Employers in the state-licensed cannabis industry must still pay their workers overtime in compliance with federal labor laws even though marijuana remains illegal at the federal level, the U.S. Court of Appeals for the Tenth Circuit said Friday.

A unanimous three-judge panel affirmed a Colorado federal district court ruling allowing the Fair Labor Standards Act claims of marijuana security worker Robert Kenney to proceed against his former employer, Helix TCS Inc.

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Kenney has alleged he and other employees regularly worked more than 40 hours a week, but Helix refused to pay overtime because they worked at Colorado-sanctioned marijuana outlets, which are considered illegal operations under the federal Controlled Substances Act.

"The district court correctly reasoned and case law has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited," Senior Judge Stephanie Kulp Seymour of the U.S. Court of Appeals for the Tenth Circuit wrote in a 12-page opinion.

Seymour continued: "This has been true with respect to the FLSA in multiple contexts, strengthening the conclusion that it remains true in this novel context of the marijuana industry. Persuasive case law endorses the concept that the FLSA is focused on regulating the activity of businesses, in part on behalf of the individual workers' wellbeing, rather than regulating the legality of individual workers' activities."

Seymour was joined in the opinion by Judges Harris Hartz and Allison Hartwell Eid of the U.S. Court of Appeals for the Tenth Circuit, who joined the appeals bench in 2017.

The panel offered no findings on the merits of Kenney's specific overtime claims. But the case has been closely watched by the marijuana industry and employment lawyers advising businesses in the cannabis space.

Helix TCS bills itself as "the premier operating services platform" in the cannabis industry. The company's brands offer tracking and compliance services as well as on-site security.

Attorneys for Helix argued that paying Kenney and other workers overtime would require a court to find that Congress intended to "both forbid" under the Controlled Substances Act "and reward" under the Fair Labor Standards Act "the same conduct: drug trafficking."

The appellate panel disagreed, however, finding that case law is clear that "employers are not excused from complying with federal laws because of their other federal violations."

"Contrary to Helix's claims, recognizing Mr. Kenney as covered by the FLSA is in line with both the plain reading and the overall purposes of that statute, and doing so does not require disavowal of the CSA," Seymour wrote.

Helix was represented by Jordan Factor, Jeremy Jonsen and Carissa Sears of Allen Vellone Wolf Helfrich & Factor. Lindsay Itkin and Michael Andrew Josephson of Josephson Dunlap represented Kenney.

The Tenth Circuit's decision is posted below: