Unions have targeted the cannabis industry and rightfully so. Unions are businesses. They see the growing number of employees working from the fields to the dispensaries as perfect candidates to join unions and pay union dues.
Several states have embraced cannabis. Some states even make it easier for unions to organize cannabis workers.
The Connecticut legislation that legalized cannabis also strongly encouraged any cannabis-related employer to permit unionization of its workforce. Similar laws promoting the recognition of unions and collective bargaining in the cannabis industry have been passed in New York, New Jersey, California, and other states.
Connecticut’s law requires cannabis establishments – as a condition of becoming licensed to do business – to enter into a Labor Peace Agreement (LPA) with a union.
I have dealt with labor peace agreements in several industries all across the United States. LPAs do the union organizing for unions.
The Connecticut law defines an LPA as:
An agreement between a cannabis establishment and a bona fide labor organization under Section 21a-421d pursuant to which the owners and management of the cannabis establishment agree not to lock out employees and that prohibits the bona fide labor organization from engaging in picketing, work stoppages, or boycotts against the cannabis establishment.
The law also requires that:
Any such labor peace agreement shall contain a clause that the parties agree that final and binding arbitration by a neutral arbitrator will be the exclusive remedy for any violation of such agreement.
That’s it: the LPA prohibits work stoppages, lock-outs, and requires binding arbitration for disputes between the company and the union.
In reality, unions that I have dealt with view the no work stoppage, no lockout, and arbitration as the minimum to what should be in an LPA. Unions always require much, much, much more.
And why shouldn’t they? As written the law requires an LPA before a company can get a license to do business. Unions capitalize on this to get what they want out of the LPA before agreeing to it, and before the company can commence doing business.
One major demand in most LPAs is card check. Card check is where an employer must recognize a union as the representative of its employees without the employees voting for union representation. A simple signature on a piece of paper indicating an employee wants to be in the union is sufficient – regardless of whether the employee knew what he was signing, knew the legal ramifications of her signature, thought they were signing up for the union’s newsletter, or signed their names after a night of pizza and beer provided by the union.
Once a majority of names appear on the paper, the company is union and must commence negotiating a collective bargaining agreement. Another element of the LPA is now triggered: the clause requiring the agreement to a union contract within 90 days or submit proposals to an arbitrator.
The National Labor Relations Act does not limit the time it takes to negotiate a union contract. First contracts usually take about a year to negotiate. After a year of good-faith bargaining, employees can decertify the union. Labor Peace Agreements that require a contract within 90 days force employers to agree to terms they otherwise would not agree to and prevent employees from decertifying the union.
As a side note – Cannabis-related employers should be mindful of Section 280E of the Internal Revenue Code. This Section it titled “Expenditures in Connection with the Sale of Illegal Drugs.” It reads in total:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
This law prohibits business deductions for the expenses of selling marijuana. Some deductions that other employers can make for things like employee salaries, benefits, legal fees, etc. are not allowed in the cannabis industry.
Margins in the cannabis industry are razor-thin because of high taxes and increased competition. Unionization increases employee costs. These cost increases, which are not deductible, could drive profitable companies into the red and force struggling companies to close.
With unions staunchly focused on organizing employees in the cannabis industry, and the proliferation of Labor Peace Agreements doing the organizing for the unions, cannabis-related employers should take proactive steps now to be better positioned to defend themselves against this one-two punch.
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Matt Austin is a nationwide management labor lawyer. Labor laws govern virtually all private-sector employees regardless of union membership. Proactive management of labor relations is critical to maintaining flexibility and increasing profit.
Matt also runs Austin Legal’s HR Legal Compliance Program that, for a small monthly fee, ensures HR decisions are protected by the attorney-client privilege.
Matt’s experience is deeply rooted in helping manage many aspects of his clients’ businesses. To effectively manage labor relations, he must also manage budgets, forecasts, new growth areas, and projected market corrections. High emotional intelligence is also critical to negotiating union contracts and to properly advise HR Legal Compliance members through the nuances of the law, its application to their companies, and how it will be received by employees.
You can reach Matt via email at Matt@MattAustinLaborLaw.com.