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New Jersey Court Orders Employer to Reimburse Injured Employee for Cost of Medical Marijuana

Posted by on Monday, February 17, 2020 in News, Updates.

In January 2020, a New Jersey state court ordered an employer to cover the costs of an injured employee’s medical marijuana. The full 31 page decision in Hager v. M&K Construction can be found here.

The New Jersey court ruling recognizes a split among state courts concerning whether state agencies may require employers to cover the costs of medical marijuana under state workers’ compensation laws. As I discussed in two prior posts, the Maine Supreme Court previously held that any such requirement is preempted by the federal Controlled Substances Act (CSA). See UPDATE: Maine Supreme Court Holds State Worker Compensation Law Preempted; and Cases to Watch: Bourgoin v. Twin Rivers and Workers’ Compensation.

In Hager, the New Jersey court rejected the employer’s (M&K Construction’s) preemption defense. (New Mexico courts had previously reached a similar conclusion.) In this post, I’ll discuss the employer’s preemption defense and the two reasons why the New Jersey court rejected it. I’ll also make two other observations concerning the New Jersey case and workers’ compensation laws more generally.

But first, let me start with a brief review of the facts of Hager.

The employee (Vincent Hager) had been injured on the job back in 2001 and suffered chronic back pain as a result of that injury. Although Hager tried a variety of more traditional treatments – including physical therapy, spinal surgery, and Oxycodone – none of those treatments worked satisfactorily and / or they came with serious side effects (like the risk of addiction associated with opioid painkillers).

In 2016, the employee’s physician recommended a new course of treatment: medical marijuana. Hager, who satisfied all of the requirements for becoming a Qualifying Patient under New Jersey’s medical marijuana law, tried the drug and reported that it gave him “some relief from the pain.” Hager at 8. Hager then asked M&K to reimburse him for the cost of his medical marijuana (roughly $600 per month for two ounces), citing New Jersey’s worker’s compensation law. Under that law, an employer “must provide a worker injured in the course of employment with medical treatment and services necessary ‘to cure and relieve the worker of the effects of the injury and to restore the functions of the injured member or organ’ if possible.” Id. at 26-27 (quoting New Jersey Statutes 34:15-15.)

However, M&K refused to reimburse Hager for his medical marijuana. Among other things, the employer claimed the state could not order an employer to pay for a drug banned by federal law (i.e., that any such requirement is preempted). In particular, the employer argued that the federal CSA preempts any reimbursement requirement because it is “impossible to simultaneously comply” with both the federal law and the state reimbursement order. Id. at 14. This same preemption claim prevailed in Bourgoin v. Twin Rivers, where the Maine Supreme Court refused to order the employer to cover the costs of the injured employee’s medical marijuana.

However, the New Jersey court rejected the preemption defense, for two main reasons:

1) The employer would not violate federal law by reimbursing the employee for his medical marijuana.

First, the court held that the employer wouldn’t actually violate federal law by reimbursing the employee for the costs of his medical marijuana:

“Under the CSA, the possession, manufacture, and distribution of marijuana is a criminal and punishable offense. But an employer’s reimbursement of a registered MMA patient’s use of medical marijuana does not require the employer to commit those offenses.”

Hager at 20-21.

The court noted that the state worker’s compensation program “does not require an employer to possess, manufacture or distribute marijuana – the actions proscribed by the CSA.” Id. at 21. But it also found that the employer would not be “aiding and abetting” the employee’s commission of a federal crime (possession of marijuana) either. Id.

As I explained in my two prior posts (see above) and in the book on pages 571-577, there are two basic elements to any aiding and abetting offense: (1) provide some assistance (however trivial) in the commission of a crime; and (2) do so with the desire to help the crime succeed. The second element (the mens rea) is the more difficult one for the government to satisfy.

In Hager, the court found that the employer would lack the necessary mens rea (intent) to aid and abet its employee’s possession of marijuana. Why? Because M&K did not want to help Hager get the drug – it was only being forced to do so by a state administrative agency:

“Under the circumstances presented here, M&K is not an active participant in the commission of a crime. The employer would be complying with an order requiring it to reimburse a person for the legal use of medical marijuana under this state’s law. M&K has not established the requisite intent and active participation necessary for an aiding and abetting charge.”

Hager at 22. The dissent in Bourgoin made a nearly identical argument.

But as I blogged previously, there’s a key problem with this reasoning: It could eliminate the category of impossibility preemption altogether.

“After all, state orders to violate federal law would always (or almost always) absolve private citizens of liability under federal law. Under [this] reasoning, for example, a state order to [a company] to dump toxic waste into the ocean in violation of federal law—or else pay a steep state fine—would not be preempted by federal law, because the company could probably raise a successful duress defense against any federal enforcement action.”

Mikos, UPDATE: Maine Supreme Court Holds State Worker Compensation Law Preempted.

As I explained in that post, it might make more sense to say that

“the state – rather than the private employer – . . . would be aiding and abetting [the employee’s] marijuana possession.” Thus, even though the federal government might not be able to prosecute the employer for aiding and abetting the employee’s possession of marijuana, “for purposes of preemption, the focus is on the actions and mindset of the state, not the employer regulated by the state. And the state clearly wants to enable the employee to obtain marijuana.”

Id. In short, even if the Hager court is correct that M&K would not be aiding and abetting Hager’s possession of marijuana, the state workers’ compensation order might still be preempted because another actor (a state official) is being forced to violate federal law.

The Hager court also offered a second reason why M&K (the employer) wouldn’t be violating federal law:

“We further note that ‘one cannot aid and abet a completed crime.’ . . . Here, [the employee] has obtained the medical marijuana before M&K reimburses him. . . . Therefore, the federal offense of purchasing, possessing or distributing has already occurred. M&K cannot abet the completed crime. The compensation judge’s order directing an employer to reimburse its employee for the use of prescribed and regulated medical marijuana is not prohibited under a federal preemption argument.”

Hager at 22-23.

But I think this argument too is flawed (even more seriously than the first argument). Consider this example: Suppose that X has a grudge against a local parking garage and wants to ruin the garage owner’s business. X announces that he will award anyone who steals a car from the garage $10,000 cash. To collect the award, the thief merely has to provide proof of the completed theft; X wants nothing in return (e.g., the thief can keep the car). Now suppose that Y hears X’s announcement, Y steals a car from the garage, and then Y seeks to collect her award from X. I think X is plainly liable for aiding and abetting Y’s theft. After all, X (1) provided assistance ($10,000 is strong encouragement to commit the crime); and (2) did so with the intention of helping the crime succeed (it was integral to his plan to ruin the garage owner’s business). It doesn’t matter that X only made his payment after Y completed her offense – so long as Y was aware of the award before she committed her offense. In the same way, I don’t think it matters that M&K would pay for the marijuana Hager has already purchased – again, so long as Hager was aware that M&K would reimburse him after the fact. And even if there might have been some doubt about the employer’s obligation before the Hager ruling (e.g., maybe the employee was uncertain whether the state workers’ compensation system would cover the expense), the Hager court’s order applies prospectively – i.e., to future purchases long after its decision was announced.

2) The employer probably would not be prosecuted by the federal government for reimbursing the employee’s costs of medical marijuana.

Apart from finding that the employer would not commit any federal offense, the Hager court also reasoned that the employer likely would never be prosecuted by the federal government, given that Congress has recently barred the federal Department of Justice (DOJ) from using any budgeted funds prosecuting people who act in compliance with state medical marijuana laws. E.g., Hager at 24 (“M&K has presented no evidence that it faces a credible threat of prosecution.”).

Although the court is correct that M&K would almost certainly never be prosecuted by the federal government, I think that’s irrelevant for preemption purposes. M&K’s preemption defense rests on the conflict between state and federal law; that conflict doesn’t disappear when the federal law elects not to enforce its law.

To support its reasoning, the Hager court cites to a handful of cases that appear to address the separate and distinct issue of standing. Standing would be questionable if, for example, M&K had sued the DOJ, say, seeking an injunction against future prosecution under the federal ban. In such a case, M&K would indeed need to demonstrate that it faced imminent federal prosecution – in other words, that its injury was not purely speculative. To make that determination, the federal government’s current enforcement policies would certainly be relevant.

But M&K didn’t file the lawsuit in Hager. In the actual case, the state court order to pay for the employee’s medical marijuana is the injury of which M&K complains; and there’s nothing speculative about it. Concerns about M&K’s standing are thus misplaced.

3) The Hager court overlooked obstacle preemption (though I’m okay with that).

There is a further problem with the Hager court’s analysis. The court suggests that state law is preempted only when the state law makes it impossible to comply with federal law.

At the outset, the court dutifully recites the standards for federal conflict preemption:

“Conflict preemption applies when ‘it is impossible for a private party to comply with both state and federal requirements, or where state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ . . .
We, therefore, must determine whether an order by a compensation judge to reimburse a user of medical marijuana can comply with both federal and state law. . . . If an eligible patient can comply with both the CSA’s prohibition of the manufacture, possession or distribution of marijuana, and the [compensation order] there is no ‘positive conflict’ that triggers preemption.”

Hager at 18-19.

However, the court thereafter focuses exclusively on the impossibility prong of conflict preemption – namely, whether the state was forcing the employer to violate federal law (as discussed above). The court appears to forget about the second variety of conflict preemption — obstacle conflicts. (Or perhaps this just wasn’t pressed by the employer.) Obstacle conflicts arise when state law undermines the objectives of a federal statute, even when state law does not make it impossible to comply with the federal law. Here, for example, the court could have found that the workers’ compensation order undermined federal law, even if it does not (as the court held) require an employer to violate federal law, because the order subsidizes use of a substance federal law seeks to eradicate altogether.

To be sure, for reasons I discuss in this article, I think courts should limit preemption under the CSA to impossibility conflicts — and ignore any obstacle conflicts. To date, however, most courts have rejected that view. The Hager court’s ruling would have been more persuasive (and helpful) had it actually engaged with that prior authority.

4) Nonetheless, I think the court could have provided a different rationale to support its ruling and uphold the workers’ compensation order.

Despite my concerns about the Hager court’s analysis, let me suggest a different way that the New Jersey court (and other courts) could preserve state workers’ compensation orders from federal preemption.

The key is in recognizing that the state isn’t necessarily requiring an employer to cover the cost of medical marijuana (per se), as the Hager court assumes. Rather, perhaps the state is just requiring the employer to pay for an injured employee’s reasonable medical expenses, whatever those expenses might involve. In Hager, for example, the state could order the employer to reimburse the employee the reasonable costs of his medical treatment – in this case, $600 per month – without declaring that the money is necessarily for medical marijuana or that Hager necessarily must spend it on medical marijuana.

Put another way, the payment from M&K could be considered compensation for medical injuries Hager suffered on the job. Under this framing, M&K would not be liable for aiding and abetting Hager’s possession of marijuana (even if Hager does use the money to buy the drug), because M&K was just seeking to reimburse him for his medical injury. In similar fashion, M&K wouldn’t be liable if another employee uses wages paid by M&K to buy marijuana. Even if M&K knows that’s how the employee will likely spend her paycheck, it’s not giving her the money with the intent to help her buy marijuana; M&K is paying her because she performed a job for the company.

That’s it for now. Hat tip to Mackenzie Hayes for calling my attention to the Hager decision.

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