A New Challenge to Mandatory Labor Peace Agreements Is Filed While Another Is Dismissed

On April 14, 2025, a cannabis retailer filed suit to challenge the provision of New York’s cannabis law that requires licensed businesses to maintain labor peace agreements with their workers. The New York lawsuit asserts that certain provisions of the Marihuana Regulation and Taxation Act (“MRTA”) are preempted by the National Labor Relations Act (“NLRA”).  Specifically, the retailer asserts that the NLRA preempts state laws that “regulate labor activity” or that “legislate in legal terrain that the NLRA either protects, prohibits or leaves unregulated all together.”  In other words, the retailer asserts that by requiring cannabis businesses to enter into labor peace agreements, the MRTA intrudes on the federal government’s exclusive authority to regulate the union organizing process through the NLRA.  

A labor peace agreement does not require the cannabis business to employ unionized workers, but it does require neutrality, meaning, among other things, that the cannabis business agrees not to lock out employees or interfere with any unionization effort.  Labor peace agreement requirements provide unions with direct access to cannabis business management, often at an early stage in the life of the business, which in turn gives unionized labor a leg up in the cannabis industry.  The MRTA takes this a step further by requiring all cannabis licensees to provide their employees’ contact information to the labor organization that may seek to represent them.  The lawsuit argues that one union in particular has dominated the representation of cannabis workers, and thus, the requirement to provide contact information to the labor organization that may seek to represent those workers affords that union a bargaining advantage and leaves the business with little room for negotiation. The New York lawsuit is the latest of several lawsuits challenging the mandate of labor peace agreements in the cannabis industry.  Similar laws have been challenged in Oregon, California, and Rhode Island.  

While several cannabis businesses have challenged labor peace agreement laws, at least one such challenge has failed.  Just last month, a federal judge dismissed the challenge to California’s law.  The judge concluded that a federal court could not even address the merits of the preemption argument because cannabis is federally illegal.  Plaintiffs “currently are, and will likely continue to be, engaged in ongoing violations of multiple provisions of federal law.”  The judge wrote that, “[b]ecause it is a business which exists solely for the purpose of making money through repeated and ongoing violations of federal law, Plaintiff comes before the court seeking equitable relief with unclean hands.”  

Federal courts have taken inconsistent positions on the implications of federal illegality, finding that cannabis companies must still comply with federal laws, such as OSHA and Title VII, but at the same time cannot avail themselves of the protections of other federal laws, such as trademark laws and the commerce clause. The California decision is the first to address the issue of federal illegality of cannabis in the context of labor peace agreements, but likely not the last.  Interestingly, the New York lawsuit attempts to use federal illegality in favor of the cannabis business, claiming that the State of New York cannot have a proprietary interest in state-licensed cannabis businesses (which the MRTA claims as a justification for the labor peace agreement requirement), because such an interest would violate the Controlled Substances Act.  We will be watching to see how the issues of federal preemption of labor relations regulation and federal illegality of cannabis play out in the context of labor peace agreements.