Labor Peace Agreements for Cannabis Businesses in California: Why Some Say the Law is “Siding Union”

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Those thinking about operating a cannabis business in California may be surprised to learn they might need to enter into a legally binding “labor peace agreement” with a union in order to receive a license to operate. Cal. Bus. & Prof. Code § 26051.5(a)(5)(A); 16 CCR § 5002 (Bureau of Cannabis Control); 17 CCR § 40128(b)(2)(Dept. of Public Health); 3 CCR § 8102(x)(CalCannabis).  Recently proposed changes by the Bureau of Cannabis Control to its emergency regulations as well as recent changes to San Francisco’s Police Code signal a growing insistence by state and local regulators that cannabis operators accept pro-union requirements generally not found outside the industry.

A Labor Peace Agreement (a/k/a a labor harmony agreement) is essentially a contract between an employer and an organized labor union in which the employer agrees to help the union organize the employer’s workforce (i.e., unionize), for example by providing certain information or by agreeing not to disrupt certain union organizing efforts, in return for the union’s agreement not to strike or cause other disruption at the employer’s workplace during a union organizing campaign. Because these agreements open the door to union activity within the workplace, they should not be entered into lightly.

Since its adoption into law, the Medicinal and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA) has required applicants for state cannabis licenses with twenty (20) or more employees to “provide a statement that the applicant will enter into, or demonstrate that it has already entered into, and abide by the terms of a labor peace agreement.” Cal. Bus. & Prof. Code §26015.5(a)(5)(A). So, on its face, the existing state law appears to require an agreement to agree and remains silent about which union to choose and under what circumstances an operator must actually sign a labor peace agreement. This left many in the industry thinking that applicants could wait until they were approached by a specific union with a reasonable offer.

Over the past few weeks, however, two things have caused the industry to reevaluate this.

First, on May 24, 2018, San Francisco’s Board of Supervisors approved amendments to the city’s Police Code in order to require cannabis companies with ten (10) or more employees to submit, as part of their permit application, either (1) a signed labor peace agreement with a union or (2) a signed collective bargaining agreement with a union. SF Police Code §§ 1602, 1609. Other cities and counties have similar requirements, including the City of Los Angeles.

Second, on May 25, 2018, California’s Bureau of Cannabis Control announced that it was intending to re-adopt its emergency regulations, but with certain amendments. As proposed, the BCC would amended its emergency regulations to require that applicants enter into a labor peace agreement no later than thirty (30) days after licensure.  Specifically, if adopted, subpart 23 of section 5002 of the BCC’s regulations would provide:

For an applicant with 20 or more employees, the applicant shall attest that the applicant has entered into a labor peace agreement and will abide by the terms of the agreement. For applicants who have not yet entered into a labor peace agreement, the applicant shall provide a notarized statement indicating that the applicant will enter into and abide by the terms of a labor peace agreement within 30 days of licensure.

CalCannabis and the CDPH’s Manufactured Cannabis Safety Branch have also proposed recently the re-adoption of their regulations with certain changes to the provisions concerning labor peace agreements. However, these particular changes would not be material.  

Cannabis companies with ten or more employees in San Francisco as well as cannabis operators regulated by the BCC will likely be disappointed to learn that they’ll soon be expected, as part of the permitting process, to affirmatively reach out to find a union to represent their employees.

We agree with the labor law experts who think these “union shop” regulations and requirements are probably preempted under U.S. labor laws and therefore unenforceable. See, e.g., Chamber of Commerce v. Brown, 218 S.Ct. 2408 (2008); see also Metropolitan Milwaukee Ass’n of Commerce v. Milwaukee County, 431 F.3d 277 (7th Cir. 2005)(striking down labor peace agreement ordinance as preempted under the NLRA). Any applicants wishing to challenge these regulations in court are encouraged to speak with us or with other labor law counsel to discuss options.

We can anticipate, however, that most applicants will prefer to follow the regulators’ lead and try to work within the regulations and local ordinances, as written. For those who do, we continue to recommend the following:

First, learn as much as you can about the existing unions that may be appropriate for your workforce. Not all unions are created equally; some have reputations for being fair-minded, principled and willing to be flexible in their approach. This could be very important for the commercial cannabis industry, which is so new to the state. Also, we would not be surprised to see one or more new unions emerge over the next few years as the cannabis industry develops and more and more companies exceed the twenty-employee threshold at the state level.

Second, be very thoughtful about what you agree to put into a labor peace agreement to satisfy requirements under California’s cannabis laws. For example, these sorts of agreements are often mistakenly referred to as “neutrality agreements” because labor law practitioners will remember that the AFL-CIO coined the term “labor peace agreements” years ago in connection with labor neutrality agreements in the construction industry. However, neutrality agreements typically contain a commitment from the property owner to remain “neutral” through a union organizing campaign by the construction workers. In contrast, California’s cannabis laws do not appear to require “neutrality.” Rather, a labor peace agreement, as defined under California’s cannabis laws, must contain just the following elements, at a minimum:

(i) a commitment by the union and its members not to engage in picketing, work stoppages, boycotts, and any other economic interference with the employer’s business;

(ii) a commitment by the employer not to “disrupt” efforts by the union to “communicate with, and attempt to organize and represent,” the employer’s employees; and

(iii) a commitment by the employer to give the union “access at reasonable times to areas in which the employees work, for the purpose of meeting with employees to discuss their right to representation, employment rights under state law, and terms and conditions of employment.”

Cal. Lab. & Prof Code § 26001(x)(2017). Terms like “disrupt” and “access at reasonable times” are vague and will likely result in disagreements down the road. For this, we encourage cannabis companies to seek expert legal advice whenever negotiating any written agreements or resolving disputes with a union.


Image Source: My 420 Tours [CC BY-SA 4.0], from Wikimedia Commons.

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