iCalifornia’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) requires commercial cannabis entities to obtain a license from California’s Department of Cannabis Control (“DCC”) to cultivate, distribute, transport, store, manufacture, process, and sell cannabis in the state of California. Since its enactment, MAUCRSA required licensees with 20 or more employees to enter into Labor Peace Agreements (“LPAs”) with “bona fide” labor organizations to receive and renew a license from the DCC, as previously outlined here. LPAs require commercial cannabis licensees and labor organizations to agree to not engage in conduct that would disrupt or interfere with the other’s dealings. In 2022, AB 195 reduced the employee threshold requirement by half, effective July 1, 2024. That means, effective July 1, 2024, all license applicants with 10 or more employees must comply with the LPA requirement to obtain a license, and all current licensees with 10 or more employees must so comply to renew their license.
MAUCRSA, defines an LPA as “an agreement between a licensee and any bona fide labor organization that, at a minimum, protects the state’s proprietary interests by prohibiting labor organizations and members from engaging in picketing, work stoppages, boycotts, and any other economic interference with the applicant’s business. This agreement means that the applicant has agreed not to disrupt efforts by the bona fide labor organization to communicate with, and attempt to organize and represent, the applicant’s employees. The agreement shall provide a bona fide labor organization access at reasonable times to areas in which the applicant’s employees work, for the purpose of meeting with employees to discuss their right to representation, employment rights under state law, and terms and conditions of employment. This type of agreement shall not mandate a particular method of election or certification of the bona fide labor organization.” Cal. Bus. & Prof. Code § 26001(ab).
MAUCRSA defines a “labor organization” as “any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists, in whole or in part, for the purpose of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work for employees.” Cal. Bus. & Prof. Code § 26051.5(a)(5)(E)(ii).
Although the July 1 deadline is just around the corner, there has been no significant uptick in the number of LPAs on file with the DCC. Per the DCC, there are 9,123 active cannabis licenses[1] (5,945 annual licenses, 3,172 provisional licenses,[2] and 5 interim licenses). Yet only about 7% of all the active licensees have LPAs on file, per DCC lists (only 652 LPAs). Indeed, the number of LPAs on file has actually decreased since we previously wrote about a related issue in May 2024. And in the next 30 days, approximately 810 now-active licenses will expire, some of which will occur on or after July 1. If any of these licensees have 10 or more employees, they must have an LPA with a bona fide labor organization to renew their license.
Enforcing the LPA Requirement
The DCC issues cannabis licenses through its Licensing Division. Its Compliance Division, together with its Enforcement Division, support and enforce regulatory compliance and investigate unlicensed activity. The DCC tracks compliance actions for licensees, and information identifying the DCC’s license denials, citations, and disciplinary actions can be accessed here. Out of the DCC’s 216 license actions,[3] the DCC suspended only one license, on January 9, 2024, for failure to comply with the LPA requirement.
Enforcement, however, is not limited to actions initiated by the DCC, because any member of the public can file an anonymous complaint against a licensed or unlicensed cannabis business through the DCC’s website. Similarly, complaints specific to LPAs can be submitted by any current or former employee of a cannabis licensee and/or any labor organization, by sending an email to the DCC or filing a complaint with the Agricultural Labor Relations Board (ALRB), which is the agency charged with enforcement of the Agricultural Labor Relations Act (ALRA).
Pertinent here, the ALRB is responsible for determining whether an entity that has entered into an LPA with a cannabis licensee is a “bona fide labor organization” as required by statute.[4] If it is not, the ALRB can declare the LPA null and void. In 2023, the ALRB issued its first two such decisions, and both decisions were based on complaints made by third party labor organizations to the ALRB.[5] The ALRB found that each purported labor organization was a sham organization for the purpose of satisfying licensing requirements, that the entities were not bona fide labor organizations, and that all LPAs with these entities were null and void. After the ALRB decisions, the DCC notified all licensees, who had LPAs with the sham organizations, of the determination, and required those licensees to enter into a new LPA with a bona fide labor organization within a reasonable time.
Takeaways
Employers that have 10 or more employees should understand their obligations to comply with MAUCRSA, and evaluate those obligations in light of the July 1, 2024 LPA requirements. DCC’s enforcement position, beginning on July 1, 2024, with respect to the LPA requirements are not yet known. Employers, with 10 or more employees, should be aware that the DCC’s actions need not be limited to those discussed above because the statutory provisions at issue specifically state that the DCC’s authority to revoke or suspend a license for violation of the LPA requirements is not limited by those provisions. See Cal. Bus. & Prof. Code §26051.5 (a)(5)(A)(iv).
FOOTNOTES
[1] Based on data for active licenses, accessed on June 18, 2024 (https://cannabis.ca.gov/resources/data-dashboard/license-report/).
[2] Provisional licenses are being phased out, and January 1, 2026, is the last day any provisional license can be in effect. See Cal. Bus. & Prof. Code §§ 26050.2(o)&(p).
[3] Based on data accessed on June 18, 2024.
[4] See Cal. Bus. & Prof. Code § 26051.5(a)(5)(D).
[5] The ALRB found that the Pro-Tech 33 and the National Agricultural Workers Union were not “bona fide labor organizations” even though both had signed over 20 LPAs with cannabis licensees. Both entities were found to be sham organizations when, among other things, they did not respond to basic inquiries about their LPAs and did not provide information about any members and officers in California.
