FILE PHOTO: An unnamed worker waters cannabis plants on Steve Dillon's farm in Humboldt County, California, U.S. August 28, 2016. REUTERS/Rory Carroll

(Reuters) - A U.S. appeals court on Friday said the federal law requiring that workers be paid a minimum wage and overtime applies to employees in the marijuana industry, as an increasing number of states legalize recreational use.

The 10th U.S. Circuit Court of Appeals in Colorado said the protections in the Fair Labor Standards Act (FLSA) apply to “all workers,” regardless of whether the business they are engaged in is illegal under federal law.

The court rejected arguments by Colorado-based Helix TCS Inc, which provides security services for marijuana businesses, that its guards were not entitled to overtime because their work is illegal under the federal Controlled Substances Act.

Lawyers for Helix and a former security guard who filed the class-action lawsuit did not immediately respond to requests for comment.

The ruling was the first by a U.S. appeals court to address the issue. Other courts have said that businesses engaged in unlawful activities, such as gambling or employing illegal immigrants, are still subject to the FLSA.

Colorado, California, and Illinois are among the eleven U.S. states that have legalized recreational marijuana use by adults since 2012. Many other states permit marijuana use for medical purposes.

In Friday’s decision, the 10th Circuit said that denying wage protections to workers in the marijuana industry would encourage employers to engage in illegal markets and give them an unfair advantage over legal businesses.

The court noted that Congress has repeatedly amended the FLSA to exempt specific groups of workers, and has never done so for employees of marijuana businesses.

The case is Kenney v. Helix TCS Inc, 10th U.S. Circuit Court of Appeals, No. 18-1105.