Written by David B. Montgomery

On June 25, 2019, Governor Pritzker signed the Cannabis Regulation and Tax Act (“Cannabis Act”) into law, legalizing the recreational use of cannabis for adults in Illinois. Many employers question how the Cannabis Act will affect them. Will drug policies need to be updated? Can employees be discharged or disciplined for cannabis use? How can you tell if an employee is under the influence of marijuana? The drafters of the new law have provided many answers to these burning questions, while leaving some unanswered.

Background

Since 2017, some members of the Illinois legislature have worked on a bill to legalize the recreational use of marijuana. With the 2019 election of a Democratic governor supporting legalization, and a legislature controlled by Democrats, Illinois became the 11th state to legalize cannabis, and the first state to do so by legislation, rather than through a referendum. The new law takes effect January 1, 2020, and key portions of the law include:

• Illinois residents 21 years of age or older may purchase and possess up to 30 grams of cannabis flower, up to 500 milligrams of THC contained in cannabis infused products, and five grams of cannabis concentrate. Non-Illinois residents will be able to possess half the amount as Illinois residents.
• Medical marijuana dispensaries will be the only legal sellers of recreational marijuana until the state grants additional licenses to new sellers, probably in mid-2020. A key part of the new law is the establishment of an inclusive and regulated market of cultivators, processors, retail stores and testing labs. Assistance will be provided to applicants in areas adversely affected by enforcement of marijuana criminalization laws.  
• Recreational use of cannabis is prohibited in any public place, in a motor vehicle, on school grounds, near a person under 21 years old, or near an on-duty school bus driver, police officer, firefighter or corrections officer.
• Employers, landlords or private property owners may prohibit the use of marijuana on their property.
• Recreational cannabis users cannot grow their own marijuana plants. 
• Generally, people convicted of possession of under 30 grams of marijuana prior to legalization (750,000+ people) will have their records expunged. 
• A quarter of tax and licensing revenue from cannabis will go to the communities most affected by the drug war.

Employment Issues

The Cannabis Act specifically addresses several issues that will face employers following the legalization of recreational cannabis. It provides guidance on what an employer may prohibit and sets forth a vague framework for disciplining and discharging employees for marijuana use while working or being under the influence at work. It protects employees from adverse employment actions for marijuana use outside of work.   

Cannabis is a Lawful Product

Under the Illinois Right to Privacy in the Workplace Act, an employer may not subject to adverse employment action an employee who uses a lawful product (e.g., tobacco, alcohol) outside of the workplace, and who is not impaired by such product during work, just because of the use of the lawful product. The Cannabis Act amends the Privacy in the Workplace Act to make cannabis a lawful product. Thus, employers cannot take adverse employment actions against employees who use cannabis away from work, during non-work time. 

However, cannabis is still an illegal controlled substance under federal Controlled Substances Act. With that in mind, the Cannabis Act does not require employers who must comply with federal rules and regulations to become non-compliant. While the Cannabis Act will probably allow employers to continue to have policies prohibiting any cannabis use if the employer needs to have such rules to comply with applicable federal law, it is possible that such policies may nevertheless violate the Privacy in the Workplace Act.  

Zero-Tolerance Policies

The law provides that “[n]othing in this Act shall prohibit an employer from adopting reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a non-discriminatory manner.” The new law makes clear that employers may discipline or terminate employees for violating the employer’s reasonable employment or drug policies, and employers can forbid employees from being under the influence of or using marijuana while performing job duties or while on call. As cannabis is a legal substance, a reasonable policy would not include forbidding an employee from using cannabis away from work while not working or not on call.

Knowing if an Employee is Under the Influence of Cannabis

The outward manifestations of cannabis impairment are more difficult to recognize than those of alcohol impairment. The new law sets forth guidelines for employers to determine if a worker is under the influence or impaired:

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 position, including symptoms of the employee’s speech, physical dexterity, agility, coordination, demeanor, irrational or unusual behavior, or negligence of carelessness in operating equipment or machinery; disregard for the safety of the employee or others, or 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. If an employer elects to discipline an employee on the basis that the employee is under the influence or impaired by cannabis, the employer must afford the employee a reasonable opportunity to contest the basis of the determination. 

As this list is non-exhaustive, an employer should be able to rely on other indicia of impairment (e.g., the employee smells of marijuana). 

Discipline and Discharge

If an employer disciplines or discharges an employee due to a good faith belief that the employee is under the influence or impaired by cannabis, the employer must give the employee a reasonable opportunity to contest the employer’s determination. Neither what constitutes a good faith belief that an employee is under the influence or what constitutes a reasonable opportunity to contest an employer’s determination are defined. 

                       Good faith belief

A positive drug test alone is probably insufficient to create a good faith belief that an employee is under the influence of impaired by cannabis. Drug tests can demonstrate whether an employee has recently used marijuana, but because marijuana can stay in an employee’s system for months, testing positive for marijuana does not mean the employee was under the influence while at work or on call. Rather than relying upon a drug test to form a good faith belief, an employer should rely upon whether an employee displays the symptoms set forth in the Cannabis Act in addition to a positive drug test result. Employers should consider training managers and supervisors on spotting symptoms of employees being under the influence, and to document such symptoms. Managers and supervisors should document whether any possible signs of marijuana use were present following workplace accidents.

As discussed above, the Privacy in the Workplace Act prohibits an employer from disciplining or discharging an employee for using a lawful product (e.g., cannabis) away from the employer’s premises during non-working hours. Under that Act, aggrieved employees may recover actual damages, attorneys’ fees, costs and statutory penalties. To avoid potential liability under the Privacy in the Workplace Act, an employer taking adverse action against an employee should have strong evidence to support a good faith belief that the employee was under the influence or impaired by cannabis. 

                       Opportunity to Contest

While it is unclear what type of opportunity to contest an employer must give an employee, it is advisable that the employer document in writing the employee’s explanation, as well as the date, time and location such explanation was given. Witnesses to the explanation should be noted, and, if the employee’s explanation is rejected, the employer should document why the explanation was rejected. 

No Private Right of Action

The law makes clear that it does not provide an employee with a private right of action against his/her employer for the following:

• Subjecting an employee or applicant to reasonable drug and alcohol testing under the employer’s workplace drug policy, including an employee’s refusal to test or cooperate in testing procedures;
• Disciplining or terminating an employee based on the employer’s good faith belief that an employee was impaired by or under the influence of cannabis while at the workplace, while performing job duties or while on call in violation of the employer’s workplace drug policy; and
• Injury, loss or liability to a third party if the employer did not know or have reason to know that an employee was impaired.

Drug Testing

Because marijuana is now considered a lawful product and the Cannabis Act limits an employer’s ability to discipline or discharge an employee to those situations where the employer has a good faith belief that the employee is under the influence or impaired by cannabis, it appears that drug testing for marijuana will no longer be permitted in Illinois unless the employer has a good faith reasonable suspicion that the employee was impaired or under the influence while at work. Pre-employment marijuana tests are probably now prohibited because they would only detect marijuana use prior to coming to work for the employer, and such use is lawful. Thus, the only type of testing for marijuana that an employer can conduct appears to be “reasonable suspicion” drug testing.

The Cannabis Act does not apply to employers regulated by the U.S. Department of Transportation’s drug and alcohol testing regulations. 

Takeaways for Employers

• Employers may ban the use of marijuana in the workplace and prohibit an employee from using marijuana while on call (employer must give employee at least 24 hours’ notice to be on standby). 
• Employers may adopt reasonable zero-tolerance or drug free workplace policies. Such policies will not be reasonable if they prohibit the use of marijuana at any time.
• Employers may prohibit employees from arriving to work under the influence of marijuana.
• Employers should only conduct reasonable suspicion drug testing. An employer may require an employee to submit to such a drug test if the employer has a good faith basis for believing the employee is/was under the influence while working or on call. Employers should not rely upon a positive drug test alone in discipling or discharging an employee, but should mainly rely upon indicia documented by managers or supervisors indicating that the employee was under the influence.
• An employer may discipline or discharge an employee if the employer has a good faith belief that the employee is under the influence of marijuana while working or on call. Employers must be vigilant in documenting signs of impairment.
• An employer must allow an employee to contest the employer’s basis for believing that the employee was under the influence of marijuana. An employer should be vigilant in documenting the employee’s excuse and why the employer rejected or accepted such excuse.
• Illinois employers should reassess and update their drug policies.
• Illinois employers should train managers and supervisors to spot the signs of an employee under the influence of cannabis.

This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and the reader is urged to consult a lawyer concerning his/her own situation and any specific legal questions he/she may have.

Written by David B. Montgomery

Labor arbitration is a key element of federal labor policy. It is the preferred method of industrial dispute resolution, and courts are reluctant to overturn an arbitrator’s award unless it does not draw its essence from the parties’ collective bargaining agreement (“CBA”). A recent decision of the Seventh Circuit Court of Appeals, Ameren Illinois Co. v. International Brotherhood of Electrical Workers, Local 51, illustrates this point. In that case, the employer terminated a unionized employee for violating its Workplace Violence Policy because the employee (1) argued with his supervisor and (2) brought a firearm to work, which he left in his truck.

The union grieved the employee’s discharge and the matter proceeded to arbitration. The Workplace Violence Policy prohibited threatening or intimidating another employee. The arbitrator determined that the dispute between the employee and his supervisor did not rise to the level of threats or intimidation and this section of the policy could not justify termination.

The Workplace Violence Policy also prohibited “the possession of unauthorized weapons by any employee . . . on Company parking lots.” Acting upon a tip, the employer asked to search the employee’s truck parked on the company lot, the employee consented, and company officials discovered a firearm. Based on these facts, the arbitrator determined that the employee violated the Workplace Violence Policy. However, relying upon the Illinois Concealed Carry Act (“Act”), the arbitrator concluded that the employer was prohibited from enforcing its rule because the Act allowed the employee to carry a concealed weapon, and the employer could only ban weapons on its property by posting a sign that firearms were not allowed on company property, which it did not do. Therefore, the arbitrator overturned the discharge decision.

The collective bargaining agreement stated: “In considering any dispute under this provision, the arbitrator [has] no authority to amend, delete from or add to this agreement.” Based upon this language and a long line of cases prohibiting an arbitrator from going beyond the issue submitted for arbitration (the issue presented to the arbitrator in this case was whether the employer had just cause to discharge the employee), the employer appealed the arbitrator’s decision to district court, alleging that the arbitrator improperly relied upon external law in making his decision, rather limiting his analysis to the terms of the CBA. The district court agreed and vacated the arbitrator’s award.

The Union appealed to the Seventh Circuit. In a detailed analysis of Supreme Court and Seventh Circuit precedent, the Court reinforced the concept that the judiciary should only overturn arbitrators’ awards in limited circumstances. The Court noted a line of cases in which courts overturned arbitrators’ awards because the arbitrator relied upon public laws that conflicted with the CBA to make their awards. However, the Court concluded that an exception exists to this rule against relying upon public law if the CBA contains language that can be construed to incorporate outside laws into the CBA.

The parties’ CBA contained the following language in its preamble: “Any provisions of this Agreement found by either party to be in conflict with State or Federal statutes shall be suspended when such conflict occurs and shall immediately thereafter be reopened for amendment to remove such conflict.” This provision was enough for the Court to conclude that that parties intended to incorporate laws such as the Concealed Carry Act within the scope of the CBA. Thus, the Court concluded that the arbitrator’s award correctly applied the external law to the dispute and enforced the award.

As inclusion of language incorporating outside laws is very common in modern CBAs, Ameren teaches that arbitrators will very often have the authority to rely upon external law in interpreting the CBA. As any dispute between the CBA and external law would eventually need to be resolved, giving to the arbitrator the authority to do so may be cost-beneficial, but it also requires an arbitrator interpret laws with which he/she may be unfamiliar. The bottom line: Employers must be sure that their work rules comply with local, state and federal laws.

This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and the reader is urged to consult a lawyer concerning his/her own situation and any specific legal questions he/she may have.

Written by David B. Montgomery

The recent election of J.B. Pritzker (D) as Illinois governor has shattered the “grass” ceiling. Throughout his campaign, the governor-elect made clear that he wants marijuana decriminalized. Days after the election, Pritzker stated that he would begin work immediately on decriminalizing the possession and use of certain amounts of marijuana. While many rejoice at Pritzker’s stance on cannabis, some have sincere concerns.

How did we get to this point?

Attitudes about marijuana use have shifted dramatically in the last few years. Recent polls suggest that most Americans (as high as 60%) favor the legalization and regulation of marijuana.

Perhaps the genesis for this shift in opinion was the acceptance by many state lawmakers of marijuana as an effective treatment for several medical conditions. Several states, including Illinois, passed laws allowing persons with certain medical conditions to get medical authorization to use marijuana to treat their symptoms. Illinois also allows the cultivation of industrial hemp, and a move exists in the federal level to do the same.

Another source for the changing views on marijuana use is perhaps what many perceive as the failure of the war on drugs, or at least the war against marijuana. Enforcement of laws that criminalize marijuana costs states almost $3.7 billion per year. According to the ACLU, marijuana arrests account for over half the drug arrests in America, with most of these arrests being for possession. According to marijuana legalization advocates, decriminalizing weed will allow law enforcement to concentrate on crimes that hurt real victims.  Further, marijuana

Illinois has already shown a distaste for enforcing its marijuana laws.  Some may be unaware that in 2016, Illinois decriminalized the possession of 10 grams or less of marijuana.  If a person is caught with less than 10 grams, s/he may have to pay a civil fine but will not face any criminal consequences.

The main arguments for decriminalizing marijuana include:

• Save Money. As discussed above, enforcement of marijuana crimes is expensive (and somewhat ineffective). According to a study by the Project for Middle Class Renewal, Illinois taxpayers could save $18.4 million in incarceration costs through decriminalization. Millions of dollars could be put to more productive use.
• Reduce Violence. By legalizing and regulating marijuana, the theory is that demand for pot obtained through the illicit market will decrease, and the violence associated with illegal operations will decrease dramatically. Further, decriminalizing marijuana will allow law enforcement to focus on crimes against victims.
• Consumer Safety. The demand for weed exists, and laws have not curbed that demand. By regulating the production and sale of marijuana, testing it for potency and contaminants, proponents argue that consumers will not ingest weed laced with other dangerous drugs or chemicals.  Further, proper labeling will allow consumers to know information such as the strength of the marijuana and whether it contains any allergens. Marijuana has lower rates of addiction than alcohol or cigarettes. Finally, marijuana does not cause fatal overdoses, unlike legal and prescription drugs that kill tens of thousands of people each year.
• Job Growth. By treating weed as a cash crop, new businesses will form, and jobs will be created in the legal economy. Recent studies by the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois estimate that legalization will create approximately 24,000 jobs, plus tax revenue of $525 million annually.
• Tax Revenue. Sales tax on pot will be a boon for the local economies. A special tax on pot can be used to fund education, social services or whatever local government decides. New employees of marijuana retail establishments will generate payroll taxes.

Those against legalization of marijuana also have compelling arguments:

• Legalizing recreational marijuana will create further racial disparities. In Illinois, most medical marijuana companies are owned by wealth white men. Legalization will lead to white marijuana entrepreneurs selling weed to minority communities and increasing drug abuse rates.
• It is difficult to test drivers for marijuana impairment. This will lead to traffic injuries/fatalities.
• Is this a slippery slope? Will legalizing weed lead to the legalization of what we now consider more dangerous drugs?
• Will legalization send the wrong message, especially to youth, that substance abuse is acceptable?  Will it increase teen usage?
• If the predominant method of marijuana ingestion is through smoking it, will this lead to more health problems?
• Will employers be able to effectively enforce their drug-free workplaces?
• Will the increased use of marijuana lead to more societal ills such has homelessness?
• Will making pot more accessible lead to more misuse?
• Will law enforcement officers be able to effectively enforce changing laws regarding marijuana possession and use?

Currently, the District of Columbia and 10 states—Alaska, California, Colorado, Maine, Massachusetts, Michigan1, Nevada, Oregon, Vermont and Washington— have adopted laws permitting the recreational use of marijuana. In all states but Vermont, states legalized recreational use of marijuana through ballot referenda. And don’t forget that the country of Canada recently legalized marijuana (O, Cannabis!).  Illinois, like Vermont before it, will likely pass legislation to legalize the recreational use of marijuana. As discussed above, the governor-elect favors decriminalization, and a Democratic majority in both state houses makes passage of a marijuana legalization bill likely. In fact, in March 2017, State Senator Heather Steans (D-7th Dist.) and State Representative Kelly Cassidy (D-Chi.) (New Dealers?) introduced bills to legalize the sale and use of cannabis to adults. The bills are pending. The earliest a recreational marijuana law can be passed in Illinois is probably late 2019 or early 2020.

1. There are no licensed dispensaries yet in Michigan for recreational marijuana. However, because of the new law, someone possessing medical marijuana could probably legally share his/her supply with others over 21 years of age.

And did you know that marijuana is now legal in Canada? The entire county. A movement is afoot to make marijuana legal in Mexico, too.

It should be noted that while several states have opted to legalize recreational marijuana use, marijuana use is illegal at the federal level. Under the Controlled Substance Act, marijuana is categorized as a Schedule 1 drug. Schedule 1 drugs, which include heroin and LSD, are deemed to have no valid medical uses and a high potential for abuse.  Thus, under federal law, marijuana remains illegal.2

What will weed consumption look like in the Land of Lincoln? Governor-elect Pritzker has provided some clues about what marijuana legalization will look like in Illinois. We know that he wants legislation to accomplish the following goals:

• Raise tax revenue.
• Review and commute sentences of those incarcerated for marijuana offenses.
• Reduce opioid overdoses.
• Invest in black and brown communities.
• Allow recreational use through the sale of marijuana by carefully licensed businesses.

As stated above, Illinois is not the first state to the pot party (that honor goes to Colorado in 2014), so the rules surrounding possession and use of cannabis will probably be borrowed from other states. And as previously mentioned, bills have already been introduced in both state houses to legalize the adult use of cannabis. Given these clues, below are my views on how the potential decriminalization of weed will play in Illinois:

Who will be able to purchase/consume marijuana?

Similar to alcohol, one will have to be 21 years of age to purchase and consume marijuana. This is the age requirement in other states that have approved marijuana for recreational use and this is the age proposed in the pending legislation. For a consumer to prove s/he is at least 21 years of age, s/he may present a government issued ID (e.g., driver’s license, passport). It does not appear that one will not need to register with the state in order to purchase marijuana.

2. It should be noted, however, that just this summer the federal government approved an anti-seizure medication that contains cannabis-derived cannabidiol, or CBD, which many claim has calming or healing effects.

Where will one purchase marijuana?

The governor-elect has stated that businesses licensed by the state will sell marijuana. In the pending legislation, these places of business are referred to as “retail cannabis stores.” While not specifically addressed in the pending legislation, retail cannabis stores will probably be stand-alone establishments rather than an existing retailer adding marijuana to its product offerings. People under 21 will not be allowed anywhere near where marijuana is sold. Buying marijuana from an unlicensed business will be illegal.

Who will be able to get a business license to sell marijuana?

With the opening of a new market with High Demand, savvy business people are going to want to get in on this Budding Industry.  Obviously, one will not be able to get a license to sell if he/she is not over 21 and does not pass a rigorous background check. Both the governor-elect and lieutenant governor-elect have indicated that some licenses should be granted to residents of historically disadvantaged communities. Those wishing to operate a retail cannabis store will need to file an application with the state (probably the Department of Public Health), similar to an application filed by those seeking to operate medical cannabis dispensaries. There is no word on whether existing medical cannabis dispensaries will get preference in obtaining licenses. Illinois medical cannabis companies are working to expand, however, due to the likelihood of legalized marijuana in Illinois.

One development that should be noted is that big business is paying close attention to the march toward marijuana legalization. Players like Altria Group (owners of Philip Morris), Molson Coors and Heineken are exploring how they can profit from this trend.  In California, Lagunitas (a Heineken subsidiary) already sells sparking water infused with CBD and THC.

How much marijuana will one be able to purchase or possess?

In most states that have legalized recreational marijuana use, customers can purchase one ounce of cannabis “flower” at a time. The flower is the smokable, trichome-covered part of a female cannabis plant. Marijuana also comes in concentrate form, which is more potent. A concentrate is an extract, such as oils and tinctures.  People like ingestible oils because they can be used in edibles (e.g., “pot brownies”), providing users with a smoke-free alternative. Because concentrates are more potent than flowers, states limit the purchase of concentrates to less than one ounce. For example, in Washington State, while customers can purchase and possess up to one ounce of cannabis flower at time, the limit for concentrates is only seven grams.  For math challenged people like me, seven grams equals a quarter ounce. Cannabis is also available in liquid form, often referred to as tinctures. Tinctures are used in electronic vape pens or drops are placed under the tongue.  Also keep in mind that dispensaries sell edibles (food with ingestible oils baked in). In Washington State, customers can purchase and possess up to 16 ounces of edibles.

In the pending Illinois legislation, Illinois residents are allowed to possess the following amounts of cannabis at any one time:

• 28 grams of cannabis, no more than 5 grams of which may be concentrated cannabis;
• Five cannabis plants; and
• Any additional cannabis produced by one of the resident’s cannabis plants.

Non-residents are limited to no more than 14 grams of cannabis, including up to two grams of concentrated cannabis.

Will there be packaging and labeling requirements for marijuana?

The likely packaging and labeling requirements will address the following concerns:

• Protection from contamination
• Child-resistant containers
• Packaged in a way that is not attractive to minors
• Resealable (unless a single use product)
• Labels must clearly state the type of marijuana product contained therein
• Labels must be securely affixed to packaging
• Labels must contain a universal marijuana symbol (which, surprisingly, is not that universal)

California’s universal symbol:

• Various information about the product (e.g., potency, allergens)
• Labels may make no inappropriate statements (e.g., marijuana has curative effects, encouraging transportation across state lines, encouraging rapid consumption)

Where will one be able to consume marijuana?

In the privacy of the home. Smoking while driving will result in fines and possible suspension of driver’s license. While “cannabis clubs” or “pot cafes” (Starbuds?) sound attractive to many users, those are a long way off. It goes without saying that dispensaries will not be able to offer samples like Trader Joe’s. The proposed legislation contains a $100 maximum fine for public consumption.

How will one be able to transport marijuana?

One will not be able to transport marijuana across state lines. If travelling in a motor vehicle with an open container of marijuana, one will need to assure that the open container is not in the passenger section of the vehicle, not even a locked glove box.  It should be placed in the trunk.

Will I be able to send pot to sweet Aunt Gladys in Indiana?

No, but it may be her reason to visit you in Illinois.

What about keeping people from driving under the influence of marijuana? This may be one of the more difficult issues for the State. No widely-adopted method is available to law enforcement to determine if someone is too stoned to drive. If police pull over a driver on suspicion of driving under the influence and the driver fails a field sobriety test, s/he will be asked to take a breath test for alcohol. If the driver passes the breath test, police may force the driver to speak with a drug recognition expert and/or submit to a blood test. However, blood tests are not very good for determining if someone is driving high because marijuana remains in a person’s system long after the high wears off, and marijuana content in blood varies between individuals based on frequency of use, weight, fat content, etc. New methods are being developed to determine if someone is driving while stoned (e.g., mouth swabs) that will hopefully be available soon. 

How will weed be taxed?

This will be a tricky issue. In addition to the typical sales taxes, state and local taxing authorities may be tempted to slap on taxes for various purposes.  In a non-binding referendum, an overwhelming majority of voters in Cook County voted favored a marijuana tax to benefit Chicago Public Schools and mental health services. In the proposed legislation, marijuana would be taxed at a rate of $50 per ounce wholesale, plus the state’s standard 6.25% sales tax. However, the government cannot get too greedy. A major reason for decriminalizing marijuana is to stop the illicit market in weed. If too many taxes are slapped on legal marijuana, people may prefer buying from illegal suppliers. Further, in states where recreational marijuana use has been legalized, the price of pot has plummeted. Thus, a tax on the amount of weed purchased, rather than the price of weed (i.e., traditional sales tax), may provide more stable income for the state.

Can people grow their own marijuana?

Many states allow individuals to grow small amounts of weed for their own use, not for sale. For example, in Colorado, residents over 21 may cultivate up to 12 marijuana plants, three of which can be in the flowering stage. Greater restrictions are placed on cultivation if children under 21 live in the residence. As mentioned above, the proposed Illinois legislation allows an individual to grow up to five plants, with no limitation on how many can be in the flowering stage. The proposed legislation also makes clear that if a person grows his own marijuana, the following restrictions must be honored:

• It may not be grown in public view;
• It must be secured from people under 21 years of age; and
• It must be grown with the property owner’s consent.

Will landlords be able to ban marijuana in their rental units?

Maybe not. The proposed legislation states that property owners cannot prohibit tenants from the possession of marijuana or consumption of marijuana by non- smoked means unless (1) the tenant is not leasing the entire residential building; or (2) the residence is incidental to detention or the provision of medical, geriatric, educational, counseling, religious or similar service; (3) the residence is a transitional housing facility; or (4) failing to prohibit cannabis would violate federal law or cause the landlord lose a benefit under federal law.

Who will be responsible for administering Illinois’ marijuana program?

The Department of Public Health. The Department will issue rules on licensing cannabis establishments, transportation and storage requirements for cannabis shipped to retailers, prevention of underage purchases of cannabis, cannabis product manufacturer standards, labeling, restrictions on advertising, civil penalties, tax collection procedures, etc.

I’m an employer.  How is this going to affect me?

Section 75 of the proposed legislation states:

Nothing in this act is intended to require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growing of cannabis in the employer’s workplace of to affect the ability of employers to have policies restricting the use of cannabis by employees or discipline employees who are under the influence of cannabis in the employer’s workplace.

Therefore, employers still have leeway to maintain drugfree workplaces. Legislators may want to consider language contained in Michigan regulations that prohibits employee from filing claims against employers for wrongful discharge, discrimination or other causes of action based upon the employer prohibiting the employee from being high at work or from attempting to work while high.

Employers can still terminate employees for smoking pot.

Illinois employer may continue to enforce their drug-free workplace policies. Because the federal government still considers marijuana a Schedule 1 drug, employers in Illinois will be free to operate drug-free workplaces and fire employees for violating rules related to marijuana consumption. Employers that contract with the federal government will most likely prohibit marijuana use.

Employees cannot consume cannabis at work.

Because persons cannot consume pot in public, employees will not be able to consume pot at work.

Employers can still conduct pre-employment and random drug tests.

Unless prohibited by a collective bargaining agreement, Employers will most likely be able to maintain their current drug testing policies.  In fact, many employers are required to drug test under federal law (e.g., employers in transportation industry).

Employers can test employees for suspicion of being stoned.

While no accepted method of marijuana impairment has been developed due to THC stating in the bloodstream for an extended period, employers can train managers to train managers to spot signs of marijuana impairment (e.g., lethargy, bloodshot eyes, lack of focus, poor coordination).  Managers should document the employee’s behavior and still send the employee for testing. If the test comes back positive, it may be possible to discipline/terminate the employee for being under the influence.

Thank you for reading my attempt to preliminary delve in the “weeds” of this issue. Stay tuned.

This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and the reader is urged to consult a lawyer concerning his/her own situation and any specific legal questions he/she may have.

Written by David B. Montgomery

Earlier this week, the Massachusetts Supreme Judicial Court ruled that an employer with a zero-tolerance policy for drug use may commit disability discrimination under that state’s anti-discrimination law if it fires an employee who tests positive for marijuana.  The plaintiff in Barbuto v. Advantage Sales & Marketing, LLC (July 17, 2017), suffered from Crohn’s Disease and IBS, and her doctor prescribed her marijuana under the state’s medical use of marijuana law.  According to Barbuto’s complaint, due to her illness, she could not maintain a healthy weight, but after using medicinal marijuana, she gained 15 pounds.  She only used medicinal marijuana in her home at night, and did not appear to work under the influence.  Advantage hired Barbuto, and a company representative informed her that she must take a mandatory drug test.  Barbuto informed her supervisor about her use medical marijuana, and the supervisor told her that should pose no problem.  Barbuto took the drug test and Advantage terminated her six days later for testing positive for marijuana.

Barbuto sued Advantage for, among other things, disability discrimination under Massachusetts’ anti-discrimination law.  The crux of her discrimination claim was that Advantage should have accommodated her disability by allowing her to use medical marijuana while not at work.  As an initial matter, the court noted that the federal government maintains that marijuana is a Schedule I controlled substance under the Controlled Substance Act with no accepted medical uses and possession of marijuana is a federal crime.  However, the court also observed that ninety percent of states, including Massachusetts, now allow the medical use of marijuana.

Advantage moved to dismiss the complaint because (1) the accommodation requested by Barbuto is unreasonable because it is a federal crime and (2) Advantage terminated Barbuto for failing to pass a drug test that all employees must pass, not because of her alleged disability.  The court began with the premise that “where an employee is handicapped because she suffers from a debilitating medical condition that can be alleviated or managed with medication, one generally would expect an employer not to interfere with the employee taking such medication, or to terminate her because she took it.”

Advantage’s fist argument failed because, according to the court, it is of no consequence that Barbuto’s proposed accommodation is illegal under federal law.  The person at risk of prosecution for a crime is Barbuto, not Advantage.  Further, the court reasoned that to declare the use of medical marijuana a per se unreasonable accommodation would be an affront to the voters and legislators of Massachusetts who recognized that marijuana has medicinal utility.  Moreover, even if Barbuto’s accommodation request to use marijuana were unreasonable, Advantage still had a duty to explore with Barbuto whether alternative methods existed to accommodate her disability.  Advantage did not engage in this interactive process.

Advantage’s contention that it terminated Barbuto because she failed the drug test, and not because her disability, also failed.  An employer is not insulated from discrimination because its policy resulted in a person being terminated.  Because Advantage’s policy prohibiting the use of marijuana was employed against Barbuto–a disabled employee being treated by a physician with marijuana– terminating Barbuto denied her the right to a reasonable accommodation in violation of Massachusetts’ anti-discrimination law.

The court noted that many employers could show that accommodating an employee by allowing her to use medical marijuana would be an undue hardship.  For example, employers who are federal contractors must comply with the Drug Free Workplace Act that requires them to take steps to maintain a drug-free workplace.  Also, transportation employers must comply with regulations that require drug testing of safety-sensitive employees.

The Barbuto decision is noteworthy because under the Americans with Disabilities Act, an employee who uses illegal drugs outside of work is not considered a qualified individual with a disability.  Further, the few state courts that have addressed this issue have ruled largely in favor of employers.

The key takeaway from Barbuto is that employers must consider the requirements of their state anti-discrimination and medical marijuana laws when confronted with an employee who requests an accommodation to use medical marijuana.  The medical marijuana laws in some states prohibit employers from taking adverse employment actions against employees solely because of their status as a person qualified to take medical marijuana.  Many state laws declare that implementation of zero-tolerance policies does not violate state law.  Employers should contact counsel prior to taking action in situations like this.

This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and the reader is urged to consult a lawyer concerning his/her own situation and any specific legal questions he/she may have.

Written by Paul J. Kozacky and Brian O’Connor

In December 2015, the Federal Motor Carrier Safety Administration (“FMCSA”) published the Final Electronic Logging Device (“ELD”) Rule. The final rule requires all carriers and truckers to install an ELD in their trucks by December 18, 2017, possibly affecting 3.5 million drivers.[1] While instituted by the FMCSA to combat truckers and carriers falsifying their hours of service in paper log books, this rule has been met with backlash from various trucking associations, most recently by the Owner Operator Independent Drivers Association (“OOIDA”), raising serious privacy and other concerns. Indeed, multiple courts have ruled that previous renditions of this final rule failed to pass constitutional muster.[2] This past year, OOIDA petitioned the United States Court of Appeals for the Seventh Circuit to review the final rule, arguing a handful of bases for why it should be declared unconstitutional. But, after the rule’s long and windy road, the court in Owner–Operator Independent Drivers Association, Inc. v. Department of Transportation, No. 15-cv-3756, 2016 WL 6407405 (7th Cir. Oct. 31, 2016) (“Owner-Operator III”), found the final rule constitutionally sound, signifying that finally, it just might be here to stay.

History of the ELD Mandate

The final rule was passed to ensure that commercial truck drivers are truly complying with Hours of Service (“HOS”) regulations and thereby promotes highway safety and attempts to limit fatigue-caused accidents.[3] For those unfamiliar with the HOS regulations, commercial drivers must document four different statuses regarding their work: (1) driving; (2) on duty, not driving; (3) in the sleeper berth; and (4) off duty.[4] They are allocated maximum times for driving, must spend a minimum amount of hours off duty each day and are limited to a maximum amount of “on duty” time per week.[5] Traditionally, drivers recorded these hours through paper logs and submitted these logs to officials during road side inspection audits.[6] Violations, including failure to maintain accurate records, meant a driver may be placed out of service,[7] thus creating an obvious temptation for drivers and their employers to manipulate records.

The FMCSA set out to eliminate this temptation by modernizing the HOS regulations, including with the requirement that each vehicle be equipped with an automated recording device, which takes the record-keeping duty out of the hands of those who may stray from the truth.[8] In 2003 the FMCSA pondered mandating installation of an Electronic On-Board Recorder (“EOBR”), the ELD’s predecessor.[9] However, the FMCSA decided against this. While striking down the 2003 final rule as arbitrary and capricious due to the FMCSA’s failure to consider its impact on drivers’ health, the United States Court of Appeals for the District of Columbia admonished the FMCSA for not adequately responding to Congress’s 1995 directive that the agency administer a requirement for automated and tamperproof recording devices.[10]

The FMCSA tried again in 2010 by issuing a new rule,[11] which required any motor carrier demonstrating serious noncompliance with HOS regulations to install an EOBR, as a penalty.[12] The Seventh Circuit tossed out the 2010 rule as arbitrary and capricious because the FMCSA failed to consider potential driver harassment as a result of electronic monitoring.[13] Particularly, the court found that the FMCSA inadequately responded to the fact that EOBRs were capable of transmitting drivers’ data in real time.[14] This theoretically allowed employers to directly communicate with their drivers and pressure them to violate the regulations.[15] For example, employers allegedly were coercing drivers to manually switch “on duty” times, such as loading and unloading, to “off duty” so that they could spend more time driving without a break.[16]

With the FMCSA facing two strikes, Congress stepped in and passed the Commercial Motor Vehicle Safety Enhancement Act of 2012 (the “Act”).[17] The Secretary of Transportation was ordered to issue regulations requiring most commercial vehicles to “be equipped with an electronic logging device to improve compliance by an operator of a vehicle with hours of service regulations.”[18] Congress specified several factors to be considered, including the potential for harassment, paper document reduction, driver privacy and the confidentiality of personal data.[19]

To comply with this statute, in 2015 the FMCSA issued the current final rule, which (1) mandates that ELDs be installed in all vehicles that are currently required to maintain HOS records; (2) provides technical specifications for ELDs; (3) clarifies the extent to which supporting paperwork is required; and (4) adopts provisions to ensure that ELDs are not used to harass drivers.[20] Some technical specifications for the ELDs are that they must automatically link to the vehicle engine when running, and they must record the date, time, location, engine hours, vehicle miles, driver identification, vehicle identification and motor carrier identification.[21] The Seventh Circuit found this data collection intentionally limited in scope and thus constitutional.[22] Instead of continuously tracking this information, the ELDs would record only at specified times, such as when the driver’s duty status changes and once per hour while driving.[23] In addition, the required ELDs would not pinpoint a vehicle’s exact location, but rather, they would provide location only within a one-mile radius.[24]

The Court’s Rebuke of OOIDA’s ELD Mandate Objections

At the heart of the debate over the final rule in Owner-Operator III, as in prior cases addressing predecessor rules, was the issue of driver privacy. Specifically, OOIDA argued that: (1) the ELD mandate is contrary to law because it does not meet the requirement that all ELDs are “automatic;” (2) the FMCSA’s definition of “harassment” is too narrow to adequately protect truck drivers; (3) the FMCSA’s cost-benefit analysis is inadequate and fails to justify the implementation of the final rule; (4) the FMCSA did not sufficiently consider confidentiality protections for drivers when designing the final rule; and (5) the final rule imposes an unconstitutional search and/or seizure.[25]

The court first addressed OOIDA’s argument that the ELDs are unable to truly record data automatically, and therefore are unreliable to combat falsified HOS records. According to OOIDA, Congress intended the ELDs to be purely automatic, meaning that there would be absolutely no human involvement in the recording process.[26] But the court found that OOIDA’s “reading of the statute [sought] to pit one statutory requirement against another rather than allow the agency to balance competing policy goals endorsed by Congress.”[27] While OOIDA argued that the ELDs mandated by the final rule require drivers to manually signal a change in their own status, and thus are possibly susceptible to manipulation, the court disagreed, stating that had Congress envisioned a device distinguishable from an EOBR, it had the power to expressly state so, but it clearly chose not to.[28] Further, the court could only imagine two types of possible devices that would allow the type of monitoring OOIDA described – video surveillance and some form of bio-monitoring device, both of which would be “breathtakingly invasive.”[29] The court reasoned that by using the term “automatically” in the Act, Congress could not have meant to require such an invasive device.[30] Accordingly, the court concluded that some type of manual “change of status” by a driver would be required in any electronic monitoring device, and so it held that the ELDs mandated by the FMCSA sufficiently complied with the requirements set out by Congress.[31]

Second, OOIDA argued that the FMCSA used too narrow of a definition of “harassment,” eliminating sufficient protection for drivers. While the FMCSA may have attempted to provide drivers with protections against harassment by their employers, OOIDA argued that the final rule fell short of doing so for several reasons.[32]Initially, drivers are not protected against harassment unless they are in direct violation of HOS regulations.[33]So for example, if a driver pulls off the road during bad weather to avoid hazardous driving conditions, he or she is not protected from employer harassment mandating him or her to keep driving.[34] Also, even if the harassment occurs during an HOS regulated activity, the FMCSA has created various roadblocks, including forcing drivers to admit violations and risk future employment opportunities, which prevent drivers from being truly protected.[35] From OOIDA’s perspective, while it may be true that the mandate prevents current employer retaliation under very specific circumstances, it does not provide confidentiality to drivers who violate the law.[36]As a result, the likelihood that employer harassment of drivers will go on unreported is very high.

In response to this second argument, the court found that the definition of “harassment” in the final rule is reasonable.[37] It interpreted the term as taking two logical forms: (1) when the driver’s ability is somehow impaired, or (2) when the driver is in violation of the hours of service rules.[38] In coming to this conclusion, the court reasoned that Congress implicitly delegated the responsibility of defining “harassment” to the FMCSA[39]and consideration of several factors demonstrated that the definition was reasonable. First, the FMCSA properly sought input from drivers, motor carriers and trade organizations regarding this definition.[40] Second, the FMCSA considered administrative implications of the definition and altered it to provide administrators with the ability to respond to harassment allegations in a timely and consistent manner.[41] Third, the FMCSA listened to truck drivers’ concerns and responded to them by altering the definition.[42] For example, one concern was that employers would use the ELDs to sound beeping noises at drivers while they are trying to sleep—the ELDs now have a “mute” function so that employers are unable to interrupt a driver’s resting period.[43]

OOIDA next asserted that the FMCSA’s cost-benefit analysis was inadequate and failed to justify implementation of the final rule. The court effectively dismissed this argument as moot.[44] It held that the FMCSA did not carry the burden of providing a cost-benefit analysis since Congress specifically instructed it to create the final rule and certain ELD specifications.[45] Even so, the court found that the benefits of the ELDs outweighed their cost.[46]

OOIDA’s fourth argument was that the FMCSA did not adequately consider drivers’ confidentiality. But the court rejected that argument, finding that the FMCSA merely had the burden of proving it adopted a reasonable approach to protect drivers’ confidentiality, which it did.[47] The FMCSA is not responsible for maintaining data, which responsibility instead is given to drivers and their employers.[48] And the final rule reflects existing privacy laws.[49] For example, the FMCSA will redact personal information within the records before publicly releasing data.[50]

The Court’s Resounding Rebuke of Fourth Amendment Concerns

Finally, OOIDA argued that the final rule imposes an unconstitutional search and/or seizure on drivers.[51]Claiming that a truck is “an office and a home away from home” for drivers, OOIDA argued that requiring the installation of surveillance devices in their vehicles constitutes a seizure of their property.[52] The court resoundingly disagreed, holding that the searching of the ELDs falls within the pervasively regulated industry exception, a doctrine permitting warrantless administrative searches when reasonable.[53] Noting that at least six other federal circuit courts have concluded likewise, the court found that the dangerousness of the trucking industry warranted pervasive regulation and held the final rule reasonable, especially in light of the FMCSA’s estimate that the ELDs likely will “save 26 lives, prevent 562 injuries, and avoid 1,844 vehicles crashes per year.”[54] Further, falsification and errors in the traditional paper recording are a widespread problem and the ELDs are a necessary tool to eliminate it.[55] Electronic logging of records offers a reasonable method to combat this problem by deterring violations.[56] And nothing really changes from the prior regulations—searches of the ELD records would occur as they always have at roadside inspections.[57] The search procedure is substantially similar from what has occurred with paper records for decades.[58] Truck drivers’ reasonable expectation of privacy has been diminished by their voluntary choice to subject themselves to comprehensive governmental regulation.[59] As long as a regulation provides for the driver to be advised that the search is pursuant to law and limits the discretion of the inspecting officer, as is the case with the final rule, a warrant that otherwise would have been required has been adequately substituted for constitutional purposes.[60]

What Does This Mean for the Commercial Trucking Industry?

If you take the Seventh Circuit’s opinion in Owner-Operator III at face value, nothing changes as a result of this final rule.  But is that true? Does the electronic recording contemplated by the final rule really not alter the privacy afforded commercial drivers during the decades of manual paper recording? How far will courts permit the FMCSA to go in its endeavor for highway safety at the unavoidable expense of drivers’ privacy?

On November 17, 2016, OOIDA issued a press release stating that it plans to petition the Seventh Circuit for a rehearing, signaling that the fight for drivers’ Fourth Amendment rights is not yet over.[61] How the court handles that petition and possible rehearing, and how the Supreme Court may weigh in on the constitutionality of the final rule, should be watched closely by those involved in the domestic motor carrier transportation industry.  If its holding remains good law, the Seventh Circuit’s analysis of OOIDA’s arguments and overview of the inadequacies of the FMCSA’s previous rules, are sure to provide plenty of ammunition to the FMCSA should the final rule be challenged in other federal circuits.

Commercial drivers should start becoming knowledgeable now about how their rights are affected by this final rule and what new obligations will be imposed on them beginning December 18, 2017. Motor carriers should be proactive and begin preparing for enforcement of this final rule to become a reality.  For example, the FMCSA estimates that the average cost of an ELD as a result of this final rule will decrease to only $495 per vehicle, with a total range of $165 to $832 per vehicle, annually.[62] Is your company adequately budgeting to account for the cost of installing and maintaining ELDs on its entire fleet by the end of 2017? How will your company fulfill its legal responsibility to store the electronically recorded data? Motor carriers also should be aware of the potential liabilities that can arise if they fail to come into compliance with the final rule, or if they encourage or knowingly permit their drivers to violate HOS regulations. Recently, accident victims’ attorneys began shifting their focus away from safety violations of an individual truck driver and towards the fleet-wide violations of the entire employer. [63] This has led to astronomical verdicts against motor carriers, which may only be the beginning considering that the ELDs are sure to give plaintiffs’ attorneys greater access to reliable, fleet-wide records.[64] For this reason, many insurance companies are raising motor carriers’ premiums or refusing to cover motor carriers all together.[65] This makes contractual language in shipping agreements even more imperative in order to adequately protect motor carriers in the event of a loss or injury.  Motor carriers should seek guidance from legal counsel now in order to plan and prepare to navigate these new obstacles and ensure compliance with the final rule by December 18, 2017.

References
[1] Owner–Operator Indep. Drivers Ass’n, Inc. v. Dep’t of Transp., No. 15-cv-3756, 2016 WL 6407405, at *4 (7th Cir. Oct. 31, 2016) (“Owner-Operator III”).
[2] See, e.g., Public Citizen v. Federal Motor Carrier Safety Admin., 374 F.3d 1209, 1216 (D.C. Cir. 2004); Owner–Operator Independent Drivers Ass’n v. Federal Motor Carrier Safety Admin., 494 F.3d 188 (D.C. Cir. 2007) (“Owner-Operator I”); Owner–Operator Independent Drivers Ass’n v. Federal Motor Carrier Safety Admin., 656 F.3d 580 (7th Cir. 2011) (“Owner-Operator II”).
[3] Electronic Logging Devices and Hours of Service Supporting Documents, 80 Fed. Reg. 78,292, at 78,303 (Dec. 16, 2015) (the “Final ELD Rule”), codified in 49 C.F.R. Pts. 385, 386, 390 and 395.
[4] 49 C.F.R. § 395.8(b).
[5] Id.
[6] Owner–Operator III, at *2.
[7] Id.
[8] Id., at *3.
[9] Id.
[10] Id.
[11] 75 Fed. Reg. 17,208 (Apr. 5, 2010).
[12] Id.
[13] Owner–Operator II, at 588.
[14] Id., at 589.
[15] Id.
[16] Petitioner’s Brief at 22, Owner-Operator II.
[17] Owner–Operator III, at *4.
[18] 49 U.S.C. § 31137(a)(1).
[19] Id.
[20] Id.
[21] 49 C.F.R. § 395.26.
[22] Owner–Operator III, at *4.
[23] 49 C.F.R. § 395.26.
[24] Owner–Operator III, at *4.
[25] Id., at *1.
[26] Petitioner’s Opening Brief at 12, Owner–Operator III.
[27] Owner–Operator III, at *1.
[28] Id., at *5.
[29] Id.
[30] Id.
[31] Id.
[32] Petitioner’s Opening Brief at 24, Owner–Operator III.
[33] Id.
[34] Id., at 28.
[35] Id.
[36] Id.
[37] Owner–Operator III, at *6.
[38] Id.
[39] Id., at *7.
[40] Id., at *6.
[41] Id.
[42] Id., at *7.
[43] Id.
[44] Id., at *8.
[45] Id.
[46] Id.
[47] Id., at *1, 9.
[48] Id.
[49] Id., at *9.
[50] Id.
[51] Id., at *2.
[52] Petitioner’s Opening Brief at 50-52, Owner–Operator III.
[53] Owner-Operator III, at *10-11 (citing United States v. Delgado, 545 F.3d 1195, 1202 (9th Cir. 2008) (warrantless administrative searches of trucks and trailers at routine traffic stops survive Fourth Amendment scrutiny).  See also, e.g., United States v. Mitchell, 518 F.3d 740, 752 (10th Cir. 2008) (warrantless search of a trailer to confirm that there are no contents in the trailer does not violate any Fourth Amendment rights); United States v. Mendoza-Gonzalez, 363 F.3d 788, 794 (8th Cir. 2004) (search of driver’s compartment underneath his sleeper birth did not violate his Fourth Amendment rights because the officer had authority to inspect all safety belts, and these belts were capable of falling into the sleeper berth compartment); United States v. Dominguez-Prieto, 923 F.2d 464 (6th Cir. 1991) (warrantless search of driver’s trailer did not violate any Fourth Amendment rights); United States v. Castelo, 415 F.3d 407, 412 (5th Cir. 2005) (if probable cause “justifies the search of a lawfully stopped vehicle, it justifies the search of every part of the vehicle and its contents that may conceal the object of the search”); United States v. Fort, 248 F.3d 475 (5th Cir. 2001) (“Texas statute, which authorizes the detention of a vehicle, also provides authority for an officer to stop a vehicle in the absence of probable cause or reasonable suspicion”); United States v. Maldonado, 356 F.3d 130, 137 (1st Cir. 2004) (warrantless inspection of moving van did not violate any Fourth Amendment rights).
[54] Id., at *10.
[55] Id., at *11.
[56] Id.
[57] Id.
[58] Id.
[59] Id., at *9.
[60] Id., at *12.
[61] Truckers will ask for rehearing on ELD lawsuit, OOIDA Press Release, (Nov. 16, 2014), http://www.ooida.com/MediaCenter/PressReleases/pressrelease.asp?prid=419.
[62] ELD myths – Separating fact from fiction, (accessed Nov. 30, 2016), https://eldfacts.com/eld-myths/.
[63] Brian Baskin, Nuclear Verdicts Have Insurers Running from Trucks, The Wall Street Journal, Oct. 14, 2016.
[64] Id.
[65] Id.

Written by Paul J. Kozacky and Brian O’Connor

Westrec Marinas manages Chicago’s harbors and it recently hosted a party in celebration of the America’s Cup Race on a converted barge. The event surely created excitement, but the party barge may have entered the strange straits known as admiralty law which is often considered a legal world unto itself.

Admiralty Law Generally Applies

As set forth by the United States Supreme Court in Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527 (1995), admiralty jurisdiction generally attaches and admiralty law applies when a tort occurs on a vessel in navigable water or where an injury suffered on land is caused by a vessel on navigable water, when the tort has a sufficient connection with traditional maritime activity and poses a substantial risk to maritime commerce. Under Lozman v. City of Riviera Beach, Florida, 133 S. Ct. 735 (2013), it is possible that the reconfigured barge of the America’s Cup viewing party could be considered a “vessel” for admiralty purposes and the fresh water upon which she floated certainly constitutes navigable waters of the United States. the fact that the barge may have constituted a type of “pleasure boat” rather than a cargo vessel or ferry would not defeat admiralty jurisdiction. It’s not difficult to imagine scenarios where an incident on the barge could have disrupted maritime commerce, such as a search and rescue. Thus, it is possible that any injuries occurring on, around, or as a result of the party barge could be subjected to admiralty law and all of its intricacies.

Impact of Admiralty Jurisdiction

Application of admiralty law to torts involving the barge could prove significant for Chicago and Westrec Marinas, depending on their precise contractual arrangements, each of which could be sued for alleged negligence in a mishap. Notably, under the Local Governmental and Governmental Employees Tort Immunity Act, 745 ILCS 10/1-101 et seq., the city and its employees or agents generally are afforded broad immunity for their negligent conduct which results in harm to others. However, the city and its employees or agents would not be entitled to immunity in an admiralty case. See Workman v. City of New York, 179 U.S. 552 (1900); Complaint of Great Lakes Dredge & Dock Co., No. 92 C 6754, 1996 WL 210081 (N.D. Ill. Apr. 26, 1999). This is due to an important feature of admiralty law, which also is the ecumenical basis for the federal grant of admiralty jurisdiction under Article III of the United States Constitution, which states that for efficient maritime commerce, admiralty law has to be uniform. For example, it doesn’t make sense for a vessel to be governed by certain law on one bank of the Mississippi River and governed by inconsistent law on the other. Admiralty law strives for uniformity throughout the nation. Accordingly, in respect to a hypothetical patron injured on the barge, the city would be unable to cloak itself in municipal immunity.

It’s also possible that the application of admiralty law could provide some benefit to the owner of the converted barge. Under admiralty law, and pursuant to the Limitation of Vessel Owner’s Liability Act, 46 U.S.C. § 30501 et seq., a vessel owner may institute a petition to limit its liability to the value of the vessel (and pending freight) in respect to claims brought by injured parties, provided the owner is not in privity to the cause of loss. By illustration, it was possible that an American court would determine limitation on liability to passengers lost aboard the R.M.S. TITANIC at merely the value of her 14 lifeboats and some unpaid passenger fare, $92,000 of the $16 million claimed. Such an opportunity to limit liability and prevent massive punitive damage judgments is only available to vessel owners in admiralty.

Admiralty law presents many differences with state law. For example, under 815 ILCS 205/2, a claimant generally is entitled to prejudgment interest on a claim only where that claim is based upon a written instrument. In admiralty, an award of prejudgment interest for all claims is the norm. See City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 195-99 (1995). Under Illinois law and pursuant to the Seventh Amendment for common law cases exceeding a whopping $20 in controversy, civil defendants have a right to a trial by jury, unless otherwise waived contractually. 735 ILCS 5/2-1105. Contrarily, admiralty law allows a plaintiff generally to secure a bench trial, even if defendants desire a jury. See St. Paul Fire and Marine Ins. Co. v. Lago Canyon, Inc., 561 F.3d 1181 (11thCir. 2009). In the context of ocean carriage, admiralty law provides substantial property damage limitations and strong enforcement of forum selection clauses, including of foreign fora, which do not exist in motor or rail carriage.

Written by Paul J. Kozacky and Brian O’Connor

Most knowledgeable people will tell you that the biggest problem facing the San Francisco‐based company Uber Technologies Inc. is its seemingly unending battles with cab companies and their regulators — in Chicago and in other major cities worldwide.

But the ostensibly unstoppable upstart technological platform provider, which appears to have revolutionized the short‐distance passenger transportation industry, now is waging battles on two fronts, this new one against its very drivers.

Uber has and continues to present itself not as a transportation provider, but rather as a licensor of a mobile application, which allows individual drivers using their own vehicles to connect with individual passengers seeking rides. Essentially, Uber has tried to set itself up as the neutral Internet middleman.

To conform to this business model, individuals who want to drive for Uber must, among other requirements, enter into licensing agreements with the company, a step almost assuredly designed to cast them as independent contractors, presumably to avoid creation of an employer‐employee (or principal‐agent) relationship.

However, according to at least one state’s labor commission, Uber’s drivers are employees, notwithstanding their independent contractor licensing agreements.

On June 3, in Berwick v. Uber Technologies Inc., et al. (No. 11‐46739 EK), the California labor commissioner found Barbara Berwick, an Uber driver from San Francisco, to be Uber’s “employee” and ordered Uber to reimburse her for necessary expenses she incurred in discharging her duties. These expenses included the applicable Internal Revenue Service mileage rate for all miles she had driven as well as charges incurred on the Bay Area’s toll roads.

The hearing officer seemed poised to rule in Berwick’s favor with respect to her minimum wage claim as well, but she failed to provide any informative records and therefore did not meet her initial burden of proof on that claim.

This ruling may have a monumental effect on the upstart, as Uber almost certainly can expect to see more California drivers, and drivers in other states and possibly other countries, present similar claims.

In Berwick, Uber argued that Berwick was an independent contractor, relying on the licensing agreement and several other relationship factors to demonstrate a lack of sufficient control over her for her to be considered its employee. For example, drivers can use the application whenever they want — there are no minimum number of hours or trips required.

Drivers use their own vehicles, not equipment as is normally provided by an employer. And there are no geographical restrictions either, which grants drivers free range to set their own territories.

These liberties are hardly the trappings of an employment relationship, Uber would certainly posit. But the hearing officer disagreed, stating the “reality, however, is that [Uber is] involved in every aspect of the operation.”

Uber diligently vets prospective drivers through background and Department of Motor Vehicles checks and requires proof of a driver’s license, Social Security number, residential address, insurance and even banking information. In exchange for a refundable deposit, it provides drivers without a compatible phone an iPhone capable of accessing the mobile application.

Uber maintains quality‐control procedures for its drivers by encouraging passengers to rate them and requiring that a driver’s rating meet a minimum threshold. Drivers whose ratings fall below this level lose their mobile application privileges.

Even though drivers use their own vehicles, Uber and its agreement “control the tools the drivers use; for example, drivers must register their cars with [Uber] and none of their cars can be more than 10 years old.” The personal vehicles must be inspected by an Uber‐approved mechanic and pass all requirements on Uber’s vehicle inspection form.

Drivers have no control over the fee paid by passengers, which is determined solely by Uber, and further are discouraged from accepting tips. Based on all of these factors, the hearing officer found that Uber exerted a sufficient amount of control over Berwick and the entire transportation operation for her to be considered its employee.

Just how large of an impact this and potentially other similar rulings in administrative proceedings and federal and state courts can have on Uber remains to be seen.

Could Berwick have sought overtime? Will drivers claim that Uber is subject to federal and state minimum wage laws? Will they seek statutory benefits due employees and medical insurance and lunch breaks and the like?

An ex‐Miami‐based Uber driver already is seeking to collect unemployment insurance. Drivers are sure to leave no stone unturned.

Most profoundly, will this lead to Uber being held vicariously liable for its drivers’ accidents? We saw how management by a third‐party logistics provider can destroy the independent contractor casting of a potato truck driver in Sperl v. C.H. Robinson Worldwide Inc., 408 Ill.App.3d 1051, 946 N.E.2d 463 (3d Dist. 2011), and result in multimillion‐dollar vicarious liability.

While the personal tragedies in Sperl are nothing to minimize, the approximately $24 million awarded in damages could be small potatoes compared to the cumulative verdict ranges for a company with around 160,000 drivers and 8 million customers taking an average of 1 million trips per day. Plaintiff attorneys are sure to leave no pocket unturned.

Written by Paul J. Kozacky and Brian O’Connor

Over the last eight months, shippers and carriers constituting the Pacific Maritime Association have been embroiled in a protracted dispute with the International Longshore and Warehouse Union, affecting 29 U.S. West Coast ports from northern Washington to Southern California.

The two sides hit an impasse when their contract expired in July 2014. The PMA had accused ILWU members of intentional slowdowns, and recent weeks saw international trade halted as a result of partial and occasionally complete port closures, leaving containerships stranded at distant anchorages, racking up tens of thousands of dollars a day in contractual demurrage and detention charges.

On Feb. 20, the two sides reached a tentative agreement, which hopefully will bring stability to the industry. While a sigh of relief is in order, now is the time for shippers and carriers, even those without West Coast connections, to ensure that their contracts have viable force majeure clauses.

A force majeure is an event or effect that is neither anticipated nor controlled, which prevents a party’s performance of a contractual requirement as previously agreed. A force majeure contract clause attempts to relieve a party from liability in the wake of such an event or effect. It typically lists such examples as “compliance with any law, regulation or order”; and “acts of God, fire, flood, war, sabotage, supply shortage”; and maybe even “labor disputes,” “strikes,” “labor shortages,” “work stoppages” and “work slowdowns.”

But does including the latter terms in your force majeure clause actually protect you in the event of such occurrences? And, if so, to what extent?

It is too early to tell the volume of force majeure litigation that will arise out of the West Coast dispute, but since many truckers already have declared force majeure, some amount of litigation can be expected. A brief overview of the few decisions likely to play a role in resolving these disputes will help understand the semantic obstacles shippers and carriers may encounter.

Many of these companies likely do not realize that based on the language of their force majeure clause, the port standoff may not be an actual “labor dispute” that excuses nonperformance.

This was the harsh lesson learned by the contractor in Murdock & Sons Construction Inc. v. Groheen General Construction Inc., 461 F.3d 837, 841 (7th Cir. 2006). There, the court found that even though the contract contained a force majeure clause explicitly listing “labor disputes,” the contractor was not excused from performance due to a work slowdown.

The court reasoned that even if the employees “consciously slowed their pace in an effort to make more money,” this did not meet the legal definition of “labor dispute” because there was no actual controversy between the contractor and employees about terms or conditions of employment or concerning the representation of the union. Further, the contractor should have anticipated — and thus assumed — labor productivity risks.

Similarly, in Teco Coal Corp. v. Orlando Utilities Commission, No. 07-CV-444-KKC, 2010 WL 8750622, at *14 (E.D. Ky., Sept. 17, 2010), a coal supply contract contained a force majeure clause that explicitly included “strikes, labor disputes and work stoppages.”

When the supplier failed to ship the contracted-for coal to the buyer, the supplier argued that its failure should be excused because it was the result of a work stoppage — contract mining companies had abandoned operations. The buyer moved for summary judgment, arguing that this did not constitute a “labor dispute” or “work stoppage” under the contract.

Since the contract did not define these terms, the court looked to a dictionary for assistance but denied summary judgment because the dictionary defined “work stoppage” as “a concerted cessation of work by a group of employees usually more spontaneous and less serious than a strike.” From this definition, the court could not find, as a matter of law, that the abandonment of mine operations constituted a force majeure under the contract.

In Aquila Inc. v. C.W. Mining, 545 F.3d 1258, 1263-65 (10th Cir. 2008), a coal supplier learned that explicitly including “labor disputes” in a force majeure clause did not protect the supplier completely when a labor dispute arose.

There, the contract contained a lengthy force majeure clause excusing performance due “wholly or partly” to “labor disputes; boycotts; lockouts; [and] labor … shortages.” The supplier was hit by a labor strike shortly after executing the contract and, within a few months, encountered several geological problems that affected production.

The court found that the labor dispute was not the primary cause of the supplier’s failure to perform and held that based on the language of the clause, and despite the explicit inclusion of “labor disputes” as a force majeure event, the supplier was entitled to only partial protection. The supplier had the difficult burden of proving the extent to which the labor dispute, as opposed to production problems, affected its nonperformance.

These cases highlight the importance of having a force majeure clause explicitly contemplating “labor disputes,” “strikes,” “labor shortages,” “work stoppages” and “work slowdowns,” as well as including appropriate language to ensure that every such event disrupting shipments is actually and fully covered.

Arguably, comprehensively defining “labor disputes” and “work stoppages” in the contracts in Murdock & Sons Construction and Teco Coal could have excused nonperformance. Clearer language may have completely excused non-performance in Aquila.

Applying the cases here, it is likely that some West Coast truckers who couldn’t deliver due to the slowdowns at the ports will not be excused under the narrow language of their force majeure clauses. A contract scrivener also is well advised to incorporate ejusdem generis catchalls like “and similar events and occurrences” when enumerating excuses.

Written by Jessica F. Garro

Two recent insurance coverage cases highlight the ever important characterization of activities undertaken by the independent contractors frequently engaged by motor carriers.

The fine line between whether or not a contractor is conducting those activities as part of “the business of” the carrier can mean the difference between a loss being born by the carrier’s own insurer or the contractor’s insurer.

In Progressive Premier Insurance Co. of Illinois v. Emiljanowicz, 2013 IL App (1st) 113664, a contractor entered into an agreement to lease a truck he owned to a carrier “for the purpose of hauling freight.” At the same time the agreement was executed, the carrier’s president instructed the contractor to have his truck inspected by a mechanic.

That same day, the contractor drove the truck to pick up a friend and take the truck to a mechanic. On his way to pick up the friend, the contractor collided with another vehicle.

At the time of the accident, the contractor was covered by an insurance policy issued by Progressive, but the policy contained a contingent liability endorsement that stated it did not apply when the contractor was operating the vehicle on behalf of anyone else or any organization. A different insurer, Occidential, issued a liability insurance policy to the carrier that covered all vehicles in service for them, but only when the vehicle is an “auto” in use exclusively for transporting freight for their services.

When the victim of the accident sued the contractor, Progressive defended him under a reservation of rights. After the case settled, Progressive filed a declaratory action against Occidential, seeking reimbursement for the defense and settlement of the claims. The trial court ruled in favor of Progressive.

The appellate court affirmed. In doing so, it applied a two‐factor test to determine whether a vehicle is being used “in the business” of a corporation: (1) Whether the contractor agreement provides that the insured corporation has exclusive possession, control and use of a leased vehicle (note that federal regulations governing motor carriers require this language in all authorized carrier leases, 49 C.F.R. Section 376.12(c)) and (2) whether at the time of the accident, the vehicle was operating on directions of the corporation.

Occidental argued that its policy did not meet the second prong of the test because the contractor was not operating on direction of the carrier at the time of the accident, but instead was on his way to pick up a friend. The court disagreed, noting that the record reflected that the contractor was picking up his friend for no other reason than to take the truck to get repaired and ultimately held that Occidential, the carrier’s insurer, was responsible for both the contractor’s defense costs and the settlement.

The Wisconsin Supreme Court recently reached the opposite conclusion in Casey v. Smith, 353 Wis.2d 354 (2014). The contractor in Casey also leased a tractor‐trailer he owned to a carrier pursuant to a contractor agreement. The carrier obtained a commercial automobile policy from Great West.

The contractor was covered by a non‐trucking use policy issued by Acceptance, which excluded coverage for the vehicle while being “operated, maintained or used to carry property in any business or en route to or from such business purpose.”

While en route to get the tractor‐trailer’s grille and oil filler tube repaired on his day off work, the contractor was involved in a three‐vehicle accident. The driver of one of the other vehicles sued the contractor, naming both insurers as defendants.

A dispute arose between Great West and Acceptance as to which of their policies covered the plaintiff’s claims. The circuit court granted summary judgment in favor of Great West, the appeals court affirmed and review was accepted by the Wisconsin Supreme Court.

Similar to Progressive, the threshold question was whether the contractor was operating “in the business of” the carrier when the accident occurred. However, the Wisconsin Supreme Court did not apply the simplistic “operating on directions of the carrier” test that is used in Illinois. It instead adopted a test articulated by the 7th U.S. Circuit Court of Appeals in Hartford Insurance Co. v. Occidental Fire & Casualty Co., 908 F.2d 235 (7th Cir. 1990).

Under the Hartford test, which applied Wisconsin law, to be considered operating “in the business of” a carrier, the vehicle must be “used to further the commercial interests of the lessee.” Relevant factors in making such a determination include the terms of the lease agreement, any instructions from the lessee and the nature and extent of the repairs.

Applying the Hartford test, the Wisconsin Supreme Court agreed that the contractor’s insurer was liable for the loss.

The court noted that the lease at issue required the contractor to maintain “the equipment in the state of repair required by all applicable regulations.” Since the repairs to the grille and oil filler tube were not required to comply with federal regulations, the court determined that such repairs were not necessary to fulfill the contractor’s duties under the lease.

The court noted that the contractor was not acting pursuant to orders from the carrier at the time of the incident, and indeed, the carrier was unaware that the contractor was getting the repairs done.

It further stressed that the damage to the grille had not put the tractor out of service or prevented the contractor from accepting or completing hauls for the carrier (as the contractor had in fact been accepting loads for about a month with a damaged grille).

Carriers and insurers alike should be aware of the differences between these ever‐important tests used to determine whether independent contractors are engaged “in the business of” the carrier. Arguably, had the carrier in Casey instructed the contractor to get the minor repairs taken care of, under the more simplistic test used in Illinois, the contractor’s drive en route to the mechanic likely would have been considered to have occurred “in the business of” the carrier, irrespective of whether the repairs were minor or required under the contract.

A prudent insured should require its broker to verify coverage based on such nuances of state law.

Written by Paul J. Kozacky

On Feb. 5, the Food and Drug Administration published a long‐anticipated proposed rule containing sanitary transportation practice criteria for shippers, receivers and carriers which transport food in the United States by motor vehicle or rail, whether or not the food is offered for or enters interstate commerce.

While a specific enforcement regime is not specified in the proposed rule, the FDA anticipates that the rule’s requirements will detail new standards that will assist in determining whether or not food should be considered adulterated for purposes of determining liability under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Section 331(hh).

This is the seventh and last rule proposed by the FDA to implement the FDA Food Safety
Modernization Act of 2011 (FSMA), which was signed into law on Jan. 4, 2011, to better protect human and animal health by helping ensure the safety and security of the food and feed supply.

This proposed rule is significant not only because it expressly applies to intrastate transportation but because it is the first time the FDA has imposed regulations directly on carriers. (For those interested in the federalism issue this presents, compare U.S. v. Regenerative Sciences LLC, 2014 WL 393602, No. 12‐5254 (D.C. Cir. Feb. 4, 2014) (FDA may regulate certain intrastate activity), with 21 U.S.C. Section 331(a) (prohibiting only the “introduction or delivery for introduction into interstate commerce of any food”).)

While carriers typically already are contractually bound to adhere to safety standards specified by their shippers, carriers and shippers both should be cognizant of the new record keeping, information‐exchange and training requirements imposed by the rule and the challenges these could present.

As it stands, the proposed rule would require carriers to:

• Demonstrate to shippers and, upon request, to consignees, that they have maintained appropriate temperature conditions during the transportation.
• Provide information to shippers about previous cargo transportation in bulk and the most recent cleaning of those vehicles, unless otherwise agreed to in writing that other procedures would be adequate for the bulk transportation at issue.
• Develop and implement written procedures subject to record keeping that describe how carriers will provide information to shippers regarding the previous cargoes and most recent cleaning of the vehicle, describe how they will maintain the requisite temperature
  conditions and specify their practices for cleaning, sanitizing and inspecting vehicles and equipment.
• Train personnel engaged in transportation operations in sanitary transportation practices and maintain records documenting the training.

In addition to the regulations, it would impose for the first time on carriers, the proposed rule would require shippers to:

• Specify to carriers in writing the sanitary requirements for a vehicle or transportation equipment to be provided for all food subject to the proposed rule and the temperature requirements for foods subject to temperature control requirements.
• Maintain records that demonstrate that shippers provide this information to carriers.
• Inspect a vehicle for cleanliness prior to loading food that is not completely enclosed by its own containers onto the vehicle.

A complete copy of the proposed rule can be seen at federalregister.gov/articles/2014/02
/05/2014‐02188/sanitary‐transportation‐of‐human‐and‐animal‐food#h‐28.

There are exemptions to the proposed rule. For example, the proposed rule would not apply to shippers, consignees or carriers who transport food but have less than $500,000 in total annual sales nor would it apply to the transportation of fully packaged shelf‐stable foods, live food animals and raw agricultural commodities transported by farms.

According to the FDA, while there is a significant number of players that have less than $500,000 in total annual sales, the rationale for their exemption is that these firms only account for 3 percent of insanitary transportation incidents.

The proposed rule will become effective 60 days after the final rule is published in the Federal Register, and compliance therewith will be required one year following that publication.

The FDA currently is required to publish the final rule by March 31, 2016. Businesses other than motor carriers who are also not shippers and/or consignees having less than $25.5 million in annual receipts and employing fewer than 500 persons would have an additional year to comply with the proposed rule.

The proposed rule is likely to have a significant impact on the cost of doing business in an industry that, until now, was not highly regulated by the FDA. The FDA estimates that the rule will cover 83,609 businesses and that total first‐year costs to industry will be $149.1 million (with an average of $1,784 per business) with total annual cost at $30.08 million (with an average of $360 per business).

The proposed rule is currently in the “public comment” period and the FDA may consider revising the rule based on input from the public. Such comments are due by May 31.

As a result, the FDA especially encourages written comments from carriers, suggesting that they would be receptive to data submitted by the transportation industry related to the cost of adhering to and the effectiveness of the proposed rule.

Comments may be submitted by interested persons and entities online at
http://regulations.gov/#!submitComment;D=FDA‐2013‐N‐0013‐0001.