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Out of Joint: How the Growing Disconnect Between Federal and State Marijuana Laws Impacts Employers

Tuesday, February 5, 2013
By Barbara L. Johnson, Edward Cadagin, and Peggah Sadeghzadeh,Paul Hastings

On election day 2012, Colorado1and Washington2became the first states in the nation to legalize the recreational use of marijuana. The passage of these laws raises questions about employers' ability to enforce company drug testing policies and limit marijuana use outside the workplace. Employers have already been caught between diametrically opposed laws when dealing with employees who use medical marijuana, in accordance with state law, but fail company drug tests for marijuana, an illegal drug under federal law.
 Courts have been consistent in affirming an employer's right to regulate marijuana use in the workplace. Now, however, the Colorado and Washington laws legalizing marijuana set the stage for additional challenges to employers' substance abuse and drug testing policies.

Clash Between State Marijuana Laws and Federal Law

On the same day voters in Colorado and Washington approved the legalization of marijuana for recreational use, Massachusetts voters approved an initiative that decriminalizes the possession and use of marijuana by residents with debilitating medical conditions. Massachusetts voters continued a trend that began in 1996 when California voters approved the first law permitting the use of marijuana for medical conditions.

Currently, 18 states (Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington) and the District of Columbia have enacted laws permitting the use of medical marijuana. Additionally, Maryland has passed laws that do not legalize the use of marijuana, but allow defendants being prosecuted for marijuana use to introduce evidence of medical necessity as a defense.

Although the states' respective medical marijuana laws differ slightly in their details, each law allows health care professionals to recommend the use of marijuana to patients for medical conditions. Generally, the health care professional must verify that the patient suffers from a serious medical condition listed in the medical marijuana law. Most states provide the patient with a registry card once physician approval has been obtained.

Despite the increasing rise of state medical marijuana laws and the legalization of recreational marijuana use in Colorado and Washington, marijuana use remains illegal under federal law. The Controlled Substances Act (CSA) categorizes marijuana as a Schedule I drug, meaning that it has a “high potential for abuse” and “no currently accepted medical use in treatment in the United States.”3 Moreover, according to the Food and Drug Administration, marijuana has no known medical benefits.

In 2005, the U.S. Supreme Court held that possession of marijuana is illegal under the CSA regardless of whether a state allows the use of medical marijuana.4In its ruling, the court stated that “the mere fact that marijuana—like virtually every other controlled substance regulated by the CSA—is used for medicinal purposes cannot possibly serve to distinguish it from the core activities regulated by the CSA.”Similarly, the U.S. Court of Appeals for the Sixth Circuit has held that “private employees are not protected from disciplinary action as a result of their use of medical marijuana, nor are private employers required to accommodate the use of medical marijuana in the workplace.”5These rulings place marijuana users in a state of “limbo” because they can use marijuana in accordance with state law but still be subject to arrest or prosecution by the federal government.
Closer Look at Washington and Colorado Marijuana Legalization Laws

The Colorado and Washington marijuana laws legalize the recreational use, display, purchase, and transport of one ounce or less of marijuana within the state. These laws, Initiative 502 in Washington and Amendment 64 in Colorado, would regulate marijuana in ways similar to the regulation of alcohol. Both laws prohibit driving under the influence of marijuana, the sale of marijuana by unlicensed facilities, and the use of marijuana by persons under the age of 21.

The Colorado law specifically addresses employers' rights, stating the law:

is not intended to require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the workplace or … affect the ability of employers to have policies restricting the use of marijuana by employees.

The Washington law does not mention employers; however, it does provide for a cost-benefit evaluation of the law's economic impacts on workplace safety.

Under the Washington law, legal possession and DUI limits became effective Dec. 9, 2012, and the state will have until Dec. 1, 2013, to establish rules related to licensing of producers, processors, and retailers. Until such rules have been promulgated, retail sales to the general public are not allowed. The law outlines a licensing system where producers and processors must renew licenses annually, and may not have any financial stake in the retail business.

This system is similar to the three-tier system used to control the sale of liquor in many states. The law also provides that the surplus received by the state should be earmarked such that 55 percent will be expended on health care, 25 percent on drug abuse and treatment, 1 percent for marijuana-related research, and the remainder placed in the state general fund.

The Colorado law, Amendment 64, took effect by Jan. 5. Similar to the Washington law, the state will implement a licensing system for the manufacture and sale of marijuana and will promulgate rules related to the retail market no later than July 1, 2013. The law also allows Colorado residents to possess, grow, process, and transport up to six marijuana plants, so long as three or fewer are mature.

To protect their privacy, consumers will only have to show government-issued identification, and the retail store will not be required to acquire or record personal information. The law also provides that the first $40 million of revenue raised annually will be credited to the public school capital construction assistance fund.

Courts Have Consistently Upheld Employer Regulation of Marijuana Use in Workplace

The clash between state marijuana laws and the CSA has generated issues in the workplace. For example, employees who use marijuana in compliance with their state's medical marijuana law may believe that their registry card serves as a “get-out-of-jail-free card” if they are faced with a mandatory employer drug test.6

Not surprisingly, these employees usually test positive for marijuana. Instead of turning a blind eye, however, many employers have discharged employees who fail the drug test, even if the employee possesses a registry card.7After being terminated for failing a company drug test, some medical marijuana users have brought suits against their employers. These suits have alleged, among other things, that the employer violated the state medical marijuana law, that the employer violated the public policy of the state, and that the employer failed to accommodate for an employee with a disability.8The courts have consistently held for employers in these suits. In fact, the state supreme courts of California, Montana, Oregon, and Washington have all upheld employers' decisions to terminate medical marijuana users.9

These courts have found that because federal law preempts the state medical marijuana laws, employees in compliance with state medical marijuana laws are not protected from employer drug testing policies. Furthermore, the courts have held that medical marijuana laws do not create a public policy protecting medical marijuana users and that medical marijuana users are not a protected class under employment laws.

The Colorado Court of Appeals has joined many other courts in its recent affirmation of an employer's right to terminate an employee after testing positive for marijuana. In 2005, in Slaughter v. John Elway Dodge Southwest/Autonation, the plaintiff claimed that her refusal to submit to a drug test led to wrongful termination in violation of public policy.10 The court disagreed. It noted that Colorado is an employment-at-will state, meaning that either party may terminate the relationship at any time with or without cause, except if the termination violates a clearly expressed public policy.

The court examined federal and state constitutional provisions as well as Colorado's statute dealing with unemployment compensation benefits. The court recognized that the unemployment statute “plainly recognizes an employer's right to conduct drug testing” and therefore rejected an employee's contention that an employee's right to refuse drug testing is clearly expressed in the tort of invasion of privacy.

In 2011, the Colorado Court of Appeals addressed employers' termination rights in the context of medical marijuana.11 There, an employee who had tested positive for marijuana in the workplace challenged her disqualification from receiving unemployment benefits on the grounds that she was authorized to use marijuana for medicinal purposes. The court recognized that the medical marijuana provision of the Colorado Constitution constituted only a protection from criminal prosecution, and did not give employees “an unfettered right to violate employers' policies and practices regarding use of controlled substances.”

Notably, the dissenting judge would have found that the provision in the constitution was intended to legalize the use of medical marijuana, and that allowing termination for medical marijuana would therefore be inconsistent with the purposes of the law.

In 2011, the Washington Supreme Court addressed the question of whether an employer may discharge an employee for use of medical marijuana pursuant to the Medical Use of Marijuana Act (MUMA).12 Roe had claimed that her termination violated MUMA and the clear public policy established by the statute. She relied primarily on language in MUMA stating that users of medical marijuana “shall not be penalized in any manner or denied any right or privilege, for such actions” along with the provision that the law did not “require[ ] any accommodation of any medical marijuana use in any place of employment.”

Roe argued that the statute, by only addressing on-site marijuana use, impliedly required employers to allow medical marijuana use occurring outside of the workplace. The court rejected this argument. The court held that even though there was no provision in MUMA regarding off-duty conduct, it was the plaintiff's burden to show a “clear statement of public policy” that off-duty use would be permissible, which the plaintiff could not do.

Moreover, the Washington Supreme Court recognized that Washington patients have no legal right to use marijuana under federal law. Therefore, the court refused to create a broad public policy “that would require an employer to allow an employee to engage in illegal activity,” finding that it would not be “proceed[ing] cautiously” as is required when finding public policy exceptions to the at-will employment doctrine.

Impact of Legalization on Employers' Drug-Free Policies

The legalization of marijuana in Colorado and Washington is not likely to have an immediate effect on the right of employers in these states to implement and enforce substance abuse policies, including provisions restricting marijuana use. In the context of medical marijuana, courts in both states have recognized employers' rights to regulate an employer's use of marijuana, even when such use is in connection with a serious medical condition.

If the courts protect employers' rights in terminating employees who have arguably legitimate medical reasons for using marijuana, it seems unlikely that courts would be less employer-friendly when employees use marijuana solely for recreational purposes. However, employees may have a stronger argument for a public policy exception to the employment at-will rule. The dissenting judge in Beinor hinted at this possible argument when he categorized the Colorado provision as legalizing medical marijuana, which, in his opinion, would make termination based on its use at odds with the purpose for the law.

The Colorado law expressly provides that legalization does not affect employers' rights in maintaining a drug-free workplace. Furthermore, while the Washington law is silent on the issue, under the precedent set in Roe, it is unlikely that the legalization of marijuana in Washington would affect employers' right to terminate an employee who is under the influence of marijuana at work.

The Washington law does not contain a provision relating to employers; therefore, employees may argue that its silence means employees can use marijuana without risking their employment. However, this argument failed in Roe where the court required the plaintiff to show a “clear public policy” from the statute that terminating an employee for marijuana use would be wrongful.

Moreover, the court in Roe reminded the plaintiff that marijuana was illegal under federal law, and therefore, would not find a public policy exception for medical marijuana use. The court did not address what the effect of state legalization would be on its finding of a public policy exception. Nevertheless, because marijuana remains illegal under federal law, and there is no provision in the Washington law relating to employers, it is unlikely a court would find a public policy exception to the employment at-will rule.

Employers' Pre-Existing DOT Obligations Remain Unchanged

Employers also should be aware that their obligations under federal law are unaffected by the new legislation. In 1987, the Department of Transportation issued comprehensive drug and alcohol testing guidelines for employers who have employees in safety-sensitive positions regulated under DOT.Under these guidelines, an employer is required to conduct testing both randomly and based on reasonable suspicion.

After medical marijuana initiatives passed in several states, DOT issued guidance that such laws were inapplicable to DOT Drug and Alcohol Testing Regulations, stating that “it remains unacceptable for any safety-sensitive employee subject to drug testing under the Department of Transportation's regulations to use marijuana.”13

DOT regulations are federal law and will necessarily preempt any state law. Therefore, employers in Washington and Colorado who are subject to DOT, and other federal regulations, should continue to comply with the applicable federal law.

Will the Federal Government Intervene?

The federal government may at any time enforce the CSA's prohibition on the use of marijuana despite state legalization. In February 2009, Attorney General Eric Holder commented that the federal Drug Enforcement Agency would no longer raid medical marijuana dispensaries in states that had approved medical use of marijuana.

Later in the year, the Department of Justice issued a memorandum stating that federal law enforcement will not prosecute medical marijuana patients or their caregivers in states that had enacted laws authorizing the medical use of marijuana. While the federal government has passively allowed states to implement medical marijuana laws, it is unclear how the federal government will respond to the legalization of marijuana for recreational use. In 2010, Holder, in response to California's legalization efforts, commented that he would “vigorously enforce” the federal marijuana prohibition. However, he remained silent during the Colorado and Washington ballot measures and has yet to issue a statement from DOJ.

It is possible that there will be a “constitutional showdown” between the federal government and the states before the laws even take effect. Shortly after the election, Colorado's Attorney General, John Suthers (R), cautioned Coloradans that:

the ability of the federal government to criminally sanction possession, use and distribution of marijuana, even if grown, distributed and used in a single state, was recognized by the U.S. Supreme Court [in Raich]. Therefore, absent action by Congress, Coloradans should not expect to see successful legal challenges to the ability of the federal government to enforce its marijuana laws in Colorado.

 Suthers asked DOJ “to make known its intentions regarding prosecution of activities sanctioned by Amendment 64 (particularly large wholesale grow operations) as soon as possible in order to assist state regulators and the citizens of Colorado in making decisions about the implementation of Amendment 64.” Suthers questioned the long term viability of the Colorado initiative.14 

On Nov. 13, 2012, former Washington Gov. Christine Gregoire (D) met with Deputy Attorney General James Cole in Washington, D.C., to understand what actions, if any, the federal government would take in response to the two laws. Gregoire told the attorney general “[m]ake no mistake, that absent an injunction of some sort, it's our intent to implement decriminalization” but that she didn't “want to spend a lot of money implementing this if [the government was] going to attempt to block it.”15

According to Gov. Gregoire, the federal government intends to treat the laws in both Colorado and Washington similarly, but has yet to determine its response. A few days before, Colorado's governor and attorney general also contacted DOJ and were met with silence by Attorney General Holder. As Colorado and Washington prepare to implement their new laws, which will both take effect in the next two months, the federal government's reaction and response remains uncertain.

Some members of Congress have opted not to wait for the federal government's response and are pushing forward with federal legislation to protect Washington's and Colorado's marijuana legalization laws. On Nov. 16, 2012, Rep. Diana DeGette (D-Colo.) introduced the “Respect States' and Citizens' Rights Act,” a measure that would exempt states from federal laws that ban the sale, possession, and use of small amounts of marijuana by adults.16

The federal legislation is co-sponsored by members of Congress from Tennessee, California, Oregon, and Colorado, including Rep. Mike Coffman (R-Colo.), who had vehemently opposed the passage of Amendment 64. In explaining his support of the legislation, Coffman stated that while he “strongly oppose[s] the legalization of marijuana” he “also [has] an obligation to respect the will of the voters.”

On the same day, Rep. Jared Polis (D-Colo.) sent a letter, co-signed by 17 other House members, to Holder urging that DOJ not take enforcement action against anyone in compliance with the laws of Colorado, Washington, and other states that choose to regulate access to marijuana for medical or personal use. The letter stated that:

“[t]he tide of public opinion is changing, both at the ballot box and in state legislatures across the country” and that “the collective judgment of voters and state lawmakers must be respected.”

It is notable that members of Congress outside of just Colorado and Washington are supporting DeGette's legislation and the letter to Justice Department. The participation of these members has expanded the scope of the marijuana legalization battle, both geographically and politically, beyond a showdown between individual states and the federal government. It will be interesting to see how the federal government chooses to respond in light of the broad, and growing, support of the Washington and Colorado laws among federal legislators.

Long-Term Implications of Legalization on Workplace Drug Testing Programs

If the federal government does not address legalization of marijuana, one question facing employers in Colorado and Washington will be whether to continue to treat marijuana like an illegal drug, or to treat marijuana like a legal drug, such as alcohol. Employers and employees are very familiar with the “under the influence” standard often applied to workplace alcohol testing.

With the legalization of marijuana in some jurisdictions, however, employers should expect that employees who test positive for marijuana will contend that they are not impaired at the workplace. Unlike alcohol, which metabolizes relatively quickly, marijuana can build up in the body's fat cells and be detectable for weeks after a person last used the drug. This means employees may fail drug tests testing for the presence of marijuana when in fact they are not impaired or under the influence of the drug at the workplace.

There may be a push in both Colorado and Washington to quantify the amount of marijuana present in the system that would constitute impairment at the workplace. Under both laws, driving under the influence of marijuana remains illegal.

In addition, Washington has defined “under the influence” in the context of operating a motor vehicle as having more than five nanograms of delta-9-tetrahydrocannabinol (THC) per milliliter in the blood stream. However, almost all workplace drug testing programs are based on the “presence” of marijuana in urine, hair, or sweat. Neither Colorado nor Washington has provided any guidance to employers as to the level of THC in urine, hair, or sweat that equates to being “under the influence” for disciplinary purposes in the workplace.

Conclusion

Courts have made it clear that employers may discipline and terminate an employee who tests positive for the presence of marijuana, even in those states that have approved the use of marijuana for medicinal purposes. Still, the passage of recreational marijuana laws means that more and more individuals may be using marijuana. Employers should be prepared for challenges, especially to pre-employment and random drug testing programs, and expect an increased number of employees who claim that their state's marijuana laws protect them from negative consequences as a result of a failed drug test.

This is an ideal time for employers to review their substance abuse and drug testing policies in light of state marijuana laws. Accordingly, employers should:

  • review their substance abuse policies and drug testing programs to ensure that the policies comply with regulations in the states within which they do business;  
  • reevaluate the circumstances under which they will conduct pre-employment, reasonable suspicion, and random testing;  
  • consider revising and republishing their substance abuse policies in an effort to educate employees about the negative consequences of the use of marijuana—even in those jurisdictions where the use has been legalized or when an employee professes to use marijuana for a medical condition; and  
  • train supervisors on how to handle inquiries from employees about the recreational use of marijuana or the use of marijuana for medical conditions.  

Barbara L. Johnson is a nationally known employment jury trial and class action lawyer representing employers and a partner in the employment law practice at Paul Hastings. Edward Cadagin and Peggah Sadeghzadeh are associates in the employment law practice of Paul Hastings. All are based in the firm's Washington office.  

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