Unions in the Cannabis Industry

Cannabis Blog Jun 1, 2021 Denver, CO

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.

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Greenspoon Marder LLP is a full-service law firm with over 240 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has upheld a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.

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Unions in the Cannabis Industry

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