The Cannabis Regulation and Tax Act: The Impact on Employers

By Brian M. Dougherty

 

The Cannabis Regulation and Tax Act (“Act”) (P.A. 101-0027) becomes effective on January 1, 2020 and will have a continuing impact on employers’ policies and practices in the workplace. This article summarizes some important features of the Act and notes what is on the horizon for employers when reviewing existing policies and practices.

 

Definitions
Before getting into the Act’s provisions, there are some definitions used in the Act that are important to understand. The first is what constitutes lawful possession of cannabis, which is defined under Section 10-10 of the Act, with the added requirement that the person must be over 21 years of age.1 Conversely, possession that goes beyond this is not lawful. This is important to note because the Act does not legalize any and all cannabis possession.

 

Under the Act, “workplace” means the employer’s premises, including any building, real property, and parking area under the control of the employer or area used by an employee while in performance of the employee’s job duties, and vehicles, whether leased, rented, or owned.2 An employer may further define “workplace” in the employer’s written employment policy, provided that the policy is consistent with the Act.3 This definition is vast and could pose a problem for gig economy employers and employees who travel or telecommute. Interpreted literally, if an employee performs work at home, he could not possess cannabis in his own house because that would be an area that the employee performs his duties. This could result in nonsensical interpretations of the Act given the realities of the modern workplace.

 

“On call” is defined under the Act as employee who is scheduled with at least 24 hours’ notice by his or her employer to be on standby or otherwise responsible for performing tasks related to his or her employment either at the employer’s premises or other previously designated location by his or her employer or supervisor to perform a work-related task.4

 

What is Not Defined
An “employer” is not defined under the Act. This can be problematic for companies with principal places of businesses in other states that do not have a similar law, but who have employees doing work in Illinois. A definition may not matter as long as the worker performs work in Illinois for any employer regardless of its principal headquarters.5 Employers with employees in different states would thus be subject to different requirements, creating an administrative headache in the process.

 

An “employee” is not defined either, so arguably the Act does not apply to independent contractors. This will certainly be an issue for companies employing such persons in such capacities (e.g., consultants, gig economy workers).

 

Another potential pitfall is the notion of “joint employment” which comes up often in employment discrimination and wage and hour cases.6 This is the theory that two or more parties can be an employee’s “employer.” A good example is a staffing company that assigns workers to third-party clients. The worker is the technical “employee” of the staffing company and not necessarily that of the client. Could the client reject any staffing company “employee” who uses cannabis lawfully? If the staffing company and client are considered “joint employers,” the answer would be no. Companies using staffing company workers should tread carefully. 

 

Does the Act Apply to Me?
The Act states that it shall not be construed to interfere with any federal, state, or local restrictions on employment including, but not limited to, the United States Department of Transportation regulation, 49 CFR § 40.151(e), or impact an employer’s ability to comply with federal or state law or cause it to lose a federal or state contract or funding.7 Thus, those employers in the interstate transportation industry and those companies that receive public funding will need to consult statutes and regulations applicable to their industries to see if any conflicts arise between the Act and other laws. There may be other restrictions besides the specific ones mentioned above that may impact compliance with the Act. 

 

The Act also does not enhance or diminish any other laws’ protections.8 This means that other generally applicable federal, state, and local laws will be enforced according to their terms (e.g., federal and state anti-discrimination laws).

 

Thus, the first step in determining whether an employer must follow the Act is whether the employer must adhere to some other state or federal law. If the answer is yes, then the Act must yield.9 

 

Following the Act’s Requirements
Once an employer determines that the Act is applicable, then Section 10-50 must be consulted. The Act makes clear that it does not prohibit employers from adopting reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis (i) in the “workplace” or (ii) while “on call,” provided that the policy is applied in a nondiscriminatory manner.10 What this means in a general sense is that because recreational cannabis is legal, it must be treated in the same manner as other legal substances that could cause impairments, the biggest one being alcohol. Employers who host dinners for clients at which alcohol is consumed, the occasional colorful speech given, and borderline unprofessional conduct tolerated should take note because disciplining employees under similar circumstances when they are impaired by cannabis would be an example of discriminatory behavior. 

 

The main thrust of the Act is Section 10-50(b). An employer can prohibit an employee from being under the influence of or using cannabis in the employer’s “workplace” or while performing the employee’s job duties or while “on call.” If the employee violates this, the employee is subject to discipline, including but not limited to termination.

 

Restrictions on Discipline
The employer’s ability to discipline employees is limited to instances where employees are under the influence of, or use cannabis, in the “workplace,” performing job duties, or while “on call.”11 The Act addresses when an employer can make that determination. The Act states that an employer may consider an employee to be impaired or under the influence of cannabis if the employer has a good faith belief that an employee manifests specific, articulable symptoms while working that decrease or lessen the employee’s performance of the duties or tasks of the employee’s job position, including symptoms of the employee’s speech, physical dexterity, agility, coordination, or demeanor.12 Other indicators include irrational or unusual behavior; negligence or carelessness in operating equipment or machinery; disregard for the safety of the employee or others; involvement in any accident that results in serious damage to equipment or property; disruption of a production or manufacturing process; or carelessness that results in any injury to the employee or others.13


These criteria do not appear to be all that helpful and are certainly not behaviors within the peculiar province of cannabis impairment. This means that employers should consider training supervisory personnel on how to spot behavior indicative of cannabis impairment and including these examples in employee handbooks.

 

The Act also provides that if an employer elects to discipline an employee on the basis of the employee being under the influence of, or impaired by, cannabis, the employer must afford the employee a reasonable opportunity to contest the basis of the determination.14 In short, this provision provides a form of pre-discipline procedure for employers to follow so that an employee can tell his or her side of the story. This is quite historic in the private sector because absent a contract with a guaranteed term, an employee is retained on an at-will basis and can be fired with or without notice.15 The Act changes that relationship. Somewhat counter-intuitively, employees who use cannabis now appear to have greater protections than employees who do not.

 

What is “Discipline?”
The notion of “discipline” is not defined under the Act either, but can take many forms from a verbal warning to a suspension to a termination. As a result, employers must decide the level of discipline to be imposed for cannabis impairment. A reasonable interpretation of the term “discipline” would likely include any and all forms of corrective action taken by an employer in an attempt to remediate an employee’s behavior.

 

There is not much detail on what constitutes a “reasonable opportunity” to contest such discipline and this could give rise to unnecessary litigation. (The Act does not provide for attorney fee shifting that would require the employer to pay the employee’s fees if the employee prevailed in litigation on this point.) In the private sector, absent some contract or policy statement (e.g., an employee handbook), employees do not typically have legal representation when discipline is being decided by the employer. The Act’s lack of clarity on this point could lead to attorney involvement in cannabis-based disciplinary meetings. 

 

Drug Testing
Because the Act requires use or impairment as a prerequisite for discipline, a failed drug test probably will no longer suffice as a sole basis for discipline, including termination. This means that reasonable suspicion, random, and post-accident drug testing can be part of the overall consideration as to whether an employee was using or impaired by cannabis, but should not be the sole, determinative factor.16


This leaves pre-employment drug testing. The Act does not use the term “applicant,” unlike some other laws,17 so employers have a good argument that a positive cannabis test could disqualify a putative employee. But under an amendment to the Illinois Right to Privacy in the Workplace Act (“Right to Privacy Act”), applicants cannot be discriminated against on the basis of lawful cannabis use.18 This means that a pre-employment drug test that detected cannabis could not be the determinative factor that disqualifies one from employment.

 

Because of the Act’s impact on drug testing, employers will need to modify their drug testing policies and procedures to comply with the Act.

 

Safe Harbors
The Act does provide three defenses that employers may assert if they are sued by an aggrieved employee or third-party. The first protects employers who seek to have an employee drug tested or discipline an employee based on a good faith belief that the employee used or possessed cannabis in the workplace, while performing job duties, or while on call in violation of the employer’s policies.19 The second protects an employer’s good faith belief that an employee was impaired or under the influence of cannabis in the workplace, while performing job duties, or while on call in violation of the employer’s policies.20 The third protects the employer from actions filed by third parties against the employer if an employee caused injury to a third-party while the employee was impaired and the employer neither knew nor had reason to know of the impairment.21


These three subsections likely operate as affirmative defenses to be raised by an employer and regarding which the employer would bear the burden of proof in any lawsuit. However, this is not much help for employers as it does not prevent a lawsuit from being easily dismissed in the earliest instance, unlike a statute granting immunity. Using terms such as “good faith belief” and “knew or should have known” suggest fact-intensive inquiries and full discovery. 

 

Amendment to the Illinois Right to Privacy Act
While the Act regulates an employee’s workplace and on-duty behavior, there is still the possibility that off-duty behavior could result in an employee being terminated for what will become lawful possession or use of cannabis.22 Because cannabis can remain in one’s system for weeks, an applicant could easily fail an employer’s pre-employment drug test. This was addressed in the Act by amending parts of the Right to Privacy Act.23 The Right to Privacy Act now includes the use of cannabis under the Act as a protected activity, meaning that an applicant or employee cannot be discriminated against (e.g., not hired, terminated, disciplined) because that individual used lawful products (e.g., cannabis) off of the employer’s premises, during non-working, non-call hours.24 To close a loophole that exists because cannabis is still a Schedule I controlled substance under the federal Controlled Substances Act (“CSA”),25 “lawful products” means “products that are legal under state law.”26 Without this language, cannabis use would not be “lawful” in Illinois due to the CSA, a federal law, which applies nationwide.27

 

What Must Employers Do?
Employers should examine existing employment policies to see if those policies may run afoul of the prohibitions contained in the Act. The Act takes effect January 1, 2020 so employers have time to adjust existing policies, especially in the area of drug testing. Where policies are revised, employers should take care to follow those policies, especially with respect to treating cannabis on par with other lawful products and preventing discrimination.

 

Safety is important in the workplace, and because cannabis use may lead to impairments, employers should reinforce safety workplace practices periodically to limit injuries and workers’ compensation claims. Employers should also check with their general commercial liability and workers’ compensation carriers to make sure that workplace injuries that may be linked to cannabis impairment will be covered under those insurance policies.

 

Because the Act requires a pre-discipline meeting with an employee who is believed to have been impaired by cannabis use, employers may want to create grievance policies that govern the procedures and practices of such meetings. Employers should also consider providing training to those employees with managerial or supervisory authority over other employees so that these managers/supervisors are adequately equipped to detect behavioral impairments linked to cannabis.

 

Cannabis users are now a protected class under the law and failing to follow the Act can result in litigation. Employers should be prepared to document rules infractions and employee discipline in cases where employee impairments are detected and where accidents occur if they appear to be caused by a cannabis-linked impairment.

 

Conclusion
The Act will require greater employer vigilance regarding what occurs in the workplace. Fortunately, employers have time to review and modify existing policies before the Act takes effect to ensure compliance.


1. Act, § 10-10.

2. Act, § 10-50(h).

3. Act, § 10-50(h).

4. Act, § 10-50(k).

5. See, e.g., 56 Ill. Adm. Code § 300.440 (Illinois Department of Labor jurisdiction over employers even though they may be physically outside of Illinois, but work was performed within Illinois).

6. Knight v. United Farm Bureau Mutual Ins. Co., 950 F.2d 377, 378-79 (7th Cir. 1991).

7. Act, § 10-50(g).

8. Act, § 10-50(f).

9. U.S. Const., Art. VI (supremacy clause).

10. Act, § 10-50(a), (b).

11. Act, § 10-50(b).

12. Act, § 10-50(d).

13. Act, § 10-50(d).

14. Act, § 10-50(d).

15. Kelsay v. Motorola, Inc., 74 Ill.2d 172, 182 (1978).

16. See Act, § 10-50(d).

17. 42 U.S.C. § 12112(b)(1), (2).

18. Act, § 900-50, amending 820 ILCS 55/5.

19. Act, § 10-50(e)(1).

20. Act, § 10-50(e)(2).

21. Act, § 10-50(e)(3).

22. For instance, an employer viewing social media posts or photographs depicting lawful cannabis use by employees.

23. Act, § 900-50.

24 . Act, § 900-50.

25. 21 U.S.C. § 812.

26. Act, § 900-50.

27. See, e.g., Coats v. Dish Network, LLC, 350 P.3d 849 (Colo. 2015) (employee’s use of medical cannabis lawful under state law but unlawful under federal law; Colorado’s lawful activities statute was thus interpreted to include federal law).

Brian M. Dougherty is a partner in the litigation group at Goldstine, Skrodzki, Russian, Nemec and Hoff, Ltd. in Burr Ridge. His practice area primarily includes representing employers and employees in employment disputes arising under state and federal law as well as business torts and general business-related litigation. He also counsels businesses on best practices under labor and employment law and contract law. He is an active member of the DCBA and is a member of the DCBA’s Labor and Employment Section. He is a former Editor-in-Chief of the DCBA Brief.