It is not often that the government has the opportunity to regulate and oversee an entirely brand new market; and, in the case of California, when it legalized recreational cannabis for adult-use, it decided to mandate involvement of labor unions in the state's emerging cannabis industry, through implementation of a Labor Peace Agreement ("LPA") requirement. Because this fundamental choice by the state has posed headaches and dilemmas for licensees, cannabis business operators in California should ensure they receive counsel from reputable management-side labor attorneys before entering into any LPAs with unions. Amidst this haze and confusion, we offer some context and observations from a labor and management relations perspective.
Of note, despite going into effect over a month ago, only a tiny percentage of licensees and operators are complying with the mandate. Moreover, whether intentional or not, California's LPA mandate has caused a union turf war, where bigger established unions have been looking to muscle out their smaller competitors for the dues of the thousands of workers in California's burgeoning canna-industry. Critically, however, the legality of the LPA mandate is still being determined by the courts, where serious Constitutional questions abound, and because other states have been considering similar mandates, observers will continue monitoring what happens in California on this issue.
Background on LPAs and the Mandate
Under California's adult-use cannabis regime, licensed commercial operators with 10 or more employees must enter into LPAs with "bona fide" labor organizations in order to receive, renew, and theoretically maintain their licenses. The mandate was expanded on July 1, 2024 to impact smaller businesses. Interestingly, there are whopping questions about whether licensees are meaningfully complying with the mandate and whether the enforcement scheme behind this mandate actually has any teeth.
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