What are the business implications of labor peace agreements for the cannabis industry?

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Marijuana labor peace agreements

Lawmakers and regulators across the United States increasingly are requiring marijuana firms to accept “labor peace agreements” that can lead to unionization.

Consider the following:

  • In New York state, medical marijuana business licensees must sign a labor peace agreement with a union.
  • The same is true in California for cannabis licensees with at least 20 employees.
  • Labor peace provisions were included in recent draft adult-use bills in New Jersey and New York.

For employers, such agreements can help maintain a solid relationship with the labor force. They also might head off work stoppages, picketing and boycotts.

On the flip side, the agreements also make it more likely that workplaces will become unionized. The pacts call for employers to remain neutral and not interfere with labor organizing.

Unionization can result in a double-edged sword:

While potentially bolstering employee retention and customer loyalty, some industry watchers say it also generally leads to higher labor costs and decreased flexibility for businesses.

Some regulators inclined to require MJ labor peace provisions

While the labor peace trend may prove most prevalent in areas of the United States that already have a strong union presence such as the East Coast, the cannabis industry has characteristics that may make it more susceptible to the requirement across the country.

California cannabis attorney Chris Conti, who has represented both unions and private companies in labor relations, put it this way: “The industry has existed for many years in the shadows, and there have been a lot of (labor) abuses.”

Samantha Walsh, a longtime cannabis lobbyist and partner at Denver-based Tetra Public Affairs, sees the trend related to a couple of factors:

  • Efforts to build social equity into an industry in which minorities and women often have been marginalized.
  • Rapid industry consolidation that has left longtime employees without job certainty.

“You see a perfect storm,” Walsh said of the factors leading to labor peace agreements.

Labor peace agreements don’t always mean unionization

Conti said he has seen figures in which more than 80% of workplaces with labor peace agreements become unionized.

But he doesn’t necessarily expect figures that steep in marijuana.

“Some factors in cannabis play against (a high rate of unionization),” Conti said. For example, he said, employees may find it exciting to be on the ground level of a nascent industry.

“My experience is that what leads employees to unionize is a breakdown in communications, feeling disrespected, unfair treatment in the workplace and certainly if another business across town provides significantly better wages or benefits for similar work,” Conti noted.

MJ firms should look for a good union fit

California law requires a cannabis license applicant with 20 or more employees to provide a notarized statement saying it will enter into and abide by a labor peace agreement with a “bona fide labor organization” as soon as “reasonably practicable after licensure.”

But Conti said some MJ businesses have agreed to potentially onerous provisions not necessarily required by the law or state regulations.

He advises California cannabis companies to shop around to find the right union partner and to maintain vigilance to avoid terms that go beyond the scope of the state’s requirement.

Some offshoots of a unionized cannabis workplace

Morgan Fox, a spokesman with the National Cannabis Industry Association, said the group’s position is that all parties should enter labor agreements consensually and shops should be open – meaning employees shouldn’t have to join a labor union if they don’t want to do so.

Seattle-based MJ retailer Have a Heart signed a labor agreement in August 2018 with the United Food and Commercial Workers Union.

Ed Mitchell, Have a Heart’s chief operating officer, said the company wanted to reduce employee turnover and thought providing good wages and health-care benefits might do it.

In fact, he reported, employee retention improved by 30%. He said he believes longtime employee expertise also translates into higher customer loyalty.

The downside, he said, is that the company has lost some flexibility.

“We used to cross-train everyone,” Mitchell said, noting it gave the company the flexibility to move employees to other positions depending on the need at the time. “Now, that doesn’t happen as much.”

Another initial hurdle was the necessary development of a relationship with a new entity.

For example, Mitchell said Have a Heart had to work through an employee dismissal issue with the union.

Overall, Mitchell said Have a Heart believes unionization has been good for the company and also could help the industry’s reputation as it goes from “black to gray to legitimate.”

“A lot of players who operated in the black or gray markets don’t understand compliance, HIPAA (Health Insurance Portability and Accountability Act), basic human resources policies. A union forces you to understand.”

Potential unionization remains a sensitive issue

While labor peace agreements are increasing in the cannabis industry, resistance also is stiff.

For example, industry officials and lawmakers in both Colorado and Washington state recently rebuffed efforts to include labor peace provisions in cannabis bills.

Randy Tiffey, organizing director for Local 7 of the United Food and Commercial Workers Union in Colorado, complained at a state Senate hearing and in a subsequent interview that the union had invested “thousands of dollars” to support marijuana legalization, only to have cannabis businesses and lawmakers renege on promises to support labor peace agreements.

But Kristi Kelly, executive director of the Denver-based Marijuana Industry Group that represents more than 500 licensees in the state, noted that a provision was included in the sunset bill that treats cannabis employees consistently with federal and state labor law.

“We believe the cannabis industry should be treated the same as all other businesses,” she said.

Jeff Smith can be reached at jeffs@mjbizdaily.com