California State Court Grants Class Certification For Wage & Hour Claims Against Cannabis Dispensaries

By Seth A. Goldberg and Nick Baltaxe

Duane Morris Takeaways: A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class.  The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.

Case Background and the Court’s Ruling

A group of dispensary and retail store employees at four different dispensaries owned by different entities asserted that they should be treated as a single enterprise. The Plaintiffs moved to certify a class of all current and former non-exempt, hourly employees of the Defendants from January 13, 2017 through the present. The Plaintiffs alleged that the putative class members were expected to work off-the-clock in order to set up their timekeeping program and their payroll program as well as review materials on the timekeeping program, before clocking-in on their personal cell phone. The Plaintiffs additionally contended that the Defendants failed to provide meal and rest periods, timely pay all wages on termination, or provide accurate itemized wage statements. The Plaintiffs also argued that because the four Defendants should be considered a single enterprise, they failed to comply with the higher minimum wage found in the City of Los Angeles Minimum Wage Ordinance.

The Court granted the Plaintiffs’ motion for class certification.  The Court noted that the Plaintiffs’ arguments  regarding the Defendants being an integrated enterprise could be established by common proof. At the class certification stage, the Court determined that the Defendants’ arguments went to the merits of the Plaintiffs’ claims and did not compel denial of the Plaintiffs’ motion.  The Court found that each of the Plaintiffs’ class claims were subject to common proof, that the Plaintiffs’ injuries were typical of the class, and that the Plaintiffs and their counsel were adequate to serve as class representative and class counsel.  Importantly, the Court reached this conclusion despite Defendants’ introduction of compliant policies and procedures relating to these wage & hour claims.

Key Takeaways

There are thousands of state-licensed cannabis operators in California, a state known for its ubiquitious wage & hour litigation, and thousands more across the 38 states in the US that have legalized cannabis for medical and/or adult-use purposes.  As the cannabis industry continues to mature and evolve, wage & hour class actions are likely to become more frequent in the cannabis industry, just as they have grown in other industries.  It is crucial that employers ensure that they follow federal and state wage & hour laws and provide their employees with complaint policies and procedures.  Arbitration agreements with class waivers also should be provided to each employee in states where applicable.  This becomes even more crucial in the cannabis space, where brands are expanding due to a high volume of M&A transactions and market consolidation.  Cannabis companies should continue to be cognizant of the strict wage & hour regulations in their states as the industry continues to grow.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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