It turns out that a positive marijuana drug test may not be an open-and-shut case when it comes to workplace impairment in New Jersey. For employers in states where recreational marijuana is legal, understanding the difference between a positive test result and evidence of impairment can be an important part of maintaining compliant workplace drug testing policies.
On September 21, 2026, the U.S. District Court for the District of New Jersey upheld an arbitration award reinstating an employee to their former position with full back pay, seniority, and benefits after being terminated following a positive marijuana drug test.
The decision shows how New Jersey's cannabis employment protections can affect disciplinary decisions, even when an employer has an established drug testing policy. In fact, this is not the first, or even the second, instance of a New Jersey employer facing legal action involving cannabis-related employment decisions.
Below is a quick overview of the September 2026 case and the court's decision to uphold the arbitrator’s reinstatement award.
The case involves a New Jersey company whose workplace drug testing policy prohibits employees from using, possessing, or being impaired by cannabis on company property. In April 2025, two company representatives reported smelling marijuana coming from an employee's vehicle as he drove past them during his lunch break.
The New Jersey employer had already warned this employee that, following an initial positive result in December 2023, another positive result could lead to termination under the company's “two-strike policy.” Following a second positive result, the employer terminated his employment in May 2025. However, the employee's union disputed the termination.
In December 2025, the arbitrator found that the employer had not actually proven that the employee used, possessed, or was impaired by marijuana while at work. Without sufficient grounds for termination, the arbitrator determined the company needed to reinstate the employee with back pay, seniority, and benefits. However, the employer, disagreeing with the outcome, turned to federal court to seek to overturn it.
New Jersey's Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA), chapter 16, legalized recreational marijuana and introduced employment protections for cannabis users with certain allowances for employers to enforce cannabis free workplace policies. Under CREAMMA, employers are not permitted to base an adverse employment decision solely on the presence of cannabinoid metabolites in an employee's system. However, CREAMMA does not prohibit employers from establishing drug-free workplace policies or taking appropriate disciplinary action when legally supported.
The law also permits employers to require drug testing under certain circumstances, including:
Employers may consider drug test results when determining appropriate employment actions, consistent with the law.
Perhaps the bigger questions here are, “How could an employee receive a positive drug test and still be reinstated after termination?” and “If CREAMMA allows employers to terminate employees over cannabis use, why was this contested to begin with?”
The employer argued that the arbitrator had improperly interpreted New Jersey law and gone beyond her authority under the company's collective bargaining agreement. However, the U.S. District Court for the District of New Jersey rejected this argument.
The court examined whether the arbitrator had acted within their authority and appropriately considered the applicable law. Four key details from the arbitration proceedings were considered in the court’s review.
Although both a coworker and a supervisor had reported smelling marijuana, the record did not establish additional signs of impairment, such as changes in speech, appearance, or work performance. The arbitrator’s argument boiled down to smell alone, lacking evidence to support intoxication on the work premises.
Despite the reported odor, the employee was still allowed to complete their shift without reports of impairment.
The company waited to formally document the reported marijuana odor for over a week after the incident, once it received the positive drug test result.
In addition to little documentation or proof of use or impairment on work premises, neither of the individuals who reported the odor had received training in recognizing drug impairment.
These four key details were considered alongside the New Jersey Cannabis Regulatory Commission's previously issued guidance on identifying and documenting suspected employee impairment. Although the guidance is not legally binding, the arbitrator used it to help evaluate whether the employer had established a reasonable suspicion of workplace cannabis use or impairment. The court opinion found that the guidance did not demonstrate a disregard for New Jersey law or an improper exercise of the arbitrator's authority. It also emphasized that “judicial review of a labor-arbitration pursuant to a collective bargaining agreement is very limited.”
Ultimately, the court found that the employer did not present sufficient evidence to overturn the award, leaving the employee's reinstatement in place.
To learn more, you can read the full opinion from the U.S. District Court for the District of New Jersey here.
This content is for informational purposes only and shall not constitute legal opinion or advice. Consult your legal counsel to ensure compliance.