United States: Marijuana Mainstream: Should It Be Treated Like Tobacco For Overtime Purposes?

Last Updated: February 1 2018

Article by Deanna Forbush, Clark Hill

The legalization of marijuana poses more conundrums for employers than just the challenges caused by employees' use of the popular herb. While most employers in states like Nevada, where marijuana is legal both medicinally and recreationally, worry about whether they can terminate an employee for lawfully using weed, others are asking whether they are required to pay their marijuana growers and cultivators overtime wages since all other agricultural employees are exempt from overtime under both state and federal law.

However, like all things marijuana in the current climate, the answer might be tied to the fact that marijuana continues to be classified by the U.S. Drug Enforcement Administration (DEA) as a Schedule I illegal drug.

No Clear Guidance

Both federal and Nevada law exempt agricultural employees from overtime wages. That means employees who work in the field of "agriculture," as that term is defined under applicable law, don't have to be paid 1½ times their regular rate of pay when they work more than 40 hours in a workweek, or under state law, more than 8 hours a day, if they earn less than 1½ times the minimum wage. (Nevada's hourly minimum wage is currently $8.25, so the overtime threshold would be $12.375.)

Although NRS 608.018(k) clearly exempts agricultural employees from overtime, state law doesn't appear to include a definition of "agricultural employee." When Nevada wage and hour law is silent on an issue, Nevada courts look to the Fair Labor Standards Act (FLSA) for guidance.

An FLSA analysis should also inform the Nevada labor commissioner when she is called on to decide a wage and hour issue. And because employers must be compliant with both state wage and hour law and the FLSA and are required to compensate employees under the law that is most favorable to them, it's wise to analyze most wage and hour issues under both state law and the FLSA.

Nevertheless, the U.S. Department of Labor (DOL) has yet to issue an opinion on any subject involving the marijuana industry, and the Nevada labor commissioner has informally advised employers in the industry, albeit without any rationale or explanation, that marijuana growers won't be considered exempt under the state agricultural exception.

Other federal agencies have arguably recognized the marijuana industry. For example, the IRS and the state taxing authority collect taxes from marijuana businesses and have even issued guidance memos on how marijuana businesses should be paying their taxes. Eventually, both the DOL and the Nevada labor commissioner are going to have to deal with the issue. Employers in affected industries are urged to seek advisory opinions from both agencies, forcing them to take a stand on the issue and defend their decisions.

Definitions and Duties are Key

The government's analysis will undoubtedly have to start with the definitions put into effect for the federal statute exempting agricultural workers from overtime pay. (Agricultural workers are also exempt from minimum wage under federal law, so employers of agricultural workers in Nevada must pay the state minimum wage to their employees.)

"Agricultural worker" is defined in the FLSA as "any employee employed in agriculture or in connection with the operation or maintenance of ditches, canals, reservoirs, or waterways, not owned or operated for profit, or operated on a sharecrop basis." Agriculture has two distinct branches: primary agriculture and secondary agriculture.

Primary agriculture includes farming in all its branches as well as the cultivation and tillage of the soil; dairying; the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities; the raising of livestock, bees, furbearing animals, or poultry; and any practices (including any forestry or lumbering operations) performed by a farmer or on a farm incidental to or in conjunction with the farming operations, including preparation of products for market.

Secondary agriculture includes activities other than farming that are performed by a farmer or on a farm and are incidental to primary agricultural activities. The FLSA states that "employees of greenhouses and nurseries that cultivate, grow, or harvest plants are engaged in agriculture" while performing their duties, including hand-harvesting duties and trimming.

The agricultural exemption is tricky because it's applied on a weekly basis. If an employee is engaged in only agricultural duties for every hour during an entire workweek, he will be exempt from overtime in that week. But if the employee performs some agricultural work and some nonagricultural work in the same week, the exemption may not apply, and it certainly won't apply for the nonagricultural work.

That said, duties that are clearly within the exemption include sowing seeds and growing plants, trees, shrubs, vines, and flowers; handling plants from the propagating frames to the field; and cultivating, watering, fertilizing, pruning, and bracing plants as they grow. Because the activities performed in a greenhouse are determinative of whether the agricultural exemption applies to a particular employee, it's important to evaluate each specific activity and its purpose when deciding whether to pay overtime to greenhouse employees.

There are other aspects of greenhouse operations to consider when determining whether to compensate employees for overtime. For example, selling stock or produce isn't within the exemption, but packing, storing, and warehousing the product is. Employees who sort, grade, and trim the stock and pack it for shipping or sale probably would be exempt. However, maintenance and clerical workers wouldn't be. Also, the exemption applies only to plants grown by the farmer, not to those obtained through a third party.

A plain reading of the law would lead to the conclusion that to the extent that greenhouse and field workers till, plant, sow, grow, harvest, and trim marijuana plants or perform related activities, they are engaged in either primary or secondary agricultural activities and aren't entitled to premium pay for overtime hours.

There is nothing in the definitions, interpretations, or related case law that predicates the application of the exemption on the type of crop being grown, cultivated, or harvested. Simply put, the FLSA expressly provides that farming includes horticulture, and a majority of the work performed in a marijuana greenhouse or field is agricultural.

Bottom Line

Many have suggested the lack of guidance on whether marijuana growers are entitled to the agricultural exemption is because the DEA still classifies cannabis as a Schedule I drug—meaning it has concluded that the plant has no "currently accepted medical use and a high potential for abuse."

Unless Congress enacts a law defining the specific crops that qualify for the agricultural exemption, we would be hard-pressed to understand how the government could contend that cannabis growers are not exempt from the payment of overtime. Arguing that it has no "accepted medical use" is not only irrelevant but also a claim that's widely contradicted by a majority of the medical community.

Based on that erroneous argument, we could ask why tobacco isn't a Schedule I drug and its growers not exempt. After all, tobacco is highly addictive and has zero medical use, yet tobacco growers are exempt from the payment of overtime.

One day soon, a brave employer will put the government to the test, and the government's logic will go up in smoke.

Deanna Forbush, editor of Nevada Employment Law Letter, can be reached at dforbush@clarkhill.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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