What To Know About Labor Peace Agreements in Cannabis

On March 9, New York State’s Cannabis Control Board (CCB) and Office of Cannabis Management (OCM) published draft regulations that spell out the eligibility criteria and application process and requirements to obtain a conditional adult-use retail dispensary license. These regulations are now subject to a 60-day public comment under New York’s State Administrative Procedure Act (SAPA) before being adopted into law. In total, these regulations require an application to include 34 separate pieces of information, as well as “any additional information requested by [OCM].”

Additionally, the proposed regulations require the applicant to “attest” to 16 conditions, including that the applicant “has entered into a labor peace agreement with a bona fide labor organization actively engaged in representing employees in the cannabis industry and understands that the maintenance of such a labor peace agreement shall be an ongoing material condition of the license.” To further protect employees, the proposed rule requires “each party to the agreement has signed such agreement prior to the license being granted.” Future retail dispensary licensees will be subject to the same requirements as these impending conditional licensees.

So, what does that mean for applicants?

Those seeking an adult-use retail license in New York must first identify a suitable local cannabis employee union as counterparty and then negotiate and execute a legally binding LPA with it. These are no small feats for entrepreneurs without labor law knowledge.

What is a Labor Peace Agreement?

Generally, a Labor Peace Agreement (LPA) is an agreement or contract between the employer and a labor union, where they both waive certain rights under the National Labor Relations Act (NLRA) related to union organizing, such as a union pledging not to strike, in exchange for certain conditions. In New York State and City, LPAs are already required for hotels, convention centers, food and retail establishments at covered development projects, government human services contracts, and food, retail, news/gifts, and duty-free concession stands.

Other labor peace agreement concessions can include card check (employer recognition of the union based on signed cards instead of secret ballot election results); neutrality (employer refraining from expressing negative opinions about a union and intervening in an organizing campaign); and workplace access (an employer allows outside union organizers).

In exchange for such concessions, unions generally promise not to strike, picket, or otherwise disrupt an employer’s operations. While the NLRA protects a union’s right to commence a strike, work slowdown or stoppage, or other type of employee action to exert pressure against an employer, this private LPA waives those federal labor rights. In short, an LPA simplifies the union organizing process for employees to join a union by compelling the employer to do so.

Labor Peace Agreements in Cannabis

Various states’ cannabis laws emphasize social and economic equity, and either require LPAs from, or confer preferential advantage to, cannabis license applicants to increase the bargaining power of employees within the cannabis industry. As a result, this tilts the scale to cannabis employee unions in negotiating an LPA; unions are otherwise reluctant to waive their right to engage in a strike without insisting on significant concessions and/or wage demands in return. Therefore, these LPAs are generally more union-friendly than those for other industries, and certainly more than the legal minimum. For example, union demands may include lower employee threshold for union recognition, waiver of rights for certain NLRB proceedings, and/or adopting employee-friendly terms in a collective bargaining agreement.

Like New York State, California employers with 20 or more employees must enter and comply with the terms of an LPA to receive and maintain a license, and New Jersey requires licensees to enter into a collective bargaining agreement with a union within 200 days from start of business. Recently, Connecticut has also required its cannabis market participants to enter an LPA prior to licensing. Additionally, Illinois grants preferential scoring points to applicants presenting an LPA.

Given the increasing emphasis on labor peace agreements in some cannabis markets, identifying the right cannabis union to execute an LPA is critical for all license applicants, as well as negotiating appropriately tailored supplemental terms that would not unduly limit the employer’s profitability. While an attorney is not required for each portion of the New York state adult-use cannabis applications, consulting one with experience in drafting and negotiating LPAs for cannabis license applications may prove valuable.

Wei Hu, Esq., is the founding partner of MRTA Law, PC, a boutique New York cannabis law firm representing clients on marijuana conviction expungement and counseling clients on the adult-use licensing process. He is also developing the curriculum and teaching “Social and Economic Equity in Cannabis” at LIM College in Fall 2022.