Do you have questions about your cannabis business? Call or email.



Ideas expressed in this blog post are mine, and do not necessarily represent that of the Firm.  This article speaks to obstacles faced within the cannabis industry, and is not politically driven. 

We haven’t seen it happen yet, but the rumors have begun and the industry is at an all-time awareness that federal enforcement might be on its way. And no one wants to be the test case.

What would federal interference look like? Who would be the target? These are real questions. Questions I have been asked many times, and to which the answers are still elusive. However, after more than four years of advising clients in this relatively new industry, I have a few hunches. 

The Black Market is Alive

As recently reported by the Associated Press, states with legal recreational markets are struggling with the black market, especially Oregon.  Marijuana is tracked from seed to sale, providing data as to how many plants are being grown, and thus defining the volume of processed cannabis that should be on the market. The problem is, we are receiving reports validating the volume produced doesn’t match the amount that makes it to retail stores. There are reasonable explanations for some of this. E.g. bugs or mold could kill a crop before harvest. Or, a strain could turn out to not meet potency or quality standards of the grower. However, these scenarios require the grower to log a “destruction” into the traceability software, so the controlling regulatory body knows the plants have been destroyed, rather than harvested and processed for sale.  Thus, a gap between what is grown and what is sold remains.

This gap may be the key used by the federal government to potentially bring down the industry. No matter how many positive statistics I throw to you, if you are anti-marijuana, they won’t matter — you will still want the industry to be stopped. This is the same for politicians. Anti-marijuana politicians are looking for reasons to interfere, however, they need a sure win. Interference and a loss would bring only embarrassment, and could embolden the industry.

It is my prediction the “test case” will have unexplained gaps in production v. sales numbers, and will be a large grower. Oregon appears to have the most documented issues with untracked marijuana sales (the linked article being one of several like it available) thus leading me to believe that an Oregon grower will be first. 

How Can I Protect Myself?

Going after medical marijuana consumers would be a political nightmare. There are many sympathetic figures who use the plant to ease chronic pain, lessen the effects of chemotherapy, or deal with other illnesses. Jeff Sessions would not take that fight. Again, he might lose. And a loss would be devastating to his career, and the fight against legalization. 

On the recreational side, licensees should be internally meticulous about their records. Externally, licensees should be attentive on the traceability software, keep records of every plant purchased, and any reason a plant may not be harvested.  Any discrepancy could be used against you. If a strain produced only small buds, take photos and notes about the strain’s issues, and keep the information closely guarded. Substantiating your records may be critical down the road.

Reading the Tea Leaves

There is no crystal ball. However, one thing is for certain: federal interference with the industry will be an uphill and highly public battle.  On July 24, 2017, Attorney General Jeff Sessions, sent a letter to all states with legalized marijuana, expressing concern over the marijuana market in that state.

Washington State’s Governor and Attorney General have already gone public to oppose any interference, and have pointed to the misinformation scattered throughout the letter. Oregon’s representatives are sponsoring legislation that would “pave the way for responsible federal regulation of the legal marijuana industry” in a series of three bills. Additionally, Cory Booker, a senator for New Jersey, has sponsored legislation to decriminalize marijuana based, at least in part, on the racial inequality of arrests for the drugs, and the all-too-often excuse that the officer “smelled marijuana” as probable cause.  

The good news is this and other creative efforts to pierce the federal armor around marijuana seem to be working.  The polls show growing support for decriminalization.  Public support and sympathy for medical marijuana users makes it unlikely, in my opinion, that federal enforcement would attack medical marijuana users. Between producers of medical marijuana and recreational marijuana, the recreational side of the industry is a much easier target, because there is no argument that recreational users are sympathetic characters. The political spin would be much easier on the recreational side.  If we see interference, it would make more political sense to go after a large recreational marijuana grower who has discrepancies in their traceability between seed to sale. Any enforcement would be risky.  Any enforcement would be met with public outcry and resistance. Any enforcement, and we will be ready to defend.  

JDSA Law helps growers, producers and retailers. The I-502 initiative legalized the production, processing, sale and use of marijuana and cannabinoid products under certain, restricted terms in Washington State. JDSA is well versed on cannabis laws, and is active in assisting growers, producers and retailers in other states. Our attorneys can help you understand the regulation surrounding this market; and advise and assist you in matters concerning the control, taxation, record-keeping, labeling, advertising, permitting, and monitoring within the cannabis industry in your state. JDSA attorneys are dedicated to helping you understand the language and laws that cover this emerging industry.

Kirk EsmondCannabis
ICANN Do What?

Fighting Intellectual Property Infringement via Email

One advantage attorneys have, in arguing Intellectual Property Law cases in the United States, is the established precedent allowing us to serve notice to international defendants via email. Often, it’s the only way.

In a recent counterfeiting lawsuit involving a European defendant, the court granted me leave to perform the process of service on the defendant by email. Opposing counsel had never heard of such a thing.  Process of service by email?  What was I thinking? The fact is, what is typical for one legal practice area might be completely foreign to another practice area. But, in cybersquatting, and other Internet and website-related lawsuits involving domain names, service of process by email has been around for fifteen years or more. 

This Blog post revisits the rationale behind service by email, the rules on which it is based, and why it helps prevent foreign defendants from thumbing their noses at U.S. victims of their fraudulent schemes instead bringing those defendants into the jurisdiction of a U.S. court.

ICANN Recognizes Potential Conflicts

In the 1990s, when domain names using literal terms were first used, the Internet community quickly recognized that trademark infringement would be a problem if persons registered domain names incorporating a brand name without that brand owner’s permission. That lead the Internet Corporation for Assigned Names and Numbers (ICANN), a non-profit organization, to set out rules for potential conflict between trademarks and domain names - bearing in mind that because of the global reach of the Internet, domain name disputes would likely extend world-wide.

ICANN decided that when registering top-level domain names (such as .com and .net) domain name registrants world-wide would have to contractually agree to provide the registrar with a current and valid email address, and that registrant must agree to accept service of process by email. The public records of each registrant showing the domain name registered and the identifying information of the registrant, including email address, are known as the “Whois” records and are easily accessible through any Internet search engine.

Extending Service of Process by Email to U.S. Lawsuits

As the Internet became more widely used, so did the scope of the abuse of trademark rights.  Fraudsters sitting off-shore in havens such as the Cayman Islands had no qualms about setting up off-shore gambling websites using domain names incorporating famous casino brands such as MGM and BALLY’S.  The fraudsters duped unwitting patrons into providing sensitive personal and credit card information to what patrons believed were legitimate gaming sites operated by famous and reputable casinos.  

The casinos had to take action. 

Trademark rights were being infringed, reputations were being damaged, and the resolution needed something more than a slap on the wrist and the taking away of a domain name.  It required large monetary judgments against these fraudsters. 

It was one thing to file a lawsuit against these defendants who were clearly violating United States trademark laws, but how could defendants be served if they resided outside of the U.S?  Plaintiffs had to find ways to haul foreign defendants into a U.S. court.

The Rio Properties Lawsuit of 2002 [1]

The owners of a Las Vegas hotel and casino, the Rio All Suites Casino Resort, (“RIO”) filed a trademark infringement lawsuit against a foreign entity, Rio International Interlink (“RII”).  RII was an entity in Costa Rica engaged in Internet gaming via its website at <www.riosports.com> grossing an estimated $3,000,000.00 annually.   RII advertised its gaming services in Nevada where the Rio hotel casino is located. RIO’s lawsuit alleged trademark infringement because RII was using a domain name incorporating RIO’s trademark without RIO’s permission and which was confusing to consumers who patronized RII’s gaming website believing it was operated by RIO.

RIO attempted to serve the lawsuit within the United States to a mailing address in Miami, but was unsuccessful. They found no person or entity entitled to accept service on RII’s behalf.  RIO filed an emergency motion for alternative service of process to known addresses and contacts, and also via email to RII’s email address.  The court granted the motion, but RII later challenged the sufficiency of service by email and the court’s exercise of U.S. jurisdiction over the Costa Rican defendant.

The case went to the Ninth Circuit Court of Appeals.  The Ninth Circuit acknowledged that it was treading on “untrodden ground,” but recognized the need for courts to keep pace with advances in technology and modern e-business models. As RII had structured its business so that it could only be contacted by email, and because email was its preferred method of contact, the court found that service by email was appropriate.  It complied with the rules requiring RIO use a method of service reasonably calculated to apprise RII of the lawsuit against it.  A fact proven when RII responded to the lawsuit.

After the RIO decision, alternative service of process by email became typical for suits where defendants were hiding off shore or behind domain name proxy services.  From this, we’ve seen the law and our courts are more than willing to keep pace with the rapid changes in technology and the new business models being created.  All it takes is presenting them with a logical, legally viable argument as to why the law needs to take another step forward.

[1] Rio Properties, Inc. v. Rio International, Interlink, 284 F.3d 1007 (2002).

Federal Overtime Exemption Rule Invalidated

On Thursday, August 31, 2017, the United States District Court for the Eastern District of Texas granted summary judgment to business interests and multiple states, permanently invalidating a federal regulation that would have significantly increased the minimum salary threshold to qualify for executive, administrative, and professional exemptions from overtime pay under the Fair Labor Standards Act.

For employers, this means that the minimum salary threshold to qualify for one of these “white collar” exemptions remains unchanged at $455 per week ($23,660) and employers can continue to plan their pay practices based on federal regulations as they have existed since 2004.

Many employers have been following developments in this area closely, as the final rule — issued in May 2016 and scheduled to take effect on December 1, 2016 — would have increased the minimum salary threshold to qualify for these exemptions to $913 per week ($47,476 annually).

Many employers adjusted their pay practices in anticipation of the new rule, but just days before the effective date, the same Texas federal court referenced above issued a nationwide preliminary injunction temporarily barring the Department of Labor from implementing the rule. The court has now issued a final order invalidating the rule. The Department is highly unlikely to appeal this decision; it recently withdrew its appeal of the Texas court’s preliminary injunction with the Fifth Circuit Court of Appeals. That court dismissed the Department’s appeal on September 6, 2017.

Although the Department may propose another increase to the minimum salary threshold for these exemptions, that rule-making process takes time and public involvement. In the meantime, employers can rely on the current regulations.

If there is a silver lining to the federal overtime rule rollercoaster of the past year, it is that many employers may have taken the opportunity to audit their pay practices and to confirm compliance where claiming white collar exemptions.

Kirk EsmondEmployment & Labor

Impact and Consequence to the Evolving Industry in Chelan County

On Tuesday, August 22nd, the Chelan County Board of Commissioners released Resolution No. 2017-75, entitled: “A Resolution Regarding Cannabis Activities Within Unincorporated Chelan County”. 

After almost two years of waiting, these regulations are not the resolution that the local industry was hoping for. The new regulations are extremely cumbersome, and all but ban the production or processing of cannabis in the unincorporated regions of Chelan County.

The County insists that these regulations are necessary due to cannabis’ existence as a “public nuisance” and lists its “negative impacts” as increased crime, traffic issues and unhealthy odors as reasons for the extremely restrictive nature of these regulations. Needless to say, compliance with Chelan County’s new code will be difficult for most and impossible for some.

JDSA Law is here to help. We can assist your business to regroup, and hopefully continue operations.

Here's what you need to know now: 

Zoning and Buffers 

Step 1:  Review the Resolution’s allowed zoning locations, which depend on whether your business is located indoors or outdoors. 

  • Indoor cannabis operations will be allowed in Rural Industrial, Commercial Agricultural Lands, Rural Residential/resource 20 and Rural Residential Resource 10 zones 
  • Outdoor cannabis operations will be allowed only in Rural Residential/Resource 20 zone  

If your business is located in one of these zones, you can proceed to step 2

Step 2:  Review the property line set-backs (called “buffers” in the regulations) to see if your property is located within allowed buffers.  If your business is located in an approved zone and can withstand the buffer requirements, your operation will only be allowed to operate if the County approves a conditional use permit.

Conditional Use Permit (CUP)  

The CUP applications can be found on the Chelan County websiteand will require all of the following:

  1. A pre-application meeting (even though the application, as it reads now, says that this meeting is optional)
  2. A vicinity map and completed Site Plan, with additional requirements as stated in the new regulations, Section 11.100.060
  3. Environmental checklist
  4. Aquifer Recharge Disclosure Form
  5. A landscape plan, parking plan, wetlands delineation, habitat management plan, geo-technical report or traffic impact study, as may be required by the Planning Department
  6. Documentation showing that the property is under the control of the license holder (lease or deed)
  7. Lighting plan – showing that the lights will not be visible from off-site residences or public roads
  8. Security plan – the licensee must be compliant with the Washington State Liquor and Cannabis Board (the “WSLCB”) security requirements and prove that the security system is functional
  9. Odor mitigation plan approved by a mechanical engineer
  10. Proof of legal and adequate water rights
  11. Waste disposal plan
  12. Fencing must be 8 feet tall or tall enough to conceal the cannabis from view, whichever is taller, and must be made out of materials that are designed for fencing purposes
  13. Proof of notice of the public hearing
  14. Proof of legal and valid access to the facility (driveway, easement, ownership)
  15. The operating plan that the licensee submitted to the WSLCB, with the addition of: (i) the number of employees, (ii) hours of operation, and (iii) on-site management contact information
  16. Notice to the adjacent landowners of the time and place of the public hearing

In addition to the above, applicants who grow indoors will need to install ventilation/air filtration systems and show the same on the site plan. 

Once the CUP application is complete, the application and filing fee are submitted to and processed with the Planning Department and a hearing will be set on the application in front of the Chelan County Hearing Examiner.  The Hearing Examiner will most likely ask questions of each applicant. 

The success of this hearing will depend heavily on the applicant’s preparation and presentation.  JDSA attorneys have been successful in representing cannabis industry clients in CUP hearings in other counties. 

If a CUP is not possible due to a buffer, the regulations set forth various circumstances in which a variance may be filed. 


 The regulations contemplate variances, allowing buffers to be reduced under certain circumstances.  Like the CUP application process, a variance is begun by filling out a Variance Application and submitting the application and fee to the County.  In addition to the application and corresponding fee, the variance application requires:

  1. Assessor’s parcel map
  2. Vicinity Map
  3. Site Plan


If the business’s location and operations are able to apply for and thereafter receives a CUP, the County will require the business to maintain compliance to these regulations and all other regulations of the County Code, including building permit requirements.  In order to police the industry, the County is establishing a registration and enforcement fund, requiring annual registration and accompanying fees from all cannabis operations in unincorporated Chelan County.  

As with the WSLCB compliance requirements, maintaining compliance with these County regulations will be key to staying in business.  Businesses should instruct all employees to read the Chelan County Code and provide training to employees on how to operate within the regulations, both at the State and the County level. 


These new Chelan County regulations are apparently retroactive, and will shut down the majority of the local industry due to the zoning and buffer requirements. 

  • If your business is located in an allowed zone and if you can meet the buffer requirements, a CUP will still be required.  In addition to the normal application process, the CUP application must be accompanied by the items listed above and given in more detail in Code Section 11.100.050. 
  • If your business is located in an allowed zone but cannot meet the buffer requirements, a variance application might be an option.  The County may require that the variance be obtained prior to the CUP, or they may require both applications be submitted at the same time. 

Given these regulations are brand-new, there will be pains in this process.  Contact the JDSA team of Cannabis Law attorneys for help.

For additional information, refer to Resolution No. 2017-75

Kirk EsmondCannabis
Disclosing Your Agreements

Cannabis license holders must disclose agreements to the WSLCB

With the passage of Senate Bill 5131, Washington State cannabis license holders were put on notice. Effective as of July 23, licensees need to disclose, to the Washington State Liquor and Cannabis Board (WSLCB), any Licensing Agreement for intellectual property or Consulting Agreement the licensee has entered into. 

As outlined in the earlier blog post, these agreements were always allowed (or at least were not expressly disallowed), leaving many in the industry wondering:

  1. Why does the WSLCB want to review these agreements?
  2. What is the WSLCB looking for?
  3. Who will be reviewing the agreements?

We now have answers to these questions

The WSLCB wants to review these agreements because in traditional business, consulting fees and licensing fees are typically based (in whole or in part) on the profits of the business receiving the consulting or intellectual property services.  However, under WAC 314-55-035, sharing profits is not allowed, and is a “true party of interest” violation, unless of course the party receiving profits has been vetting and approved by the WSLCB, prior to the party receiving any money.  The WSLCB recognized the ease in which parties could share profits under these types of agreements, and is now requiring all such agreements be disclosed to check for true party of interest violations.    

In the Washington State regulatory system, each licensee is assigned an Enforcement Officer tasked with inspecting the licensed premises, signing off on changes to the license or the premise, and dealing with other issues surrounding compliance.  Given this is a compliance issue; it should be of no surprise that these agreements are to be reviewed by the licensee’s Enforcement Officer. 

These agreements are common in the cannabis industry. 

It would be best practices to review the agreement prior to disclosure in order to check for any provision that may trigger a violation.  If the agreement contains a true party of interest violation, the license will be canceled pursuant to WAC 314-55-530True party of interest violations are taken very seriously, and there is no warning violation or slap on the wrist – there is only one available penalty and it is the cancellation of the license. 

If you have entered into a consulting agreement or licensing agreement, disclose it as soon as possible. Reach out to the other party to the agreement to give them a heads up, especially if the agreement has a confidentiality provision. 

As always, compliance is key.    

Kirk EsmondCannabis
Canopy Expansion: The Wait Is Over

Washington State Now Allows Cannabis Producers to Own Multiple Licenses

Last week the cannabis industry received much anticipated news: producers are now allowed to own up to three licenses, expanding their canopy to amounts initially allowed when the licensing process first began.

In 2013, hundreds of Washington residents applied for a license to producer cannabis, choosing one of three types of licenses, tiered by the amount of square foot canopy growing space allowed.  Each person was able to apply for up to three licenses, meaning that a single person could be licensed to grow up to 90,000 square feet (if they held three tier 3 licenses) of cannabis. The licensing window closed and the Washington State Liquor and Cannabis Board (the “WSLCB”) discovered that if it allowed all of the applied licenses to go forward, the licensed canopy space would greatly surpass the 2 million square feet of canopy space it had originally set as the maximum amount to be allowed within the State. 

                  The solution to the canopy issue was allow each person to only utilize one of the licenses that was applied for and on February 19, 2014, the WSLCB issued Board Interim Policy BIP-02-2014, limiting licensees to only one license per person or entity.  Many licensees had structured their business plan and projections around the utilization of more canopy space than was ultimately allowed and have been waiting to expand, realizing the full potential of their initial business plan.  

                  On Wednesday, August 9, 2017, the WSLCB gave notice that BIP 02-2014 has been rescinded and canopy expansion will now be allowed.  Current licensees (and folks looking to get into the business) can officially apply to own up to three licenses, maximizing canopy space depending on the tier of the licenses. 

                  In order to take advantage of this new rule, licensees cannot apply for a new license, but rather may purchase an existing license through the purchase of the licensed entity or through an assumption of the license.  As always, the WSLCB must approve the purchase of the license and the new owners individually prior to the actual transfer of ownership or assumption of the license.  The purchase of an existing licensed entity is accomplished through a Change In Governing Person Form, which will begin the vetting and approval process with the WSLCB.  During this process, the LCB will require a Purchase and Sale Agreement and a Bill of Sale, among other documents like a lease and floor plan.  The assumption of the license is accomplished by filing a new business license application and marijuana addendum for the purchasing company.  A Purchase and Sale Agreement and a Bill of Sale are also required by the WSLCB during the license assumption process. 

                  This expansion is great news for the industry.  However, the notice also provides that co-location of producer licenses will not be allowed. Presumably this means that each license will need its own “licensed premise” a defined term which essentially means the floor plan that has been submitted to and approved by the WSLCB.  By disallowing co-location, licensees will need to lease additional space, have separate log-in stations, have separate employee badges and incur other overhead expenses for its second and/or third location.  Additionally, if the same labor force is working in more than one licensed premise, the employer must be registered as a farm labor contractor with the Department of Labor & Industries.  Without the allowance of normal deductions thanks to Internal Revenue Code Section 280E, purchasing additional licenses will most likely be an expensive endeavor.     

                  Even though the purchase of additional licenses may present a few challenges and upfront expenses, growing more product will mean larger yields and profits.  As long as the proper business structure is in place so that the licensee is operating in a manner which maximizes certain business efficiencies, additional licenses will be worth the wait.

Kirk EsmondCannabis
Legislative Changes In Public Records Requests

How Changes in the Laws will impact you

By Evan McCauley

By Evan McCauley

The next time you submit a public records request, you may notice something different. On July 23, 2017, two new House Bills went into effect. Below are highlights of the new legislation. 

House Bill 1595 —

Changes include: 

Public Records Charges

  • Electronic Records —  Agencies are now authorized to charge for providing copies of electronically produced records.
  • Custom Service Charge — Agencies may now assess a customized service charge for records requests that require the preparation of data compilations, or customized electronic access services, that are not used by the agency for other purposes. This fee is in addition to the authorized copying costs, and may include reimbursement for the actual costs of providing records.

Excessive Requests

  • Agencies may now deny frequent, automatically generated (bot) requests for public records that would interfere with the other essential functions of the agency.
  • Agencies may consider requests for all or substantially all agency records ‘invalid’ under the Public Records Act.

Additional details of House Bill 1595, including the costs that can be assessed for public records requests can be found here.

House Bill 1594 —

House Bill 1594 will create a grant program to help local governments, particularly smaller agencies, pay for training to better manage public records. It will also allow the Attorney General’s office to assist local governments in complying with requests, and will begin a study to explore creation of a statewide online portal for public records access.

Additional details of House Bill 1594 can be found here.


Looking Through The Crystal Ball at Tax Reform

With every new administration comes a new approach to taxation and changes to deductions and credits.  The Trump administration has promised tax reform since the early campaign days, and his latest tax reform legislation does just that.  However, instead of highlighting what the legislation would alter if its adopted, this article focuses on what is likely to remain the same.   

With the latest administration in office, there may be changes to the tax breaks you have historically claimed on your tax returns.  While it's still unclear what tax laws will change, USA Today recently reported there are five tax breaks that remain unaltered in the current version of tax reform legislation:

  • Mortgage Interest Deduction
  • Charitable Contributions Deduction
  • IRA Contribution Deduction
  • Premium Tax Credit
  • HSA Contribution Deduction

Let’s take a more detailed look at each to get a better understanding of how you may be affected, relevance to the taxpayer, and how these deductions might help:

Mortgage Interest Deduction:  As its name reflects, the mortgage interest deduction is available to those who pay a mortgage and itemize their deductions.  While this deduction would not change, the proposed reforms to the tax laws may not leave enough itemized deductions intact to make itemization of deductions a viable option for most folks. Combine fewer deductions with raising the amount of the standard deduction, and relatively few taxpayers may bother itemizing under a revised system.  As a result, even though you might continue to qualify for a mortgage interest deduction, it may not make sense to take it because the standard deduction would be a better deal.

Charitable Contributions Deduction:  A certain percentage of charitable contributions are deductible under the current tax code and like the Mortgage Interest Deduction, this looks like it won’t change in the tax reform package.  Also like the mortgage interest deduction, charitable contributions are only available if you itemize your deductions.

IRA Contribution Deduction:  Contributions to IRAs are deductible under certain circumstances and at present, this non-itemized deduction would remain unchanged.

Premium Tax Credit:  Unsurprisingly, this credit is tied to the Affordable Care Act, which is very much unresolved at the present time.  This credit will still exist for low and moderate-income taxpayers who buy private health insurance, but changes are expected under the new plan. The proposed new version of the Premium Tax Credit would make it available to a wider range of income levels and the credit amount would increase with age, rather than with need. Additionally, the new premium tax credit won’t require taxpayers to buy health insurance policies on the ACA marketplace, as the current tax credit does.

HSA Contribution Deduction:  This is part of the tax reform plan that appears to be expanding in the healthcare reform package. If approved, annual contribution limits would increase to nearly double what they are right now. HSAs would become a payment option for every health insurance policy, instead of just for special HSA-enabled plans. Lastly, the healthcare reform package would expand what qualifies as medical expenses for the purposes of HSA spending.  If this tax reform legislation passes as-is, it would make sense to increase HSA contributions. 

No one has a crystal ball to determine exactly what will be changed with the tax reform.

Of interest – and certainly water cooler discussion – is how these changes will impact you as a taxpayer, and when the changes will become effective. The only certainty right now is that changes will come, and it’s important for you to be informed.

Source:  USA Today ‘5 tax breaks President Trump won't kill’

Kirk EsmondTax
STAY CONNECTED: Employment and Labor Law

NEWS that impacts your personnel policies and procedures

Kristin Ferrera

Kristin Ferrera



On June 29, 2017, the Washington State Supreme Court answered two questions certified from a federal district court in the case of Brady v. AutoZone Stores, Inc.

The Court answered the following certified questions as follows:

  1. Is an employer strictly liable under WAC 296-126-092? No. The employer is not automatically liable if a meal break is missed because the employee may waive the meal break under the regulation.
  2. If an employer is not strictly liable under WAC 296-126-092, does the employee carry the burden to prove that his employer did not permit the employee an opportunity to take a meaningful break as required by WAC 296-126-092? An employee asserting a meal break violation under WAC 296-126-092 can establish his or her prima facie case by providing evidence that he or she did not receive a timely meal break. The burden then shifts to the employer to rebut this by showing that in fact no violation occurred or that a valid waiver exists.

The opinion can be found at Courts.wa.gov

What does this mean to employers?

Employers may allow employees to waive their meal periods, but the employer may never coerce or force the employee to do so. Also, if you allow employees to waive their meal periods, then you should keep evidence of the waiver on file for at least three years to protect against liability for violations of WAC 296-126-092.  In practice this could be a written waiver signed by an employee either for a period of time or on a case by case basis.

Washington State’s Department of Labor and Industries has posted the following advice to employers:

Business owners please note: The Department of Labor & Industries recommends that you get a written statement from workers who want to give up their meal periods.”

Agricultural employers please note: The regulation for meal and rest periods for agricultural workers is different than that cited in the Bradycase. WAC 296-131-020 governs meal periods for agricultural workers and states that employees “shall receive a meal period…” as opposed to the nonagricultural regulation that states the employees “shall be allowed a meal period…”[emphasis added]. This could give way to the interpretation that while the nonagricultural meal period is waivable, the agricultural meal period cannot be waived.

If you have further questions about this, contact an attorney to assist you with implementing the proper policies and procedures for missed meal periods.


New Law Relating to Pregnancy Accommodations Effective on July 23, 2017

Effective July 23, 2017, Washington employers with 15 or more employees must provide reasonable accommodations to their pregnant employees and may not discriminate against pregnant employees on the basis that the employer will have to provide these accommodations.

The summary of the law is as follows:

It is an unfair practice for any employer to:

  • Fail or refuse to make reasonable accommodation for an employee for pregnancy, unless the employer can demonstrate that doing so would impose an undue hardship —undue hardship means an action requiring significant difficulty or expense;
  • Take adverse action against an employee who requests, declines, or uses an accommodation;
  • And deny employment opportunities to an otherwise qualified employee if the denial is based on the employer's need to make reasonable accommodation;

Reasonable accommodation means:

  • Providing more frequent, longer, or flexible restroom breaks;
  • Modifying a no food or drink policy;
  • Job restructuring, part-time or modified work schedules, reassignment to a vacant position, or acquiring or modifying equipment, devices, or an employee's work station;
  • Providing seating or allowing the employee to sit more frequently if the job requires standing;
  • Providing a temporary transfer to a less strenuous or hazardous position;
  • Providing assistance with manual labor and limits on lifting;
  • Scheduling flexibility for prenatal visits;
  • And any further accommodation an employee may request, and to which an employer must give reasonable consideration to in consultation with information provided by the Department of Labor and Industries or the attending health care provider.

An employer may not claim undue hardship or require written certification from an employee for:

  • Providing more frequent, longer, or flexible restroom breaks;
  • Modifying a no food or drink policy;
  • Or providing seating or allowing the employee to sit more frequently if the job requires standing.”

Learn more here: Final Bill Report SSB 5835

The full text of the law is here: Substitute Senate Bill 5835


OSHA Extends Deadline for Electronic Record-Keeping from July 1 to December 1, 2017

The U.S. Department of Labor, Occupational Safety & Health Administration (OSHA) is not currently accepting electronic submissions of injury and illness logs and has issued a proposed rulemaking to extend the July 1 deadline for certain employers to electronically submit such data to the agency for posting online.

Employers with 250 or more employees and those with 20-249 employees in certain industries with historically high rates of occupational injuries and illnesses (including agriculture, construction, and other industries, see full list here) must now submit certain 2016 injury and illness data from Form 300A electronically by December 1, 2017.

Although the extension is in the form of a proposed rulemaking, because OSHA is not accepting electronic submissions and the electronic reporting system will not be available until August 1, employers can assume the deadline has been extended at this time. OSHA describes the deadline extension as an opportunity for the new administration to review the reporting requirements and for employers to familiarize themselves with the electronic reporting system. Based on OSHA’s stated intention to also reconsider, revise, or remove other provisions of the prior final rule, employers should watch for further changes prior to the December 1, 2017, implementation date.

JDSA will continue to provide updates as changes occur.

Although the requirement to electronically report injury and illness information has been delayed, employers’ obligations to track and record workplace injuries and illnesses remain otherwise unchanged.

We’ll continue to keep you well informed of current and upcoming changes that impact you, and your business.

UPCOMING – In the coming weeks, we will post updates on the Third Washington State Legislative Session, and bills currently under consideration including paid family and medical leave, workplace bullying, and articles on the federal Department of Labor’s change in: policies regarding independent contractor classification and joint employer status.

The Cannabis Business: What You Need To Know Now!

A 90-minute presentation you don’t want to miss. 

By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

The business of cannabis is big business. If you’re involved, you know the potential. But do you know—and understand—all the legal matters that come with operating in this emerging industry? If you don’t, you can gain a lot of knowledge in a short amount of time.

Producers, growers, and retailers can best grow their cannabis-industry business by knowing more about the laws and regulations governing this potentially lucrative industry.

JDSA Law is presenting a seminar on Cannabis in Central Washington on Tuesday, June 27, 2017. JDSA Law attorney, Lindsey Weidenbach, will lead this 90-minute early-evening event. Lindsey will focus on providing two key areas of information:

  • Changes happening in the cannabis industry
  • The issues cannabis businesses are experiencing in Central Washington

There are numerous areas of discussion surrounding the cannabis industry in Washington and Oregon - such as Consulting and Licensing Agreements, Retail License Expansion, Research, Industrial Hemp, Advertising, and others. And while the focus of this presentation will be on changes and related issues, the wealth of knowledge you can gain from Lindsey, and her presentation, could help make a significant difference in the overall success of your business.

In addition to the vital industry-related information you will receive in the seminar, attendees will also receive a $40.00 discount on the 50+ page Handbook, "Maintaining Compliant Business Practices in the Washington Cannabis Industry”, which she created, authored, and maintains to keep cannabis business owners current with the evolution of the cannabis industry.

This seminar is being presented at the Confluence Technology Center in Wenatchee from 5:30pm to 7:00pm. Limited seating is available. Attendance is $20.00.

Register by clicking here.

Lindsey Weidenbach began her practice in the cannabis industry, at its infancy, in 2013. She services over 30 cannabis industry-related clients (from producers to retailers) in varying stages of their business practices. Lindsey is licensed to practice and represent cannabis clients in the states of Washington and Oregon, and is currently being considered as a speaker at multiple national industry conferences in the months ahead.

Kirk EsmondCannabis
Another Door Closed: Real Estate Transactions in the Cannabis Industry

By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

On April 18, 2017, national title companies such as Fidelity National Title Insurance Company, Chicago Title Insurance Company and Alamo Title Insurance received Underwriting Bulletin No. 2017-RC-04, closing yet another door to the cannabis industry: title & escrow.  The memorandum, states that if the title company receives any notice from the broker, seller, buyer or anyone else, that the Land is or will be used in some capacity for growing, producing, distribution or dispensing of any type of marijuana or marijuana products, the title company is not allowed to:

  1. Be involved in the handling of any escrow or other funds of any type
  2. Issue any type of zoning coverage
  3. Issue title insurance without the inclusion of an exception related to violation of federal law

We have been told that the possible reason for the  title companies’ sudden change of heart is because of Sean Spicer’s and the Attorney General’s comments on marijuana and the current administrations unpredictability as to the topic.  This fear of federal enforcement is often used as an excuse by national companies to discontinuing working with the cannabis industry. 

The cannabis industry has grown accustom to having to get creative in order to just retain some semblance of normalcy in business.   However, this new mandate from title & escrow affects folks who might want to purchase property and rent space to cannabis operations and thus applies to those with no tie to the industry, other than a something as simple as a lease. 

Typically, financial institutions acting as lenders will require that the purchase and sale be closed by a title company.  The borrower would have to negotiate a very unusual exception to close a bank-financed transaction outside of a title company.  The good news is that as long as the real estate transaction doesn’t involve bank financing, law firms with real estate experience and licensed Limited Practice Officers (LPO) can close real estate transactions.  At JDSA, we can draft the purchase and sale documents, coordinate title insurance with the title company, issue settlement statements and record the transfer documents, be it a deed or real estate contract. 

The cannabis industry once again must get creative in order to conduct normal business practices. 

Even though the title companies have suddenly determined that closing real estate transactions for land that may be used for cannabis growing, processing or retail sale is too risky, Law firms such as JDSA are equipped to close real estate transactions that do not involve bank financing.  JDSA is standing by the industry and will assist with creative solutions to the hurdles that are put in place. 

Kirk EsmondCannabis
Washington State Cannabis Laws: Change Has Arrived

Senate Bill 5131 Changes the Washington Cannabis Rules

By Lindsey J. Weidenbach

By Lindsey J. Weidenbach

On May 16, 2017, Washington State Governor Jay Inslee signed Senate Bill 5131 into law, initiating changes to the recreational and medical cannabis rules, which will become effective on July 23, 2017.  Below is summary of the changes and how they affect the cannabis industry moving forward.

1.     Consulting and Licensing Agreements.  SB 5131 expressly allows licensees to enter into agreements for consulting services and the licensing of intellectual property rights such as trademarks, trade secrets and trade names.  These agreements must be disclosed to the Washington State Liquor and Cannabis Board (the “WSLCB”) for approval.  Noticeably absent in the legislations is clarification as to whether or not these agreements have to conform to all other I-502 rules and regulations.  If not, SB 5131 assumedly would give licensees the ability to structure agreements so that the payment for consulting or licensing are tied to the licensee’s profits. 

2.      Purchasing Plants & Home Grows.  Qualifying medical cannabis card holders who are entered into the State’s database will be allowed to purchase immature plants and clones and may also purchase seeds for the purpose of growing cannabis at home.  The WSLCB will begin assessing the ability of recreational cannabis users to grow cannabis at home in light of the principals set forth in the Cole Memo.  

3.     Retail license expansion.  Currently, retail licensees and financiers can hold up to three licenses.  SB 5131 expands the retail license number to five licenses per person.  However, if you are unreasonably delayed in the licensing process, the WSLCB can forfeit the license application. 

4.     Marijuana Research.  The cannabis industry has been long attempting to conduct research on cannabis and its various strains, which was disallowed under the prior I-502 rules and regulations.  SB 5131 opens the door to marijuana research and instructs the WSLCB to begin structuring a process for the issuance of research licenses.  SB 5131 had a “companion bill” EHB 1857 which, in part, addressed research licenses.  EHB 1857 (sponsored by local representative Cary Condotta) is still in the committee phase. 

5.     Advertisements.  Cannabis licensees, especially retail licensees, are going to be restricted to the amount and the type of advertising that they can engage in after these new rules become effective.  The legislature found that cannabis billboards and other advertisements were targeting children, young adults and non-residents of Washington.  Therefore, licensees will now be disallowed from advertising anything other than: (i) trade name; (ii) location of the business; and (iii) the nature of the business.  The advertisement must be affixed to a building or other structure and “transport advertisements” are expressly disallowed.  Additionally, licensees cannot use a commercial mascot, toys, banners or inflatables to entice customers to come into their store.

6.     Industrial Hemp.  In 1938, the magazine Popular Mechanic published its February issue entitled “Billion-Dollar Crop” referring to industrial hemp for fiber, paper, dynamite and oil.  Hemp has similar qualities to the cannabis plant and was described within the definition of “marijuana” in the Controlled Substances Act (and other earlier legislation), making it illegal to grow.  Many speculate that hemp’s association with cannabis, and its subsequent status as an illegal substance, is due to the lobbying efforts of the timber industry which was threatened by the rise of hemp.  Under a new Section within SB 5131, the WSLCB is directed to come up with a regulatory framework for allowing industrial hemp to be grown in Washington State. 

7.     The Gift of Cannabis.  A lessor known fact of the prior I-502 rules is that gifting cannabis was still illegal.  The State will now allow gifts of small amounts of cannabis so long as the delivery is done in a nonpublic place and the cannabis is in its original packaging. 

8.     Organic Cannabis.  Many local farmers have been pushing for organic certification of cannabis for many years, and these farmers may soon get their wish.  Under SB 5131, the WSLCB may now adopt rules to certify cannabis as organic, both under the standards provided by the federal organic program and the Washington state organic program. 

9.     Tribal Land.  Licenses will not be issued if the premises is on tribal land or Indian country without the consent of the tribe or Indian country. 

10.  Inspections.  Under current I-502 rules, inspections by the WSLCB were triggered mostly by either changes to a licensee’s site or operating plan or by complaints of violations.  The new rules allow inspections for violations at any time and these inspections can result in fines for violations seen by the enforcement officer.  These fines will include reimbursement for the State’s costs in conducting the inspection plus $1,000.  These fines are in addition to the fines which already exist in the regulations, which include the forfeiture of the license, and SB 5131 allows the WSLCB to implement new fines for violations of the rules and regulations. 

The above is a summary of the main changes within SB 5131.  These changes will be effective as of July 23, 2017 and will not be retroactive.

Kirk EsmondCannabis

Each year on April 26th the intellectual property community celebrates World Intellectual Property Day to recognize the role creation and innovation has played in our lives.  Intellectual property – ranging from patents and trademark to copyrights and trade secrets – has made our lives safer, more comfortable, and through innovation is turning problems into progress.

Trademarks, or “brands” as they are known in the advertising and marketing community, are the more familiar form of Intellectual Property that people interact with on a daily basis.  From the morning cup of Starbucks® coffee to the late-night snack from McDonald’s® our lives, our possessions, are an array of trademark choices often influenced by a trademark’s reputation.  As a brand grows in recognition and reputation so can its value and so it is appropriate on World Intellectual Property Day to not only recognize the world’s most valuable brands, but also to consider why trademarks are a valuable asset to any business.

The Most Valuable Brands of 2016:

Authorities differ on which brand was the most valuable in 2016, but there is a general consensus that certain brands consistently rank among the world’s best in reputation and value[1].  The following list from Forbes offers no surprises as to which companies have the most valuable global brands, but perhaps food for thought is the fact that something as simple as a trademark can be worth billions of dollars:


Source: Forbes


Why Trademarks are Valuable to Any Business:

No matter the size of a business, nor the goods and services it sells, its trademarks are likely to be the most valuable asset it has.  Even so, many businesses underestimate the potential value of their brands and how to get the most value out of a trademark.  Trademarks have a certain role to play in the business arena.  Knowing what that role is and then allowing a trademark to properly do its job could turn a new business enterprise into the next billion-dollar business world leader.

1.     Trademarks Relay Information to Consumers:

Trademarks are an efficient way to market your products to consumers.  They are source identifiers.  They tell consumers that here is the source of a certain product of a certain quality and reputation.  Trademarks help consumers find products among a sea of competing goods and the more distinctive and recognizable a trademark is, the more likely it will stand out from its competitors and influence a consumer’s choice of purchase.

Importantly, it is consumer experience that creates value or “good will” in a brand.  The more consumers learn that when buying a certain product, they will get a certain experience – good or bad – the more the reputation of the brand under which the product is sold grows. 

2.     Trademarks Can Efficiently Promote Your Products, and Enhance Business Reputation Through the Internet:

Many consumers use the Internet to search for information on products and services and typically do so by typing a brand name into the search engine.  The more a trademark is marketed and becomes known to consumers, and the more consumers search the Internet by using that trademark, the higher that trademark tends to appear in Internet rankings.  A higher ranking can in turn generate more traffic and greater consumer interest toward the trademark resulting in greater brand value.

3.     Trademarks Ensure Companies Don’t Lose Business to Competitors:

Trademark law is designed to protect consumers from becoming confused between products and from accidentally purchasing one product when they intended to purchase another.  The goal of a trademark is to prevent that confusion by being as distinctively different from competitors’ marks as possible.  Logically, no business wants to lose customers.  A business should, therefore, not only adopt trademarks that are distinctive, but also monitor the marketplace to make sure competitors are not appropriating customers by intentionally using a confusingly similar brand.

4.     Trademarks Can Enhance Employee Experience:

A brand’s reputation can have an effect on employees working under that brand.  If the brand has a good reputation, employees may feel more positively toward their jobs, and have a greater sense of pride in their work.  A more reputable brand is more likely to draw applicants for employment positions than a brand with a bad reputation.  A more reputable brand can create better business opportunities for the brand owner.

5.     The Billion Dollar Brands Were Initially Purchased for a Few Hundred Dollars:

An application for a federal trademark can be as little as $325; less for a state registration, and the fees to maintain a registration every five or ten years are only a couple of hundred dollars.[2]  Considering the value a good mark can add to a company, the cost to adopt, use and register a trademark is a bargain. 

Without a doubt, our lives are better today because society encourages innovation and creation, and recognizes the value of intellectual property.  As the world celebrates World Intellectual Property Day, take a look around and see how creation and innovation over the years have enhanced your life.

  [1] A brand’s value should not be confused with a company’s value.  A brand can be considered an asset entitled to its own entry on the company balance sheets.

[2] While the United State Patent and Trademark Office, and various State offices, have made applying for a trademark a fairly simple process, there are pitfalls and seeking legal advice from an Intellectual Property Attorney is recommended.

Washington Paid Sick Leave – Spring Update
Kristin M. Ferrera

Kristin M. Ferrera

Rita H Lovett

Rita H Lovett

As previously reported, Initiative 1433 was approved by Washington voters in the last statewide election, and as a result, Washington employers must permit certain employees to accrue at least one-hour paid sick leave for every forty hours worked beginning January 1, 2018.

The Washington State Department of Labor & Industries (“Department”) solicited feedback on the new law from interested stakeholders, and multiple employers and associations provided written comments on issues raised, as well as some proposed solutions. The Department has now issued draft proposed rules to implement the law, scheduled a meeting for Monday, April 24, 2017, 9:00 am – 11:00 am, to discuss the draft rules, and solicited further feedback. If you are interested in attending or calling into this Monday’s meeting, you can participate online, by phone, or in person.

Feedback to the Department’s draft rules is due April 28. The Department intends to revise the proposed rules based on this feedback, circulate an updated draft during the week of May 8th, and seek further stakeholder feedback by May 31. The Department will then draft administrative policies for the new law and hold public hearings throughout Washington this summer, with a final deadline for stakeholder comments on the proposed policies of September 1, 2017.

We will post a blog article, after the Department circulates updated rules in early May, to update you with the current status of the rules. You can find further information about the Department’s paid sick leave rule-making process, including the current draft proposed rules at: https://lni.us.engagementhq.com/.

There is still an opportunity to weigh in on these important rules.

If you have concerns about paid sick leave that are not addressed by the current draft rules, please provide comments to the Department or contact us so we can provide comments on your behalf.


L&I Meeting on Proposed Rules - April 24, 2017

Join WebEx Meeting Online:
Link: http://bit.ly/2pxK8JX
Meeting number (access code):  920 577 968
Meeting password: QKjJJU4W

Join by Phone:
1-877-668-4493 (Toll-free)
Meeting number (access code):  920 577 968

Meeting Location:
L&I Headquarters, Room S117
7273 Linderson Way SW, Tumwater, WA 98501-5414

Washington Minimum Wage Increase – Effective 1/1/17

This table shows the minimum wage increases for the next four years.

This table shows the minimum wage increases for the next four years.

On November 8, 2016, Washington voters passed Initiative 1433 to increase the state minimum wage beginning January 1, 2017.

Beginning on January 1, 2021 and each January 1 thereafter, the minimum wage will be adjusted, using the methodology that is set out in the statute.

Employers in industries with employees who receive tips, should be aware that tips and gratuities, and all service charges, except those itemized as not payable to employees servicing the customer cannot count toward the minimum hourly wage calculation for employees.


New Overtime Rules Not in Effect … Yet

The US Department of Labor’s (DOL) new regulations regarding overtime exemptions for executive, administrative, and professional employees (known as the “white-collar exemptions") were scheduled to take effect on December 1, 2016.  The regulations would have significantly increased the minimum salary threshold for employees to qualify for white collar exemptions.  Currently, salaried employees who make $455/week ($23,660 per year) or more, are exempt from overtime pay if they satisfy the duties test for one or more of the white collar exemptions.  The new DOL regulations, if permitted to take effect, will increase this salary threshold to $913/week, or $47,476/year.

On November 22, 2016, a federal district court in Texas issued a nationwide preliminary injunction which temporarily stops the DOL from implementing or enforcing most of the new overtime rule. What this means to you, the employer, is that you can continue to pay your exempt executive, administrative, and professional employees just as you have been, assuming they are properly classified as exempt under the current salary threshold and the duties test, until further court order.

DOL appealed the preliminary injunction to the Fifth Circuit Court of Appeals, which established an expedited briefing schedule that has spanned the inauguration and change in administration. In late January, sixty business groups and four states filed briefs in support of the injunction. It is unclear whether the new administration will continue to litigate the matter.

The Texas court’s decision temporarily blocks implementation of the proposed regulation, except for the provision increasing the minimum salary threshold for the Highly Compensated Employee (HCE) exemption. That increase, from $100,000 to $134,004, appears to have taken effect December 1, as planned, by virtue of its exclusion from the judge’s list of blocked regulations. While some suspect this may be a scrivener’s error and the court intended to block this provision along with the others, if you are relying on the HCE exemption, the most conservative approach would be to assume the salary threshold has increased, or consider whether one of the other white collar exemptions applies.


What does this mean to employers? 

  1. Ensure your executive, administrative and professional employees are properly classified as exempt under the current salary threshold and duties tests.
  2. If properly classified as exempt under current rules, continue paying those workers just as you did prior to the proposed change to the DOL regulation.

JDSA will continue to monitor this issue in the courts, and update the blog with new developments.

Washington Paid Sick Leave – Begins January 1, 2018

In addition to a minimum wage increase, Initiative 1433 also included provisions for paid sick leave.  Effective January 1, 2018, every employer with one or more employees (as defined in the Washington Minimum Wage Act which excludes certain categories of employees) must provide each employee paid sick leave as stated in the ‘Sick Leave Accrual” information below.

Because the Initiative is silent with respect to full time, part time, or temporary status, these classifications of employees likely also qualify for paid sick leave.

There are many unanswered questions about how this law will be applied and Washington State’s Department of Labor and Industries (“L&I”) will be responsible for answering many of these questions when it issues regulations via the rulemaking process this year.  JDSA will be participating in the rulemaking process and updating our blog as important developments happen.  L&I has held one meeting for interested stakeholders and has distributed stakeholder comments for review. The next meeting of stakeholders is scheduled for February 13, 2017 at L&I’s Headquarters in Tumwater, Washington.

If you are interested in following this process, you can sign up for email updates from L&I’s Wage and Hour list by subscribing to L&I's Wage and Hour E-mail Listserv or by contacting Allison Drake at allison.drake@Lni.wa.gov.

If you would like to submit comments, you can do one of the following:

  1. Send your feedback directly to L&I, or
  2. Submit your questions and concerns by contacting JDSA Law, and we will include them with our comments.

Sick Leave Accrual

Under the new law:

  • Employees accrue one hour of paid sick leave for every forty hours worked
  • Employees may use accrued paid sick leave beginning on the 90th calendar day after starting employment
  • Employees may carry over up to 40 hours of sick leave per year

Post-Accident/Injury Drug Testing – OSHA Rulemaking

The U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA) recently issued new rules that will significantly impact employers in two ways: 

  1. As of December 1, 2016, anti-retaliation protections went into effect that restrict employer policies regarding post-accident drug testing and require employers to inform employees of their right to report work-related injuries and illnesses
  2. Starting on January 1, 2017, certain employers (depending on size and industry) must electronically submit certain injury and illness data to the Federal OSHA for posting to OSHA’s website

This applies to your company on January 1, 2017 if:

  • Your company has 250 or more employees at any location during the year, including temporary and seasonal workers.  If you qualify under this, you must report on OSHA Forms 300, 300A, and 301, -OR-
  • Your company has 20-249 employees at any location during the year (including temporary and seasonal workers) and your business is listed as one of these industries. If your company qualifies, you must electronically submit information on OSHA Form 300A only.

In addition, if you have a “Post-Accident Drug Testing” policy, you can no longer condition a post-accident drug or alcohol test solely on the occurrence of an accident at the workplace.  Instead, you must have a reasonable suspicion that drugs and/or alcohol use was a contributing factor to the accident.

For more on the new OSHA rule, visit the OSHA website.


OSHA Actions Needed

Beginning 12/1/2016:

  • Inform employees of their right to report work-related injuries and illnesses
  • Ensure the required L&I poster is prominently displayed to satisfy the new OSHA rule. The poster can be found on the L&I website
  • Review your ‘Post-Accident Drug Testing’ policy (if applicable) to ensure it complies with the new rule

Beginning 1/1/2017:

  • Certain employers must submit injury and illness data electronically to OSHA

Cash Payments to Employees in Lieu of Benefits

In June 2016, the federal appellate court for our region ruled in Flores v. City of San Gabriel, that any employer who pays their employees cash payments in lieu of health benefits or pays cash for unused benefits must include those payments in the calculation for the regular rate of pay for overtime compensation.  Failure to do so violates the federal Fair Labor Standards Act (FLSA) and will expose your company to liability for back wages and other penalties.

The court further held that even payments the employer made directly to trustees and third parties for health benefits must be included in the employees’ regular rate of pay. Although such payments are normally excluded from the regular rate when made pursuant to a “bona fide plan” of benefits, in this case, the court determined that the payments did not qualify for the “bona fide plan” exemption because employees received plan contributions in cash that were not incidental in value.

The court then went even further to hold that the employer was liable for back wages and penalties, because the employer did not prove that it acted in good faith and, despite the lack of case law in this area, the employer “knew or showed reckless disregard” that its conduct violated the Fair Labor Standards Act.

Employers should review any cash in lieu of benefit policies in light of this case and consider alternatives to such policies where they contradict the Ninth Circuit’s decision. In the alternative, employers should ensure that cash paid in lieu of benefits is included in the regular rate of pay for purposes of calculating overtime.

Employer-Mandated Tip Pooling – Don’t Do It

In March 2016, the federal appellate court for our region upheld a previous DOL ruling that barred ‘tip pooling’ for employees who typically do not earn tips (i.e., back of the house staff) under the Fair Labor Standards Act. 

Employers in the service industry cannot require staff who do not fall within FLSA’s definition of “customarily and regularly tipped employees” (such as line cooks, dishwashers, etc.) to be included in any tip pooling.  Staff may include these employees in tip pooling voluntarily, however.

Please visit DOL’s website for more information.