On June 30, 2022, California Governor Gavin Newsom approved Assembly Bill (“AB”) 195, enacting various changes to the State’s cannabis regulations that will roll out over the next few years.  Among those changes is an update to the Business & Professions Code (“BPC”) section on labor peace agreements (“LPAs”).

The BPC defines an LPA for cannabis purposes as “an agreement between a licensee and any bona fide labor organization [(“BFLO”)] 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.”  An LPA grants a BFLO the authority to communicate with, and attempt to organize and represent, an applicant’s employees, and to do so free of disruption by the applicant.  An LPA additionally grants a BFLO reasonable access to employee work areas to allow it to meet with employees to discuss their right to representation, state employment rights, and employment terms and conditions.

California law before AB-195 held that a commercial cannabis business with 20 or more employees would have to either provide a notarized statement that it will enter into, or demonstrate that it has already entered into, and abide by the terms of an LPA.  A commercial cannabis business with less than 20 employees that had not yet entered into an LPA would have to provide a notarized statement that it would enter into and abide by an LPA’s terms within 60 days of employing its 20th employee.

With the passage of AB-195, the following key changes have been implemented to the LPA framework described above:

• As of July 1, 2024, the requirements that apply to an applicant with 20 or more employees will apply to an applicant with 10 or more employees, and the Department of Cannabis Control (“DCC”) will not renew a license for a licensee with 10 or more employees as of that date unless the licensee provides a statement that it has entered into and will abide by an LPA’s terms.
• An applicant with 10 to 19 employees that has not yet entered an LPA must provide a notarized statement in its application that it will enter into and abide by an LPA’s terms within 60 days of employing its 20th employee, or on or before July 1, 2024, whichever is earlier.
  
• An applicant with less than 10 employees that has not yet entered an LPA must provide a notarized statement in its application that it will enter into and abide by an LPA’s terms within 60 days of employing its 10th employee, or on or before July 1, 2024, whichever is later.
• Compliance with an LPA’s terms shall be a condition of licensure, and a licensee seeking renewal must attest to the DCC that it remains in compliance with any applicable LPA’s terms.
  
• Any labor organization, or current or former employee of a relevant licensee, may report to the DCC that the licensee has not provided a truthful attestation of compliance as described above, and must provide documentation to substantiate the allegation.  If the DCC finds the allegation valid, it may suspend, revoke, place on probation with terms and conditions, or otherwise discipline the license and fine the licensee.
  
• Any labor organization, or current or former employee of a relevant licensee, may complain to the Agricultural Labor Relations Board (“ALRB”) that an organization a licensee has entered an LPA with is not a BFLO.  The ALRB will consider all relevant evidence and issue a report with its findings no later than 90 days after receiving the complaint.  If an entity is found to not be a BFLO, the DCC will notify all licensees that have signed LPAs with the entity and offer them a reasonable time period (not to exceed 180 days) to enter an LPA with a BFLO.  Failure to enter an LPA with a BFLO after that period will be considered a statutory violation.

For the purposes of the LPA provisions described above, the following definitions apply:

• An “employee” does not include a supervisor (see below).
  
• A “supervisor” is “an individual having authority, in the interest of the applicant, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibility to direct them or to adjust their grievances, or effectively to recommend such action, if, in connection with the foregoing, the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”
• A “labor organization” is “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.”

By Patrick Babajanian, July 18, 2022.