Employers Updating Drug Free Workplace Policies with New Recreational Cannabis Laws

As of January 1, 2025, 24 states have legalized recreational adult use cannabis.

Many of the relevant statutes have reserved the employer’s right to maintain drug free workplace policies, allowing employers to test for cannabis on employee drug tests and take adverse action based on a positive result. Other states, such as Illinois, New Jersey, and New York prohibit employers from discriminating against an employee due to the employee’s legal off-duty use of recreational cannabis. No state law requires employers to allow employees to possess or be under the influence of cannabis while on the clock, although there is no scientific way to determine a level of impairment as with an alcohol breath test.

While many employers continue to take adverse action based on positive cannabis testing in states that allow it, their drug free workplace policies may not be as airtight as they believe. In a recent case before the Sixth Circuit Court of Appeals, Fisher v. Airgas USA, LLC, an employee returned to work after treatment and surgery for liver cancer and began using a product called “Free Hemp” to alleviate the side effects of his treatment. While Airgas was free to take adverse action based on a drug test positive for cannabis under state law, Airgas did not have a policy prohibiting the use of hemp-derived products.

When the employee tested positive on a random drug test, the employee informed Airgas that he did not use cannabis, and that his use of Free Hemp may have triggered a positive result. Airgas retested the sample but did not inform the laboratory of the employee’s use of Free Hemp or asked the laboratory whether the product may result in a positive drug test. Upon a second positive result, Airgas terminated the employee.

While the district court initially found that Airgas had an honest belief in a nondiscriminatory reason for terminating the employee and granted summary judgment for Airgas, the Sixth Circuit overturned the district court, determining that Airgas had not investigated whether the hemp product could have caused the positive result and therefore could not show they had made a reasonable and informed decision for termination. 

Currently, The US Supreme Court is reviewing a case related to CBD, a nonpsychoactive component of cannabis. Like hemp products, CBD can cause positive results on a drug test for cannabis. CBD is often used to treat medical conditions or disabilities, and time will tell how states allowed to take adverse action based on positive tests for legal cannabis must accommodate the off-duty use of CBD.

The response of many employers is to cease testing for cannabis altogether. However, this can have negative consequences in states that provide a rebate on workers’ compensation insurance for enforcing a drug free workplace policy requiring regular drug testing using a panel that includes cannabis. Federal contractors must, of course, follow federal law, under which cannabis use is still illegal.

Current drug testing technology is not sophisticated enough to differentiate between psychoactive and nonpsychoactive components of cannabis and hemp-derived products, or to determine whether an employee who has tested positive for cannabis is impaired. Caselaw is slowly beginning to shape existing state laws to provide answers and a way forward. Multistate employers must be particularly careful in following all developments in the law, as it will vary from state to state.