Seyfarth Shaw: Unions Are Going Green: What Cannabis Companies Need To Know About Peace Agreements

If you are a cannabis business trying to operate in California (and now possibly Illinois too), you’ve probably heard that you need to enter into a peace agreement (also known as an LPA). But what is that?

An LPA is an agreement a cannabis business enters into with a union. The agreement includes obligations for both the union and the cannabis business.

In California, the Bureau of Cannabis Control issued a regulation that recreational cannabis companies who employ 20 or more employees need to enter into a “labor peace agreement” with a union or provide a notarized statement that they will do so in order to receive their license to operate. 16 C.C. R § 5600(20).

Similarly, the City of San Francisco requires cannabis business with 10 or more employees to enter into a peace agreement. SF Municipal Code § 1609(b)(12). Failure to do so will subject a company to penalties, and/or permit suspensions or revocations of licenses. Police Code, Art. 16, §§ 1631-1633.

Now, Illinois’ most recent cannabis legalization bill also specifies that businesses seeking marijuana licenses with the state must be given credit for demonstrating “a plan of action” to “engage in fair labor practices, and provide worker protections.” The “General Assembly supports and encourages labor neutrality in the cannabis industry.” The bill also defines a “labor peace agreement,” as an agreement between a cannabis business establishment and any labor organization recognized under the National Labor Relations Act. House Bill 1438 (Cannabis Regulation and Tax Act).

While the final version of the Illinois bill removed language making a labor peace agreement a requirement to obtain licenses, the implications are there.

Why does this matter?

  • Having a union at the workplace means that the company and the employees don’t work as closely on the terms or conditions of employment because a third party—the union—is involved and needs to agree on the terms on behalf of the employees.
  • Some companies believe that by entering into a peace agreement employees automatically have to unionize, but that’s not the case. A peace agreement simply states that a cannabis company will allow the union reasonable access to talk to its employees.
  • Some companies believe that by entering into a peace agreement, companies are required to enter into net neutrality agreements, but that is not the case either. The peace agreement only requires union access in exchange for the union’s agreement not to disrupt or interfere with the business or employer’s operations.
  • Some companies believe that they cannot negotiate the terms of the peace agreement, that too is inaccurate. While some unions have template peace agreements, some will agree to negotiate the terms. Other unions will accept peace agreements drafted by or prepared on behalf of the company. These agreements should be prepared and negotiated with the assistance of counsel.

What should a cannabis business do once it has a peace agreement? It is important for companies to be prepared and know the signs of unionization. Under the National Labor Relations Act (NLRA), there are many things a company can and cannot do while employees are trying to unionize. To avoid future litigation or claims of impropriety, companies should provide management level training to its supervisory employees regarding unionization.

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