Mandatory Labor Peace Agreements Challenged In Oregon Court

Last week, an adult-use cannabis processor and retailer filed suit to challenge the constitutionality of a new Oregon law that now requires entry into a labor peace agreement for licensure. 

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 work against 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.

Under the new law, which went into effect this past December, businesses seeking licenses and certifications to manufacture or sell cannabis products must submit “a signed labor peace agreement entered into between the applicant and a bona fide labor organization actively engaged in representing or attempting to represent the applicant’s employees” or an attestation that the business and bona fide labor organization have entered into a labor peace agreement.  Without entering into a labor peace agreement, cannabis-related businesses will be unable to receive – or renew – existing licenses. 

The complaint, filed last week, asserts that the new law violates the Supremacy Clause of the U.S. Constitution because the National Labor Relations Act (“NLRA”) governs labor relations for private sector employers.  It alleges that the new law “impermissibly intrudes into federally governed labor relations under the NLRA” and “attempts to impose requirements and restrictions in direct violation of the NLRA” by requiring the cannabis businesses to enter into a labor peace agreement.  The complaint further alleges that: the new law violates the Due Process Clause of the Fourteenth Amendment for being impermissibly vague, for being an unlawful restraint on the plaintiffs’ freedom to contract, and for constraining plaintiffs’ First Amendment freedom of speech; and the Equal Protection Clause of the Fourteenth Amendment by impermissibly favoring unions.

This lawsuit is the latest challenge to state statutes mandating labor peace agreements in the cannabis industry.  In California, a cannabis retailer challenged the state’s labor peace agreement requirements, asserting they are preempted by the NLRA and that they violate the Due Process Clauses of the U.S. Constitution.  In response, defendants filed a motion to dismiss the action asserting, among other things, that the plaintiff cannot invoke “the Court’s equitable powers to facilitate federally illegal conduct.”  Argument on the motion was scheduled for February 20, 2025. In Rhode Island, a medical marijuana dispensary filed a lawsuit challenging the state’s LPA mandate.  The case was later voluntarily dismissed before any ruling on the validity of the LPA mandate was reached.

Like the challenged statutes in Oregon, California, and Rhode Island, Connecticut’s cannabis statute also requires entry into a labor peace agreement as a precondition of licensure.  But unlike the other states, the LPA requirement in Connecticut has not yet been challenged in court.

We will be following the existing cases and tracking any updates regarding the validity of labor peace agreements in the face of the constitutional challenges.