By: Nick Richards, Partner and Michael Freimann, Partner
This past week, the Denver Post reported that workers from two Colorado cannabis companies unionized. And, the union representative was quoted in the article that they are “very actively organizing in cannabis.” This, along with the recent developments at the federal government and proposed legislature coming from the Biden administration should have cannabis companies on full alert!
And the alert is far more important in the cannabis industry than in other industries because of IRC Section 280E. Essentially, 280E disallows business deductions for the expenses of selling marijuana – dispensary employee costs (salary, benefits,, etc.) are the biggest category of disallowed costs. Unionization will certainly focus on increasing employee pay and benefits. And, because they are largely not deductible, cannabis company owners will be paying the costs out of their own pocket. In an industry of very slim margins due to extraordinarily high taxes, unionization and the increased employee costs that come with it could drive profitable companies into the red and those struggling out of business.
With the White House changing from republican to democrat, the composition of the National Labor Relations Board changes as well. As of this summer, a new majority of Biden appointees will be on the Board and most likely overturn or unwind many of the Trump-era NLRB decisions. This will shift the application of labor law to being much more union and employee friendly. Additionally, the Protecting the Right to Organize (PRO) Act of 2021 passed the House of Representatives and is sitting with the Senate. If the Senate garners enough votes, this new law will provide considerable changes to the labor landscape and make it significantly easier for unions to successfully organize workers.
As a maturing and growing industry, cannabis employers are fast becoming the focus of national unions – those with the resources to pour a lot of money into union organizing campaigns and any associated legal disputes. As such, the cannabis industry should make sure it minimizes any union risk and is prepared if it encounters it. The following are some suggestions:
- Train management on what is permitted under the National Labor Relations Act (NLRA) to include what falls within the definition of protected concerted activity
- Enforce discipline uniformly
- Understand what employers can or cannot say to its employees about unions
- Understand how to respond to unions who ask for recognition
- Update employee handbooks to ensure compliance with changing workplace rules
- Proactively prepare and strategize how the pandemic has altered the workplace
It is always better to be proactive and over-prepared. The cannabis industry may be subject to the “perfect storm” of unionization and it will take hard work, preparation and thought out to strategy to weather this storm.
