Why it matters

An employee who was fired for his use of medical marijuana can move forward with his lawsuit against his former employer, a federal court judge in California recently determined. Justin Shepherd had worked at Kohl's Department Stores for five years when he was diagnosed with acute and chronic anxiety and provided with a recommendation for medical marijuana use. Although he did not inform his employer about his drug use, the company subsequently updated its policies to state that employees in California would not be discriminated against for valid medical use of marijuana. Shepherd was injured on the job and a drug test revealed his drug use. He was terminated, and he sued alleging breach of an implied contract and covenant of good faith and fair dealing as well as defamation. The court denied Kohl's motion for summary judgment, finding that a reasonable jury could determine the employee would not be discriminated against for his medical marijuana use based on the employer's policy. The court did toss a number of claims under the state's Fair Employment and Housing Act, however. Employers attempting to walk the fine line between federal law (which continues to recognize marijuana as an illegal substance) and contrary state laws (permitting marijuana both for medical and recreational use) should take note of the decision.

Detailed discussion

Justin Shepherd was hired by Kohl's Department Stores as a material handler in June 2006. As part of his hiring, he signed a written agreement that included a provision stating he was an at-will employee. In 2011, Shepherd—who had since been promoted—was diagnosed with acute and chronic anxiety. His doctor recommended medical marijuana.

Shepherd did not disclose the recommendation or his use of medical marijuana to Kohl's. But in 2012, the company updated its personnel policies to include exceptions to its drug testing and substance abuse policies stating that employees in certain states (including California) would not be discriminated against with regard to hiring, termination, or other employment matters based on their drug use due to a valid medical marijuana recommendation. Shepherd said he relied on these policies when he elected to continue using the drug to treat his anxiety and not look for a new job.

In 2014, Shepherd was injured at work and sent to a healthcare provider that contracted with Kohl's. A drug test revealed trace amounts of marijuana metabolites. Shepherd showed management his recommendation for medical marijuana and explained that he only used it while off duty, but that metabolites can remain in the system for some time.

Shepherd was terminated for his drug use and told that he "should have chosen a different medication." He filed suit alleging three counts under the Fair Employment and Housing Act (FEHA), invasion of privacy, wrongful termination in violation of public policy, breach of implied contract and the covenant of good faith and fair dealing, and defamation.

Kohl's moved for summary judgment and U.S. District Court Judge Dale A. Drozd entered a mixed decision.

First, he dismissed the FEHA claims. Despite the passage of the Compassionate Use Act, which ostensibly legalized medical marijuana in California, employees were not granted new rights. "[I]t does not violate the FEHA to terminate an employee based on their use of marijuana, regardless of why they use it, and the Compassionate Use Act did not change that," the court said.

Neither was the employer required to accommodate Shepherd's medical marijuana use, the court added, and therefore could not be liable for a failure to accommodate or engage in the interactive process. Further, the plaintiff failed to provide any evidence of disability discrimination, instead offering evidence only as to how Kohl's acted with regard to how he chose to treat his condition. The invasion of privacy claim also failed, as the evidence established the plaintiff was aware he could be drug tested long before he was injured.

However, the court was persuaded that Shepherd's claims for breach of implied contract and the covenant of good faith and fair dealing should survive summary judgment. The plaintiff contended that the policies adopted by Kohl's in 2012 became terms of his employment agreement and part of an implied contract, binding the employer not to breach them.

The existence and content of employer agreements not to terminate based on certain assurances are particularly fact-driven inquiries, Judge Drozd noted, pointing out that Shepherd testified he abandoned his efforts to look elsewhere for a job because he understood the Kohl's policies "to very clearly say that as long as I used the [medical marijuana] at home and not close to a shift, I would be protected from getting fired even if I tested positive."

"Here, a reasonable jury could conclude from defendant's policies and plaintiff's testimony that the parties agreed, subsequent to his 2006 acknowledgement of the at-will nature of his employment, that plaintiff would not be discriminated against for his medical marijuana use, since he was a registered medical marijuana cardholder," the court wrote.

The court also allowed Shepherd's defamation claim to move forward. The parties did not dispute that the only evidence of the plaintiff's impairment at work was the positive test result for marijuana metabolites, which Shepherd countered remain in a user's system for up to 30 days after use. He also testified that he did not use marijuana within several days of working as a general rule and had not used it for days before he was injured in January 2014.

"Based on this evidence, a reasonable jury could find plaintiff was not in a condition unfit to perform his job, was not under the influence of alcohol or other drugs at work, and/or was not using, consuming, or selling alcohol or other drugs at work," the court said, referencing the reasons given by Kohl's for Shepherd's termination. "Further, given the dearth of evidence presented by the defendant of plaintiff's purported impairment, a reasonable jury could conclude these statements were made with a 'reckless or wanton disregard for the truth,' thus establishing malice."

To read the order in Shepherd v. Kohl's Department Stores, click here.