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Unions Elbow Into Pot Industry With State-Backed ‘Peace’ Deals

Feb. 18, 2020, 4:22 PM

Unions are using an age-old technique to organize the lucrative and growing cannabis industry, and political leaders are pushing rules to give them a leg up.

The potential for union expansion in the industry is huge. By some estimates, the industry will grow to $30 billion in sales by 2025. And the cannabis labor force is expected to boom across the 33 states and the District of Columbia that have legalized medical marijuana and the 11 states and the district that have legalized recreational use.

Like in other industries, unions have been negotiating labor peace agreements with many marijuana companies, agreeing not to strike or otherwise interfere with business operations in exchange for employers agreeing not to lock out employees or run anti-union campaigns. Such agreements have been used to organize shipyard workers, communication workers, hotels, and other industries.

But in a controversial move, some unions are asking states to mandate that pot companies sign peace agreements if they want to obtain a cannabis license.

California, and to a limited extent, New York, already require cannabis companies to sign union peace agreements. And this month Michigan regulators held a public hearing over a proposed rule to impose the requirement on every business seeking or renewing a cannabis license in the Wolverine State.

States and unions should be cautious in pushing for these rules, said Benton Bodamer, an adjunct professor on the cannabis industry at Ohio State University’s Michael E. Moritz College of Law, and a member of Dickinson Wright PLLC’s Columbus, Ohio, office.

There is a place for organized labor in the growing cannabis industry, but, “don’t kill the golden goose of cannabis legalization trying to make it lay perfect social equity eggs,” Bodamer said.

“We absolutely support the rights of cannabis workers to organize and unionize without fear of reprisal,” said Morgan Fox, spokesman for the National Cannabis Industry Association. But, he said, “Labor peace agreements should be entered into consensually with all parties, if they are entered into,” and not mandated by states.

Push for ‘Peace’

The United Food and Commercial Workers International Union (UFCW) is behind many of these efforts, part of its push to grow cannabis industry members.

“In the early days of the cannabis industry some of these businesses had poor working conditions and few employee benefits,” said Jessica Raimundo, spokeswoman for the UFCW.

Peace agreements helped the union organize cannabis workers and improve their working conditions and wages, according to the UFCW, which includes some 1.3 million workers in the U.S. and Canada.

In California, Jeff Ferro, who helps lead the UFCW’s national cannabis organizing effort, also chairs the state’s Cannabis Advisory Committee, which advises California agencies about rules related to cannabis.

The union also is leaning on states in the Northeast to include a mandate for peace agreements among their rules as they consider legalizing marijuana.

“America’s cannabis industry has the power to create thousands of good jobs that support hardworking families and the communities they serve. But we can only achieve this with strong labor peace agreements that set high standards that reward responsible businesses, strengthen worker voices, and put consumer safety first,” Marc Perrone, president of the UFCW, said in a November letter to Northeast governors, urging them to require peace agreements.

The Teamsters, too, are actively organizing cannabis workers.

Workers “need improved economic, safety, and health standards,” said Kara Deniz, spokeswoman for the Teamsters. The Teamsters are “engaged and supportive of peace agreements.”

The state-mandated agreements often go beyond labor “peace” and include provisions that make it easier for unions to organize, such as requiring employers to share employees’ contact information with a union and allowing union organization via “card check,” which avoids a secret ballot election.

In the majority of states where there is no labor peace mandate, companies may choose to sign peace agreements because “the cannabis industry is rapidly growing and it’s very competitive,” said Kate Bronfenbrenner, director of labor education research at Cornell University School of Industrial and Labor Relations. “In a competitive industry, they don’t want labor trouble.”.

“On the other hand, there’s a lot of money in the industry and they could afford to spend it fighting unions,” she said.

The Cost of Cash-Only

The illicit cannabis market can be likened to alcohol during prohibition, which often came with violence and gang activity, Bronfenbrenner said.

Security concerns and limited benefits are common issues in the industry, and this is because cannabis businesses are required to operate as cash-only, the National Cannabis Industry Association’s Fox said. Criminals may target pot shops because of the cash and it’s difficult to fund benefits without access to bank accounts, he said.

At the same time, Fox said, “I’m not aware of poor working conditions being a common complaint of cannabis industry employees.” Industry surveys show that jobs continue to grow in the cannabis sector and employee satisfaction is good, he said.

Mixed Reception in States

In the Northeast, the UFCW said it is working closely with politicians as they look to legalize marijuana.

New York state is a priority , one that the UFCW hopes will mandate peace agreements if lawmakers do agree in 2020 to legalize recreational marijuana, as expected. The UFCW is also focusing on New Jersey and Massachusetts, according to the union.

In contrast, some states where union strength isn’t traditionally strong have banned rules requiring peace agreements.

Louisiana prohibits any governmental body from imposing zoning, contractual, or licensing conditions on an employer or employee, including labor peace agreements, that limit their “full freedom to act” under federal labor laws. Tennessee has a similar statute.

Likewise, Alabama prohibits local governments from mandating labor peace deals. Mississippi similarly restricts the ability of cities and local jurisdictions to require labor peace agreements.

Union gains, on the other hand, have come in more traditionally blue states.

A Washington state bill would require labor peace agreements, and Illinois, which began recreational pot sales Jan. 1, gives extra consideration to would-be licensing applicants that secure labor peace agreements.

Unions recently convinced Michigan Gov. Gretchen Whitmer (D) to include a peace agreement mandate among that state’s proposed cannabis rules, though the proposals face blowback from the industry and are unlikely to clear the state’s Republican-controlled rules advisory group.

“It’s like a protection racket and we see this as a back door around Michigan’s right-to-work laws,” former Michigan Lt. Gov. Brian Calley (R), president of the Michigan Small Business Association, said in a phone interview. “If the administration can conjure labor peace agreements out of thin air and make them a prerequisite for this profession, what’s to stop them from requiring them in every profession?”

“I think it’s a balancing act,” said Matt Luzadder, Kelley Drye & Warren LLP partner.

Businesses must weigh the benefits of labor peace agreements, and possibly a unionized workforce, when contemplating whether to enter into the agreements, said Luzadder, who is based in Chicago and specializes in labor and cannabis-industry law. The agreements and subsequent union recognition could lead to better employee recruiting and retention, but also include higher labor costs, he said.

At the end of the day, Luzadder said, “for many companies it may tilt toward being union friendly.”

To contact the reporters on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com; Adrianne Appel in Boston at aappel@bloomberglaw.com; Stephen Joyce in Chicago at sjoyce@bloomberglaw.com

To contact the editors responsible for this story: Terence Hyland at thyland@bloomberglaw.com; Tina May at tmay@bloomberglaw.com

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