Opinion: Cannabis business owners should negotiate labor peace agreements before signing

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Image of the white bird of peace carrying a branch in its beak
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Alexa Steinberg

When you apply for a marijuana business license in California, one of the many documents you must sign is a sworn statement that your business will enter into a labor peace agreement, or LPA.

Almost every licensed cannabis entrepreneur will eventually have to sign an LPA, which is a preliminary contract between your business and a labor union.

Image of Dan Stone
Dan Stone

However, many in the industry sign an LPA without even reading it or understanding what it means for their business – let alone speaking with a lawyer about it.

This is a mistake.

When you sign an LPA, your business will have to live with its terms for years to come.

Even though an LPA is often required by law, it is not a standard form.

Some of its terms are negotiable and absolutely should be negotiated like any other contract.

What is an LPA?

An LPA addresses what a union can and can’t do to unionize a business.

If employees elect to unionize, employers will have a legal obligation to negotiate with the union about issues such as wages and working conditions.

Practically speaking, an LPA form is almost always provided by a labor union.

That form is typically drafted by the union’s lawyers and includes terms that favor the union.

If you applied for a cannabis license in California – particularly in Los Angeles – you might have already been approached by some of the major unions in the cannabis industry, such as the United Food and Commercial Workers (UFCW), the Teamsters or Service Employees International Union (SEIU).

If you don’t recognize the name of the union, or if you can’t find a website for the local branch listed on the agreement, think twice before signing.

California currently requires most cannabis licensees to sign an LPA once they have 20 employees or more.

Most smaller businesses will have to sign an LPA no later than July 1, 2024.

What should be in an LPA?

The agreement should have protections for both the employer and the union.

Two important provisions to look out for are:

  • Times when union representatives can meet with your employees.
  • Whether you agree to recognize a union without an election.

Per state law, an LPA will include language providing the union with “access at reasonable times to areas in which the applicant’s employees work.”

This means union representatives can walk into your business and meet with your employees – the question is when.

This is where the language of the LPA is key. An LPA should not allow a union to access your business whenever it wants.

Most reputable unions’ LPAs allow them to access your business at “reasonable times” and provide that the union “shall not disrupt or interfere with the company’s operations or business.”

Major unions will generally cooperate with you in scheduling times to meet with your employees.

State law also makes clear that an LPA “shall not mandate a particular method of election or certification” of the union.

Even so, some unions include a “recognition” and “elections” provision in their LPA that would limit your business’ rights.

Some LPAs include provisions that would require your business to recognize the union by way of a “card check,” which effectively eliminates your right to seek a formal election.

Employers should insist that such unfavorable provisions be removed from the LPA before signing.

The bottom line

Many cannabis companies will be unionized in the coming years. If and when that happens to you, the union will be an important part of your business.

Your ability to deal with a union in negotiating the terms of the LPA, and the unionization process is a preview of how it will be to deal with the union once it represents your employees.

Do your due diligence on unions before you sign an LPA, not after.

Most sophisticated businesses have an attorney review every labor contract before they sign.

Find a lawyer who can advise you on labor agreements and the collective bargaining process.

At the very least, it is imperative to read your LPA and understand your obligations, and the union’s, before you sign.

Alexa Steinberg is a corporate and transactional attorney at Los Angeles-based Greenberg Glusker with deep roots in the cannabis space. She can be reached at asteinberg@greenbergglusker.com.

Dan Stone is a partner at Greenberg Glusker with special knowledge of labor negotiations and collective bargaining agreements. He can be reached at dstone@greenbergglusker.com.

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