Curaleaf, one of the largest cannabis operators in the United States, employs hundreds of people in New Jersey at multiple locations across cultivation and retail. It reports having invested heavily to find its way to profit and compliance. In April of this year, its New Jersey overseer, the Cannabis Regulatory Commission (NJCRC), voted to reject renewing Curaleaf’s licenses, only to put its decision temporarily on hold two business days later at a hastily called emergency meeting. Even though its application was complete and supported by the commission’s executive director, some commissioners originally took issue with the conduct of Curaleaf’s union relations while others abstained or voted against Curaleaf without comment. To resuscitate its licenses, the NJCRC has required Curaleaf to file in the future a sworn attestation “that it is not engaging in union-busting activities or tactics.”
This article explores the labor law context that led to this predicament.
Current Regulatory Mandates
Eight states currently require or encourage businesses to enter into union agreements as part of the licensing process. The obligations vary from state to state and have expanded over time.
Five states (California, New York, Rhode Island, Delaware, and Connecticut) require businesses before launching operations to enter into pre-hire agreements with unions that facilitate staff unionization and, in practice, afford unions significant leverage in demanding terms in these pre-hire agreements. New Jersey goes further. It requires a pre-hire agreement without stipulating what needs to be included in it—thereby emptying the phrase “labor peace agreement” of any meaning and granting unions immeasurable leverage. It has the narrowest definition of acceptable unions; even the newly formed Amazon union that garnered so much media coverage for grassroots organizing would likely not qualify. And the state requires operators, within 200 days of “opening,” either to enter into “or to make a good faith effort to enter into a collective bargaining agreement”—or else have their license suspended or revoked.
The determination of whether an operator has breached either of these agreements rests in the hands of the NJCRC commissioners, none of whom were appointed because of their expertise in labor relations.
State vs. Federal Regulation
Since the 1930s, the federal government has uniformly regulated the conduct of union organizing and collective bargaining nationwide, and the courts have held that this federal regulation scheme supersedes (i.e., pre-empts) state regulation on these same topics with respect to the same employers. Under the federal labor relations scheme, the government does not direct the outcome between employers and employees regarding unionization and collective bargaining. Instead, the federal government regulates how union elections are conducted so that employees in “laboratory like conditions” are able to vote freely and secretly whether they want union representation. Employers have the right to express and disseminate “any views, argument, or opinion” regarding unionization so long as “such expression contains no threat of reprisal or force or promise of benefit.” Similarly, the federal government does not impose a labor contract on an employer but does regulate how the parties bargain. Statutorily, the duty to bargain in good faith “does not compel either party to agree to a proposal or require the making of a concession.” Regulating process, not outcomes, is a defining feature of the federal construct. Federal law created a specialized administrative agency, the National Labor Relations Board, to assess compliance with these process obligations.
In order to avoid balkanized labor relations, federal labor law pre-empts local regulation where a local government seeks to regulate activities that are protected, arguably protected, prohibited, or arguably prohibited under federal law or if local government seeks to regulate areas that have been left "to be controlled by the free play of economic forces” under the federal scheme.
Several legal experts have opined that the state cannabis regulations described above run afoul of these pre-emption principles. The states have in essence placed their proverbial thumb on the unionization scales, something the federal government forbids.
Local government, however, may require true labor peace agreements when acting like a business protecting proprietary interests so long as the regulation is tailored to protect that interest. Hence, the cannabis laws term the pre-hire union agreements “labor peace agreements” and some even reference the state’s “proprietary interests.” Such appellations cannot hide the fact that the states do not own or have a direct financial interest in any of the private cannabis businesses, and there is no history of labor disruption at a cannabis greenhouse, processing center or retail outlet. In 1986, the U.S. Supreme Court concluded that licensing is the type of regulatory interest—not proprietary interest—that cannot be tethered to union-friendly conditions.
Notwithstanding the breadth of federal labor law preemption, to date not a single cannabis business or industry group has brought suit about it.
The Impact of State Promotion of Unionization and Industry Acquiescence
State promotion of unionization and cannabis business inaction has had three primary impacts: skyrocketing unionization, both within those states that regulate union relations and in others; active lobbying to expand the scope and breadth of pro-union cannabis regulations; and state regulators taking liberties with their suspect authority.
National Labor Relations Board Election Petitions | Cannabis Employers |
2022 | 55 |
2021 | 25 |
2020 | 3 |
2019 | 3 |
2018 | 1 |
Source: www.nlrb.gov. Analysis of NLRB data above provided by Jay Sabin.
Curaleaf’s predicament illustrates the latter phenomenon.
Curaleaf’s Predicament
April 13, 2023, started well for Curaleaf. Prior to its appearance before the NJCRC for the renewal of its vertically integrated, adult-use licenses, the NJCRC’s executive director had recommended that the commission renew the company’s five licenses.
As the meeting began, the commission was approving the renewal of other MSO licenses that preceded Curaleaf on the docket. Then, one commissioner, Krista Nash, made extended comments, directed at all applicants, that New Jersey’s adult-use cannabis legalization law was an extension of the state’s “long history of protecting workers’ rights. ... to provide fair and inclusive working conditions and wages so that business owners and company employees can fairly share in the success of a company.”
Nash explained that compliance with the twin requirements under New Jersey’s adult-use law of entering into a pre-hire agreement and a collective bargaining agreement were “not optional” and should not be seen as a “challenge for companies to find a loophole in the law.” Although the NJCRC had not received any submissions about an applicant’s compliance with those twin obligations (other than what had been submitted by each business), she went further:
“In my opinion some companies have deviated from the labor requirements. Some make union access very difficult, depriving workers of their Section 7 rights of the NLRA. Some have unfair labor practice filed against them in New Jersey and other states. … In my opinion, these practices signal a blatant disregard of workers and their rights. … This is unacceptable and we need to ensure that New Jersey workers are treated fairly, and we need to fix this now.”
Shortly thereafter, when Curaleaf’s application was up, she voted against it. The commission chair, Diana Houeno, abstained from voting and noted the concerns that had been raised about compliance with the union agreement requirements. All told, after two commissioners voted against the renewal and two commissioners abstained, Curaleaf was suddenly out of business in New Jersey.
Two business days later, at a hastily called emergency meeting and after Curaleaf had sought emergent judicial relief, the commission voted to rescind its non-renewal and provide Curaleaf with a temporary reprieve so long as it submitted certain documents by the next regularly scheduled commission meeting. Those documents include a sworn attestation by Curaleaf “that it is not engaging in union-busting activities or tactics.” New Jersey’s adult-use law makes no mention of “union-busting” and does not regulate how an employer may negotiate so long as it proceeds in “good faith.”
Nash closed the emergency meeting with an admonition for all license holders:
“Last week's CRC meeting appears to have been a wake-up call for many cannabis companies doing business in New Jersey. Apparently some companies did not understand or appreciate their obligations as it concerns labor relations with their employees and their representatives. If the meeting served to remind companies of that obligation, then the CRC has done its job. Let me make this very clear: it is time that we favor people over profits. … In my opinion Curaleaf in several of its locations have not complied with the mandatory labor provisions set forth in the law, and that alone was reason to deny their application for renewal. I base my opinion on several factors, including public testimony from workers and the union stating the company has not been compliant with the law. … At this juncture the cannabis industry in this state is at a crossroads.”
Which Crossroad to Take?
In New Jersey, the goal of protecting the government’s ostensible proprietary rights has now morphed into a call-to-arms for unionization, worker protection, and equitable profit sharing. Operators are being required to swear that they are not union-busters and there is no subtlety about the commission’s regulatory bent.
What the Curaleaf example has demonstrated is that a cannabis operator, to curry favor with the NJCRC in the future, will need to ensure union support and, therefore, will need to be mindful of its overall labor relations conduct both within and without the state. Technical compliance with NJCRC regulation will not be enough for the NJCRC, or as Curaleaf’s Executive Chair has put it: “This was a capricious and vindictive attempt by political appointees at the CRC board.”
Or, alternatively, the industry might abate the regulatory creep by enforcing the pre-emptive effect of federal labor law and respond in kind to the signal now being sent by the NJCRC.
In deciding which crossroad to take, the concern about over-reach will likely not be limited to those cannabis businesses with New Jersey operations. The state has been the test case for lobbyists seeking to extend the reach of union-friendly regulation in the cannabis industry. Today, only New Jersey requires collective bargaining agreements; tomorrow, other states may decide to expand in that direction, and, in the absence of a definitive court ruling, those legislators may have no compunction about the legality of doing so.
Jay Sabin is a labor and employment attorney at Brach Eichler.
