California’s Labor Peace Agreement Requirements for Growing Cannabis Businesses

What To Know

• California law requires commercial cannabis licensees with 20 or more non-supervisory employees to enter into a labor peace agreement; however, the legal requirements of such an agreement are far less than labor unions would suggest.
• Licensees should avoid signing a labor peace agreement without first consulting an attorney.

When filing an application for a new or renewal annual cannabis business license, California State law (i.e., MAUCRSA) and regulations adopted by the California Department of Cannabis Control (DCC) requires commercial cannabis businesses to submit a notarized statement confirming that the applicant either: (a) has fewer than 20 employees or (b) will enter into and abide by a Labor Peace Agreement (LPA) within 60 days of employing its 20th employee. Failure to comply with the requirements can lead to license suspension or revocation. But what does it mean to comply?

First, an LPA is a private contract between an employer and a union in which both sides agree to waive certain rights under federal labor laws. Multiple unions are currently active in the cannabis industry, so a number of organizations may approach businesses. However, licensees are only required to enter into an LPA with one union and should not feel pressured to negotiate with others after entering into an LPA.

Second, MAUCRSA provides that commercial cannabis licensees are only required to enter into LPA negotiations after hiring the 20th non-supervisory employee. A “supervisor” has the authority to hire, fire, and discipline other employees, among other similar responsibilities. So for example, if a company has 20 employees, including a CEO and store manager, the company likely has not crossed the threshold that would require it to enter into an LPA. Even after hiring the 20th non-supervisory employee, the law does not require licensees to proactively seek out a union or initiate negotiations. Instead, licensees must participate in negotiations in good faith. Further, the 60-day grace period should provide sufficient time to thoughtfully negotiate an LPA after hiring the 20th non-supervisory employee. Therefore, licensees should not feel pressured to hastily sign an LPA or respond to a union’s threats to report it to the State for failure to enter into an LPA on demand. Rather, this would be an ideal time to contact your attorney to discuss a potential counter proposal and the collective bargaining process in general.

Third, the law does not specify what an LPA must contain beyond the following basic concepts:

• It must prohibit the union from engaging in picketing, work stoppages, boycotts, and other economic interference with the applicant’s business;
• It must prohibit the employer from disrupting efforts by the union to communicate with, and attempting to organize and represent, its employees; and
• It must provide the union access at reasonable times to areas in which the employees work to meet with employees.

Licensees may choose to adopt a more comprehensive agreement, which should be drafted in consultation with legal counsel. Therefore, we recommend consulting with an experienced Labor and Employment attorney before signing or agreeing to the terms of any LPA.

Finally, while this alert is focused on California, similar requirements have been adopted and are being considered in other states, such as New York and Illinois. And license applications often require additional attestations addressing a range of similarly technical subjects. For additional information on complying with California’s Labor Peace Agreement requirements or applying for a commercial cannabis license generally, please contact any member of Arent Fox’s Cannabis group.