States legalizing cannabis are increasingly requiring that cannabis licensees enter agreements allowing unions access to their employees for organization activities. Some states go even further, not only requiring a labor peace agreement (LPA), but that employees agree on the terms of a collective bargaining agreement (CBA) soon after licensure. As we previously reported, such requirements are especially prevalent along the East Coast, with varying labor requirements imposed by New York, New Jersey, Virginia, Delaware, and Connecticut, as well as California.
Labor lawyers and experts have long questioned the legality of state labor mandates depriving employees of the right to determine whether and with whom to organize by imposing mandates that effectively require cannabis employers to have union workforces. But so far, licensees have been reluctant to challenge these requirements and raise the ire of regulators and powerful unions.
The day of reckoning for LPA requirements may be approaching. Rhode Island’s Cannabis Act (Cannabis Act), enacted in 2022 as part of its adult use authorization requires adult use cannabis providers to enter LPAs with unions as a condition of state licensure. Greenleaf Compassionate Care Center, a Rhode Island cannabis dispensary is challenging Rhode Island’s LPA mandate in federal court in Rhode Island, arguing that the Cannabis Act violates the National Labor Relations Act (NLRA) by effectively stripping Greenleaf of its bargaining power because Rhode Island law requires unionization to sell adult use cannabis.
Greenleaf argues that the NLRA only requires that employers and unions bargain in good faith, and stops short of requiring the parties to actually reach an agreement. Greenleaf also argues that the state cannot require an employer to enter into a LPA with its employees unless the state is acting as a market participant with “proprietary interests.” The Cannabis Act does not identify specific state proprietary interests, according to Greenleaf.
In compliance with the law, Greenleaf entered into an agreement with the United Food & Commercial Workers (UFCW) Local 328, which according to Greenleaf’s complaint, contained “largely unfavorable” terms for the company. Greenleaf alleges that it had no choice but to accede to the union’s demands given the state’s mandate for a LPA as a condition of cannabis licensure.
The defendants – the union, and state agencies and officials including the Rhode Island Department of Business Regulation and the Rhode Island Cannabis Control Commission – have moved to dismiss Greenleaf’s challenge, arguing that Rhode Island did not coerce Greenleaf into reaching a CBA with the union and that Rhode Island’s LPA mandate does not violate the NLRA. Defendants argue that Greenleaf and the union had been in contract talks a year before the Cannabis Act became law. The union also argues that the National Labor Relations Board, not the federal district court, has jurisdiction over the complaint.
Greenleaf opposed both motions to dismiss on October 31, 2023, arguing in part that the LPA mandate was “designed to give unions leverage in negotiations over terms and conditions of employment, causing cannabis businesses to enter into union-favorable CBAs.” It also pushed back against UFCW’s motion to dismiss, arguing that the union lobbied for the LPA provision as the parties bargained for a new contract.
Greenleaf’s complaints are consistent with concerns our clients regularly present to us as they grow their workforces in the nascent cannabis industry. Though perhaps not the perfect test case to challenge whether states can compel cannabis employees and employers to run union shops – arguably, an employee would be best positioned to argue that state law infringes on their federal rights – this case nevertheless is one to keep a close eye on. It presents one of the first opportunities for a federal court to weigh in on these issues. Given its implications, Duane Morris’ cannabis labor team will provide ongoing updates with developments of the case.