STIRRING THE POT
Legality of Pennsylvania’s cannabis industry ‘labor peace agreements’ challenged
When counter workers at a North Shore cannabis store voted for union representation in September, it was barely a blip on the daily news.
But the United Food and Commercial Workers, which represents 13 Trulieve Cannabis Corp. workers at the North Shore dispensary, had its sights on a bigger prize: organizing the 800 workers who will eventually staff Trulieve’s huge cultivation center planned for a former steel pipe making plant in McKeesport.
“The cultivation operation is not lost on us,” said Wendell Young, president of the United Food and Commercial Workers Local 1776, which counts the North Shore dispensary employees among 600 cannabis workers that the union represents in Pennsylvania. “Trulieve is somewhat very antiunion, so that’s not going to be an easy task. Clearly, we’re up to it.”
Trulieve did not respond to requests for comment.
Here’s the dilemma: the licensing preference that Pennsylvania hands cannabis companies — smoothing the way for unionization in exchange for labor peace at their stores — may not hold up in court. The issue is who will take up the challenge.
“It’s trying to regulate the process of collective bargaining,” said Michael C. Duff, former National Labor Relations Board litigator and current professor at St. Louis University School of Law. “And I think that’s a problem.”
“What you’re doing is putting a thumb on the scale, making it easier for a union entity to start up,” Mr. Duff said. “It’s a kinder, gentler way of interfering in the collective bargaining process.”
Copies of Trulieve’s labor peace agreement were not available from the Pennsylvania Department of Health.
But thanks to state Health Department preferences, medical cannabis cultivation and sales have become fertile ground for union organizing in Pennsylvania at a time when union membership overall has been shrinking nationally. In the meantime, questions have emerged about the legality of the leg up that unions are getting.
An advisory written by lawyers Todd A. Lyon and Alexander A. Wheatley, of the Atlanta-based law firm Fisher & Phillips, called the legality of labor peace agreements “questionable.”
“Given that the state requirements impose obligations where the National Labor Relations Act does not, there is a strong argument that these laws are entirely or largely pre-empted by the NLRA,” the pair wrote in 2020.
And in March, the National Right to
Work Legal Defense Foundation, a conservative advocacy group, asked the NLRB to protect workers who were being forced to unionize through state licensing requirements.
“In other states, including Pennsylvania and Illinois, state officials will give points to cannabis license applicants who have labor peace agreements, which is effectively preferential treatment for those businesses which have already chosen a union for their employees to work under,” the Washington, D.C.-based group said. “The states enacting these schemes have acted at the behest of several national labor unions, with the United Food and Commercial Workers being on the forefront of these forced unionism efforts.”
The National Labor Relations Act governs organizing, contract bargaining and other union activities, which courts have routinely determined takes precedence over state laws that step on the Depressionera labor relations law.
Pennsylvania’s cannabis licensing preference — the kind of preference that is actually baked into legislation in New Jersey, California, New York and other states — is preempted by the federal statute that created the National Labor Relations Board, said Mr. Duff, a former member of the Teamsters union.
Last year Quincy, Florida-based Trulieve bought three buildings, including a former U.S. Steel guard house, and nearly 37 acres from the Regional Industrial Development Corp. to build a medical marijuana cultivation and processing facility in McKeesport, totaling at least 508,000 square feet — a sprawling nine
football fields in size.
Trulieve, the leading medical cannabis retailer in Pennsylvania, already owned two buildings at the site, the one-time home of the U.S. Steel Tube Works. No timetable was given for the start of construction, but RIDC President Don Smith said in 2021 that the new facility would employ 800 people.
Pennsylvania already ranks third in medical cannabis sales for Trulieve, which has stores and grow facilities in 11 states, with a forecasted $117.7 million for 2022, according to Cantor Fitzgerald & Co. analyst Pablo Zuanic, trailing Florida in first place at $788.6 million and Arizona, $249 million, second place. The company reported total sales of $938.3 million in 2021.
Trulieve received a $2 million state redevelopment assistance grant for the McKeesport project, and like other outfits competing for licenses to sell medical marijuana in Pennsylvania, the company received preference points for having a labor peace agreement. Such agreements typically allow
union access to workplaces, the card check option for recognizing unions instead of secret ballot vote and employer neutrality on organizing efforts.
Using the same kind of labor peace requirement, Pittsburgh took things a step further in its Home Rule charter of 1999 by requiring companies that receive city contracts to have labor agreements with their employees — and also their subcontractors.
A downside to labor agreements is higher cost of goods because higher wage and better benefit costs are generally passed along to the consumer; the upside is better wages and benefits for workers.
In June, benefit costs for union workers averaged $20.60 per hour worked and accounted for 40.2% of total compensation, according to the U.S. Bureau of Labor Statistics. That compared to average nonunion benefit costs of $10.65 an hour or 28.2% of total compensation for the same month.
A contract with cannabis workers at Modern Cannabis dispensary in Chicago that was signed in March, for example, permits customers to tip workers, guarantees annual raises, seniority rights and 40-hour work weeks for full-time staff. In Pennsylvania, the UFCW is planning an apprenticeship program for cannabis employees, much like the traditional training programs in bricklaying, iron work and plumbing, Local 1776 President Young said.
But whether Pennsylvania’s licensing preference — and comparable laws in other states — are legal won’t be known until they are challenged in court. And it’s uncertain when that might happen, legal experts say.
Cannabis is a young industry and companies may decide that challenging licensing preferences in court may be a distraction at a time when the market is growing at a torrid pace, goosed by the prospect of legalized recreational use of cannabis in many states. Cannabis sales in Pennsylvania were expected to reach $1.2 billion by 2025, according to Statista Inc., a New York City-based market data outfit, up a booming 84% from the $680 million forecasted for 2022.
“No one has an economic reason to challenge it,” Mr. Duff said. “It’s not worth anybody’s while — yet.”
In the meantime, labor peace agreements in the cannabis industry ensure high paying jobs with good benefits, the UFCW’s Mr. Young said.
“You don’t want to create jobs like Walmart with taxpayers footing the bill,” Mr. Young said. “This is good old democracy in the workplace. I think we’re a natural for this.”