountable for discrimination in the workplace. Instead of addressing the legality of the workplace in the first place, or the legality of plaintiffs’ own conduct by working in the state-legal-but-federally-prohibited marijuana industry, the federal courts squarely focus on the factors that a plaintiff must necessarily allege in order to set forth a case for retaliation under Title VII and wholly ignore the fact that cannabis is and continues to be classified as an illegal substance under the Controlled Substances Act (“CSA”).
Likewise, federal courts have ruled that the Fair Labor Standards Act (“FLSA”), which regulates minimum wage, overtime pay, record keeping, and youth employment standards, also applies to the cannabis industry. For example, in Kenney v. Helix TCS, Inc., the U.S. Court of Appeals for the Tenth Circuit ruled that the context of the FLSA is clear that employers are not excused from complying with federal wage and hour laws just because their business practices may violate federal law, and therefore the FLSA applies to a marijuana worker even though marijuana is deemed illegal by the CSA.
Between Title VII and the FLSA, the federal courts’ analysis ignores the illegality of the cannabis industry and instead focuses on whether the actual law itself is being violated. However, this approach directly contradicts the position the federal courts have adopted under Titles I and II of the Americans with Disabilities Act (“ADA”), which prohibit the discrimination of employees in the workplace (both for private entities (Title I) and public entities (Title II)) based on their disabilities. Contrasting with the federal courts’ approach to Title VII and FLSA, which ignores marijuana’s status as illegal under federal law, the illegal status of marijuana is a central basis for the federal judiciary to simultaneously conclude that Titles I and II of the ADA provide no protection against discrimination on the basis of medical marijuana use, even where that use is state-authorized and physician-supervised. Federal courts have likewise consistently rejected the argument that discrimination on the basis of medical marijuana use reflects discrimination on the basis of the disability that the medical marijuana is used to treat. In these opinions, the federal courts point to the illegality of marijuana under the CSA as a reason for excepting it as a basis for discrimination under Titles I and II of the ADA. Federal courts could very well take this same approach when addressing discrimination under Title VII or wage and hour claims under the FLSA—that is, courts could refuse to provide protections to workers in state-legal marijuana industries—but, to date, with respect to the two latter statutes, the courts’ analysis instead focuses on the violation of the underlying statute itself, not the illegality of the substance under the CSA.
Muddying the waters even further is the fact that that federal courts will likely require cannabis businesses to be in compliance with Title III of the ADA, which is a separate provision of the ADA that prohibits discrimination in public accommodations on the basis of disabilities. For example, in Smith v. 116 S Market LLC, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s ruling that the defendant had violated Title III of the ADA by failing to provide ADA-compliant parking spaces and routes to its property, which was leased to a marijuana dispensary. The Ninth Circuit distinguished its Smith opinion from that of James v. City of Costa Mesa (“James”), in which it ruled that Title II of the ADA did not prohibit discrimination on the basis of medicinal marijuana use, because (1) the two cases arose under different provisions of the ADA; (2) James was limited in its holding to medical marijuana users who claim to face discrimination on the basis of their marijuana use; and (3) the district court’s ruling was silent as to marijuana use and only required compliance with the ADA. These are hardly compelling distinguishing factors; at a minimum, the Ninth Circuit, on its face, appears to be treating cannabis use differently within the same federal statute.
The federal judiciary’s inconsistent opinions extend beyond employment law statutes. Recently, the U.S. Court of Appeals for the Sixth Circuit ruled in Great Lakes Cultivation, LLC v. Vara (In re Great Lakes Cultivation, LLC) that federal bankruptcy protections and processes are not available for assets that are used for, or generated by, a business prohibited under the CSA. However, this reasoning begs the question: if a cannabis business cannot file for federal bankruptcy protections because its business practices are prohibited under the CSA, and an employee cannot maintain a claim for disability discrimination under Titles I and II of the ADA because marijuana is an illegal substance under the CSA, why do those same business practices trigger federal protections for employees who are subject to discrimination under Title VII and wage protection under the FLSA? The status of marijuana as illegal under the CSA appears to apply to prohibit individuals and businesses from seeking protection under the law in some instances, while it is wholly ignored in others.
When read independently, each opinion makes logical sense. However, when read together, it is clear that the federal judiciary has not been able to commit to a consistent position with respect to applying federal statutes to the cannabis industry. This is concerning for both cannabis businesses and the legal professionals who advise them because not only are inconsistent rulings unfair and unpredictable, but they also can have tangible “chilling effects” on the industry, stymieing growth for an industry otherwise poised for rapid expansion in the future.
Given the uncertainties inherent in the cannabis industry, as well as the numerous and demanding state regulations with which most marijuana businesses must contend, well-advised cannabis businesses must be aware of the federal statutes that apply to the industry and, perhaps even more importantly, how federal courts are interpreting these statutes. Depending on, apparently, the specific subdivision of the law being applied to a particular set of facts (e.g., Title III versus Titles I and II of the ADA), federal courts will treat even the most upstanding and reputable marijuana business either the same as any other legitimate business, or as a miscreant without permission to enter through the courthouse gates.
Reprinted with permission from the American Bar Association’s Business Law Today Business Regulation & Regulated Industries.
- Aichele v. Blue Elephant Holdings, LLC, 292 F. Supp. 3d 1104 (D. Or. 2017); Jones v. Blair Wellness Ctr., LLC, No. ADC-21-2606, 2022 U.S. Dist. LEXIS 66919 (D. Md. Apr. 11, 2022).
- EEOC v. AMMA Inv. Grp., LLC, No. 1:30cv2786 (D. Md. Sept. 24, 2020).
- 284 F. Supp. 3d 1186 (10th Cir. 2018).
- Zarazua v, Ricketts, No. 8:17-cv-318, 2017 U.S. Dist. LEXIS 161990, at *5 (D. Neb. 2017) (no cognizable claim under the ADA for denial of access to medical marijuana); Steele v. Stallion Rockies, Ltd., 106 F. Supp. 3d 1205, 1212 (D. Colo. 2015) (termination on basis of medical marijuana use did not constitute discrimination for purposes of the ADA); Forest City Residential Mgmt. v. Beasley, 71 F. Supp. 3d 715, 731 (E.D. Mich. 2014) (medical marijuana user was not an individual with a qualified disability).
- Bailey v. Real Time Staffing Servs., 543 F. App’x 520, 524 (6th Cir. 2013) (unpublished); Eccleston v. City of Waterbury, No. 3:19-cv-1614 (SRU), 2021 U.S. Dist. LEXIS 52835, at *17 (D. Conn. Mar. 22, 2021).
- For example, in the Eccleston opinion, Judge Underhill stated, “[B]ecause medical marijuana does not fit within the supervised-use exception [of the ADA] and remains illegal under federal law, an individual who uses medical marijuana cannot state a prima facie case under the ADA for discrimination on the basis of medical marijuana use.” Id. at *18 (emphasis in original); see also James v. City of Costa Mesa, 700 F.3d 394, 403 (9th Cir. 2012).
- 831 F. App’x 355 (9th Cir. 2020) (unpublished).
- 700 F.3d 394.
- No. 21-12775, 2022 U.S. Dist. LEXIS 148145 (6th Cir. 2022).