‘Labor Peace’ Agreements Unlikely to Give Employers Peace

By Danielle Moore, Bailey Bifoss, and Christopher Conti
Fisher Phillips law firm
Special to mg Magazine

In January, recreational cannabis use became legal in California, with the state mandating cannabis employers comply with the regulatory framework applicable to all businesses. However, as cannabis employers are quickly finding out, they are also subject to rules not generally applicable to other employers, including the requirement they institute a “labor peace agreement” in order to conduct business.

The framework

The term “labor peace agreement” describes a neutrality agreement between an employer and a union, under which both sides agree to give up something in exchange for “peace.” Unions give up their right to picket, strike, or otherwise engage in conduct that interferes with business operations; employers give up their right to lock out organizing employees, run anti-union campaigns, or make negative statements to employees about the union.

Labor peace agreements typically arise when the government asserts a “proprietary interest” in a business or facility, usually as the result of providing financial assistance to a private-sector employer. The government then requires the business to sign a labor peace agreement with the union in order to protect the government’s financial interest. Although the state has not defined its proprietary interest in the cannabis industry, it may be based on the right to assess fees and taxes. An asserted proprietary interest on this basis may be subject to legal challenge in the future.

Key components

California’s rule requires any cannabis license applicant with at least twenty employees, or any applicant that plans to hire at least twenty persons, adhere to the terms of a labor peace agreement. However, the threshold may go down, particularly in California’s most union-friendly municipalities. Los Angeles, for instance, already has proposed lowering the number to ten employees. Importantly, the rule applies only to licensed businesses, not growers.

The labor peace agreement must, at a minimum, require the union and its members refrain from engaging in economic action, such as picketing, work stoppages, slowdowns, boycotts, handbilling, and any other interference with the employer’s business. In exchange, the employer must refrain from disrupting union organizing efforts. Departing from traditional notions of labor relations, employers also must permit access to their premises during business hours for union meetings.

Unlike many statutes, which require labor peace agreements provide for a particular method of union recognition (like a card check or secret ballot), California’s rule provides labor peace agreements shall not mandate any such method of recognition.

Terms of future agreements

Although California sets forth the basic standards for labor peace agreements, employers should expect unions to push for more than the bare minimum. As a result, businesses should be wary of any agreement proposed by a union representative. Agreements will vary from employer to employer and from union to union and should be vetted by an experienced labor attorney.

For example, employers should watch for proposed language that could loop in unsuspecting businesses or corporate entities that otherwise would not be covered. The requirement applies to licensed businesses only. Thus, agreements that apply to unlicensed businesses or entities owning an interest in the licensed business may be overbroad.

Additionally, the procedure for union recognition should be clearly defined. When an employer’s workforce is attempting to unionize, many employers prefer secret ballot elections because it provides for anonymity in the election process. Therefore, employees are more likely to express their true feelings regarding union organization, free from undue influence or coercion. Employers should expect unions to propose recognitions by a procedure known as “card check.” Under card check recognition, employees sign cards stating they wish to be represented by the union. Typically, however, election cards are distributed and collected by a union business agent or an employee who is a proponent of unionization, which may inject additional pressures on employees’ decisions. Employers should be prepared to negotiate firmly on this issue.

Employers are also encouraged to define the eligible voting unit, campaign duration prior to the election, and a post-election waiting period. Loosely drafted agreements could foreseeably result in a greater likelihood of unionization, indefinite campaigns, recognition based on stale authorization signatures, or multiple elections within a short period of time.

Practical effect for employers

Unfortunately, if you need the cannabis license and have or plan to have at least twenty employees, you need to agree to a labor peace agreement. Practically, cannabis employees working under labor peace agreements are substantially more likely to unionize. If they do, employers can fairly expect increased overall labor costs, substantial time and expense administering the collective bargaining relationship, and decreased flexibility. Still, employers retain the right to negotiate important substantive terms of the labor peace agreement as well as any collective bargaining agreement, and should be prepared to do so.

Long-term impact

Although California’s regulations went into effect January 1, 2018, bringing with them the requirement of labor peace agreements, hope is not lost for employers that wish to remain non-union. Courts around the country have ruled certain labor peace agreements violate the National Labor Relations Act (NLRA), the federal law governing labor-management relations in the private sector.

Nevertheless, barring a successful challenge to the labor peace requirement (which is by no means guaranteed), employers should prepare to negotiate with unions. Employers should seek counsel to evaluate what the statute requires, what is in their best interest, and how the agreement proposed by the union matches those two issues.

DANIELLE MOORE is a partner in the San Diego office of employment law firm Fisher Phillips. She may be reached at [email protected].

BAILEY BIFOSS is an associate in the San Francisco office of Fisher Phillips. She may be reached at [email protected]. 

CHRISTOPHER CONTI is an associate in the Fisher Phillips San Diego office. He may be reached at [email protected].

Visit FisherPhillips.com for more information.