In Ross v. Sherman Hemp LLC et al., a case filed in the U.S. District Court for the Eastern District of Texas, the operators of two CBD shops in Texas were sued in a proposed class action by a former sales associate who says the businesses illegally avoided paying overtime wages by sharing staff and paying them with separate paychecks. The shops are CBD USA Plus franchises.

In a complaint filed as the new year began in a Texas federal court, Colin Ross sued two CBD USA Plus franchises, asserting that despite requiring employees to work at both North Texas locations, the businesses treat the CBD shops as separate entities to avoid paying overtime wages in violation of the Fair Labor Standards Act (“FLSA”). CBD USA Plus is an Oklahoma-based CBD company with more than 80 locations.

Ross is seeking to represent a collective of current and former hourly, nonexempt workers employed at the two CBD USA Plus franchises in Sherman and Denton, Texas. Ross seeks an order that finds the franchises and their owners liable for unpaid backpay and damages equal to the unpaid overtime compensation.

Jay and Jamie Ashley, a married couple, were also named defendants in the suit as owners and managers of the two franchises, which operate as Sherman Hemp LLC and Ashten LLC. The complaint alleges that the Ashleys used employees interchangeably between both locations, including directing employees to transfer inventory between the two stores.

Because the two locations share both owners and employees, the complaint filed by Ross asserts that the joint employment doctrine under the FLSA requires that the hours worked by employees for both entities be aggregated for purposes of calculating overtime pay and that the joint employers are liable for their failure to calculate and pay overtime compensation correctly.

“Even though defendants jointly employed plaintiff, defendants refused to combine the hours plaintiff worked for both Sherman Hemp, LLC and Ashten, LLC each week for overtime purposes,” said Ross in the complaint. Ross said that he would receive paychecks from both businesses each pay period, “as if Sherman Hemp, LLC and Ashten LLC were totally independent and unrelated companies.”

As a result of this arrangement by the Ashleys, Ross claimed that hourly employees consistently worked far more than 40 hours per week but were not paid overtime premiums for any hours worked beyond the 40-hour threshold. “My understanding is that they set up these separate entities to specifically avoid paying overtime,” said Douglas B. Welmaker, attorney for Colin Ross.

Welmaker added that Jay and Jamie Ashley also own three other CBD USA Plus franchise locations in Oklahoma, where they allegedly operate a similar scheme to avoid paying workers overtime. He noted that the Oklahoma workers and locations may be added into this litigation as well.

Through discovery, Welmaker hopes to determine how much CBD USA Plus was aware of this practice carried out by its franchisees. “If we find some sort of knowledge of and or awareness of these shady business practices then we will definitely be looking at looping them into the litigation as well,” said Welmaker.