Union Organizing Raises Special Challenges for the Cannabis Industry

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While marijuana remains illegal under federal law, it has been legalized in 15 states and the District of Columbia. Another 29 states have decriminalized marijuana or allowed its medical use, or both. This loosening of restrictions has attracted not only entrepreneurs and investors, but also union organizers who see the cannabis industry as a potential source of new members. The nature of the cannabis industry, however, as well as the differences in state laws and regulations around the country, give rise to some unique legal issues for employers confronting union organizing efforts.

Interstate Commerce

The National Labor Relations Act is the federal law that governs union organizing and collective bargaining in most private-sector industries. The Act (1) grants to employees the right to organize and (2) requires employers to recognize and bargain with the unions formed by employees. The National Labor Relations Board, the federal agency that enforces the Act, will conduct a secret-ballot election upon an appropriate “showing of interest” where at least 30% of employees sign cards indicating they wish to be represented by a particular union. If the union captures more than 50% of votes cast, the NLRB will certify the union as the exclusive bargaining representative of the employees.

The Act applies to employers engaged in or affecting interstate commerce. To determine whether a particular business affects interstate commerce, the NLRB has established specific monetary standards for different industries. In the retail industry, any retail business will be deemed to affect interstate commerce if its annual gross revenue exceeds $500,000 and where it has “some business, greater than de minimis, across State lines.”

Because of the federal prohibition of marijuana, however, the cannabis industry is an inherently intrastate business. In a state where marijuana is legal, it must be grown and sold within the state. A lawful dispensary in one state cannot purchase marijuana legally grown in another state – the act of transporting the product across state lines may violate federal law. How can it be said, then, that a dispensary is engaged in interstate commerce?

In 2013, the NLRB’s General Counsel decided that, despite its intrastate nature, “an enterprise that is involved in the medical marijuana industry is within the Board’s jurisdiction if it otherwise meets the Board’s monetary jurisdictional standards, and that the Board should assert jurisdiction over this type of business enterprise.” Consequently, the NLRB has asserted jurisdiction over retail dispensaries with more than $500,000 in annual revenue that purchased some amount of goods of “greater than de minimis” value from out of state.

Agricultural Workers

The National Labor Relations Act specifically excludes “any individual employed as an agricultural laborer” from the class of “employees” protected by the Act. This means that the NLRB cannot certify a union as the representative of a group of employees that includes agricultural workers and cannot compel an employer to bargain with a union purporting to represent such a group.

For cannabis grow facilities, the exclusion of agricultural workers has been particularly significant. The NLRB has found that workers who are primarily engaged in the cultivation, harvesting, and packaging of cannabis, and who do not do anything to significantly transform the natural product from its raw state, are properly considered agricultural laborers and therefore outside the protection of the Act. 

Be Careful What You Wish For                     

It can be possible for employers in the cannabis industry to use the agricultural exemption as a means of avoiding unionization of their grow-facility employees – depending upon the state in which they are located. Some states have their own collective-bargaining statutes covering employers and employees, including agricultural workers, who fall outside the jurisdiction or protections of the National Labor Relations Act. Moreover, some of these state laws are more favorable to employees and unions than the National Labor Relations Act would be. 

The Massachusetts collective bargaining statute, General Laws chapter 150E, expressly protects agricultural workers. Unlike the National Labor Relations Act, the Massachusetts statute provides for the certification of a union as the exclusive bargaining representative of employees without an election, if the union obtains signature cards from more than 50% of employees. In one recent case, in order to avoid such a “Certification by Written Majority Authorization” under state law, a Massachusetts grow-facility argued to the NLRB that its employees were not agricultural workers and therefore should be protected by the National Labor Relations Act.

Be Prepared for Union Organizing Efforts

Before getting to the point of arguing over NLRB jurisdiction and the agricultural exemption, an employer in the cannabis industry can best protect itself by taking steps to be prepared for potential union organizing efforts; for example –

  • Be on the lookout for signs of organizing and ensure that supervisors know what to look for.
  • Train supervisors on what they can and cannot say to employees about unions within the constricts of the law.
  • Be alert for employee disaffection and morale problems. Regardless of whether their complaints are warranted, disgruntled employees are often the source of union organizing drives.
  • Comply with state and federal wage and hour laws. This may seem obvious, but many cannabis companies are inherently new or young entities, so ensuring compensation and payroll practices comply with state and federal law at the outset—even if union organization does not seem imminent—can prevent problems down the road. In one recent cautionary example, an employer was required to pay $75,000 in back pay to its employees as part of a settlement with a union.
  • Be sure to have clearly defined job descriptions, identifying employees with supervisory functions who would be excluded from a potential bargaining unit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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