Cannabis businesses, as part of a highly regulated industry, have a lot of rules to follow. In addition to state regulatory rules, cannabis businesses have to follow a multitude of other state and federal laws specific to employment. Among these, the subset of wage and hour laws are particular, fact-specific, and can be some of the most difficult to comply with. Unsurprisingly, even the most sophisticated of cannabis business owners may be unaware of some of the more obscure wage and hour laws.
When it comes to cannabis employment matters, one of the questions I see most frequently relates to final paychecks. Like many states, Oregon has complicated laws surrounding final paychecks. Knowing the requirements and complying with them to a T can save money and expensive litigation. And we have definitely seen a recent uptick in cannabis litigation related to employment (see our posts on recent filings here and here).
To begin, timely payment of final paychecks in Oregon depends on how the employment relationship was separated. If an employer terminates an employee, or the employment relationship is terminated by mutual agreement, the final paycheck is owed at the end of the first business day after the termination. This means that if you plan on terminating someone, have payroll prepared to issue a check immediately.
If, on the other hand, an employee quits with at least 48 hours notice, the final paycheck is owed on the employee’s last day of employment. This may seem harsh, and it can definitely create some logistical headaches, but there is little wiggle room on this statutory requirement.
If an employee quits without 48 hours notice, things are a bit easier on the employer’s side. The final paycheck is due within five business days, or at the next regularly scheduled payday, whichever is sooner. If the employee’s time records are required to calculate the amount owed, and they are unavailable, the employer must pay the employee what it reasonably believes is owed. If the employee later provides the time records, the employer must issue payment for any remaining amount owed within five days of receipt of the time records.
Failure to timely pay a final paycheck comes with strict and hefty penalties. Penalty wages begin from the due date of the final paycheck. Penalty wages are calculated as the employee’s regular hourly rate for eight hours per day until paid or until legal action is commenced. Penalty wages are tricky and continue even if you have paid the employee their regular wages. For example, let’s say an employee quits with at least 48 hours notice. She is given her final paycheck three business days after she quits. Penalty wages began to accrue on her final day, but the final paycheck did not include penalty wages. Despite the fact that she was paid her final wages, penalty wages continue to accrue until the penalty wages are paid. Penalty wages continue for 30 days or until legal action is commenced.
Penalty wages only kick in if an employer willfully fails to timely provide a final paycheck. “Willfully” sounds like it requires intent by the employer to avoid paying the wages, but court cases make it clear that much less is required. In fact, Oregon courts only require that some sort of effort by the employer be shown to make the final wage payment. Without this showing, a court will find that the employer has “willfully” fail to pay final wages.
There is only one real way to avoid wage and hour lawsuits for your marijuana business: Ensure that your practices comply with the law. The ending of employment relationship can come with a lot of stress and potential litigation. Learn and comply with wage and hour laws to reduce exposure. If you are unsure if your practices comply, it’s best to have an outside expert like an employment attorney review your practices.
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Author: Megan Vaniman