As the cannabis industry rapidly expands across the United States, a unique legal and regulatory landscape is taking shape. At the heart of this landscape is the intersection between state-mandated Labor Peace Agreements (“LPAs”), the National Labor Relations Board (“NLRB”), and the evolving relationship between employers and unions. With the NLRB currently lacking a quorum and federal preemption in question, employers and unions alike are navigating uncharted territory.
Background
An LPA is a neutrality agreement entered into between an employer and a union. Under an LPA, the employer agrees to remain neutral and refrain from interfering with union organizing efforts during a union organizing campaign. Some LPAs require more, such as a recognition procedure, upon a showing of majority status, but the law is more complicated as additional pro-union features are added. LPAs have become particularly significant in the cannabis industry. As states legalize medical and adult-use cannabis, many have incorporated LPA requirements into their regulatory frameworks due to political pressure from unions. States such as California and New York require cannabis businesses of certain sizes to enter into LPAs as a condition of licensure. However, other states, like Oregon, have had their LPA requirement struck down by the state’s federal courts, ruling it was preempted by the National Labor Relations Act (“NLRA”).
This state-based approach is in response to the absence of federal cannabis legalization. State regulators have stepped in to fill the void—dictating the terms under which cannabis businesses can operate—including labor relations.
The Courts and Preemption
Historically, attempts to challenge state-mandated LPAs in court on the grounds of federal preemption have met with limited success. Courts have often upheld state requirements, finding that they do not necessarily conflict with the NLRA.
However, the NLRB—charged with enforcing the NLRA—currently lacks a quorum, and may for the foreseeable future. This raises fundamental questions about whether federal preemption is even possible. Normally, the NLRB would assert its authority to ensure uniformity in labor law, potentially overriding conflicting state requirements. With the NLRB currently unable to act, some argue that preemption should not apply when the federal agency is nonfunctional.
The Practical Reality for Employers
For cannabis employers, the decision to enter into an LPA is often logical. Unions may offer to help secure state licenses in exchange for neutrality agreements—a quid pro quo that can be mutually beneficial. Some employers embrace LPAs as a way to expedite licensing and avoid conflict, while others see them as an unwanted imposition and may resist unionization efforts.
The current chaos at the NLRB complicates matters. Employers who wish to challenge LPAs on preemption grounds may find there is simply no functional forum to hear their case. In the absence of a working NLRB, federal courts are left with unprecedented questions: Can a board without a quorum preempt state law? How should courts address these disputes when the primary federal authority is effectively offline?
The Cemex Problem and “Backdoor” Unionization
This uncertainty is compounded by recent NLRB decisions, such as the 2023 Cemex decision, which changed the landscape for union recognition and bargaining orders. If an employer resists unionization and commits unfair labor practices, the NLRB can bypass an election and order the employer to bargain with the union—a powerful incentive to comply with LPAs. But with the NLRB’s current uncertainty, even this enforcement mechanism is in doubt.
Outlook
For now, the cannabis industry and labor law practitioners are left without an answer. Each state is charting its own course, and what works in California might not work in Massachusetts or New York. The lack of a functioning NLRB means there is no clear answer to the preemption question, and employers face significant risk and uncertainty.
The intersection of LPAs, the cannabis industry, and the NLRB presents a legal landscape marked by uncertainty and rapid change. As states continue to require LPAs as a condition of licensure, and as the NLRB remains without a quorum, employers and unions must navigate a patchwork of state regulations without clear guidance. Until federal legalization or NLRB functionality brings greater clarity, businesses should work closely with legal counsel to ensure compliance with state requirements while preparing for potential shifts in federal enforcement. Ultimately, the future of labor relations in the cannabis sector will depend on how courts, regulators, and industry participants respond to these unprecedented challenges.
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