Season 1, Episode 6: Will Connecticut See a Wave of New Cannabis Workers in 2023?

Sarah Westby: Sure. Thanks Gabe. I appreciate you having me on the podcast today. So in addition to advising clients on labor and employment issues at Shipman, I'm also a co-chair of our cannabis practice. And over the last several months, we've been advising clients on forming a cannabis business and applying for an adult use cannabis license. So in terms of kind of the 30,000 foot view, cannabis is still illegal on a federal level with the exception of hemp, which is defined as cannabis sativa L that has a THC concentration of 0.3% or less by dry weight. So with the exception of hemp, cannabis is still illegal on a federal level. And in fact, the FDA takes a position that even derivatives of hemp, including CBD oil are not approved as dietary supplements and can't be added to foods or used to treat, prevent, or cure health conditions.

Gabe Jiran: Well, let me stop you right there. So I'm driving around Connecticut, I see shop selling CBD, is that legal?

Sarah Westby: It is legal so long as the CBD contains 0.3% or less THC by dry weight.

Gabe Jiran: So it's not an intoxicant in other words,

Sarah Westby: Right. That's correct.

Sarah Westby:  So on a state level, states around the country have been legalizing various forms of cannabis use, whether it be for medical or adult use for many, many years. And just recently last year, Connecticut legalized adult use cannabis in the state. And that means that it's- it's localized to the state so you can't bring it across state lines. It's not legal in states that have not specifically passed a law, but in Connecticut, it is legal as of July 2021. Now, if you want to actually sell cannabis, you have to obtain a license from the department of consumer protection. And there's a licensing process that's going on right now in order to legally manufacture, grow and sell cannabis within the state. And so doing those things is not legal until you obtain a license.

Gabe Jiran: I got it. So tell us a little bit about the licensing process and, you know, timeline and what's all involved there.

Sarah Westby: Sure. So there are eight different types of licenses that the state is granting for adult use cannabis, ranging from growing to manufacturing, to food and beverage production, to actually retail sales like in a dispensary. The application process opened in February of this year and the various license application deadlines are closing on a rolling basis from May to June of this year. All of those application deadlines will close by June and then the state is going to run a lottery to select a very small number of people to get licenses in each of those categories.

Now there's two non-lottery pathways to obtain a license for cannabis sales or growth, one of which is for cultivation, which entails partnering with what's called a social equity applicant locating your cultivation facility in one of the disproportionately impacted areas of the state and paying a $3 million fee. The other non-lottery license pathway is to partner with an existing medical dispensary owner or grower and to open a shop in partnership with them. That's the status of the licensing process in the state right now. Currently we don't have anyone who's able to legally sell adult use cannabis, but there are several medical dispensaries that are in operation and have been since about 2013.

 Gabe Jiran: Interesting. So then with a medical dispensary now, can they be both? Does the statute contemplate that you would have kind of a dual type of operation where you're both selling medical cannabis as well as recreational?

Sarah Westby:  Absolutely. And it's called a hybrid license and so existing medical dispensaries can automatically convert their licenses to sell both medical and adult use cannabis, and they can also partner with new market entrants who want to sell both medical and adult use. And even new business owners can apply for those licenses too, but the existing dispensaries have a leg up in that they can convert automatically and don't need to go through the lottery.

Gabe Jiran: I see, so if I'm a medical dispensary now, timing wise, when would they be able to convert to recreational?

Sarah Westby: They can convert already, but they can't start sales until the first licenses are awarded.

Gabe Jiran: I see. Okay. So tell me about that then. When do we expect those licenses to be granted and then when we are going to start seeing recreational dispensaries?

Sarah Westby: We think that the lottery is going to be run sometime this summer, probably within the next several weeks. I would expect by July or August of this year but we don't have a firm date for that. Once the lottery is run, the individuals selected will be awarded a provisional license and they will have 14 months in which to comply with all of the department of consumer protection and social equity council requirements to obtain a final license. Now I expect that existing dispensaries and multi-state operators who are partnering with business owners in Connecticut will be able to get up and running well before that 14-month deadline. And so it's possible that we can see sales of adult use cannabis in the state by the end of the year. I think that's a little ambitious, but it's possible.

Gabe Jiran: Wow. You know, it's interesting because it's very rare that we see a whole new industry get introduced to a state, particularly a state like Connecticut. It presents a lot of different questions, I think, for folks like us who advise clients and such, but also, for any of our listeners or just the general public about what does this mean, how's this new industry going to affect daily life or, things like even where the workers going to come from, is that something that you've been looking at?

Sarah Westby: Absolutely, we've been doing a lot of work with the licensing process in these last few months, but we're now looking to what the next legal issues are going to be and as you know, Gabe, we've already been advising clients on the use of cannabis in the workplace, both, medical and now adult use because that's been legal since July of 2021. But there are a host of different issues for businesses that they need to consider in this upcoming period once the provisional licenses are awarded, and one of those big issues is the workforce. Where are these employees going to come from?

I think that primarily they're going to come from within the state. We may have people moving in who are in specialized positions like master growers, head budtenders for dispensaries. But I think a lot of the workers are going to come from the state and maybe they're changing careers like a lot of the business owners I've been speaking with going through the licensing process. I expect we're going to have a lot of former disenchanted restaurant workers who want to join this business and people who've done other types of retail because their skills translate over. I think that we can expect, you know, some movement into the state, but a lot of existing workers from the state of Connecticut switching jobs.

Gabe Jiran: There's obviously some expertise necessary associated with the business, but when it comes down to it, it ultimately is a retail establishment. So you're having people working the counter or dealing with customers, and like you said, that could be, you know, any number of careers could translate into this one.

Sarah Westby:  Sure. And agricultural workers too, people who might have worked in garden centers before, you know, there's a lot of overlap there. Of course, there is specialized knowledge that goes with the plant, but you know, after the top level people, I think a lot of those jobs can be handled by people who've worked in similar businesses in the state.

 Gabe Jiran: One question that has come up and I've read a bit about is whether these new employees will be members of a union, or could they be members of a union. What are you seeing there?

Sarah Westby: It's a great question. And actually within the state of Connecticut and across the country, the United Food and Commercial Workers Union has claimed cannabis workers as their own and they've already taken some steps to market themselves as the union of cannabis workers in the state so we can certainly expect some union activity there. And the cannabis statute requires that every licensee who is going to obtain a final license for adult use cannabis has entered into a labor peace agreement in order to obtain final licensure.

Sarah Westby: So Gabe, have you seen those labor peace agreements in other contexts and can you tell us a little bit more about those?

Gabe Jiran: So the way the statute defines a labor peace agreement is that the two parties, so the establishment that's selling the cannabis and a union, have to enter into an agreement that prohibits the union from picketing any work stoppages, boycotts strikes, that sort of thing and then on the other side, the employers agreeing that they can't lock out employees. A lot of, in fact, probably most collective bargaining agreements have that type of provision in them anyway. And so if there were a unionized workforce in one of these dispensaries or growing operations or whatever, that's likely going to be negotiated by the parties. What I find interesting from the statute, and it's not very clear though, is how does this come into play? It seems like you wouldn't need this labor peace agreement unless there was a union involved. The statute doesn't really say that, right?

Sarah Westby: That's right.

Gabe Jiran: I don't know, we'll have to see how it plays out. But the statute defines it fairly narrowly to this labor peace agreement and dealing solely with the work stoppages or locking out of employees  and my guess would be that legislative history shows that this is designed so that there's not disruptions in work and that sort of thing that are caused by these economic tools that either the employer has, or the union has if there's any disagreements.

And it also provides if there's any issue with the labor peace agreement or any violation of it, that it's submitted to arbitration. And that again, I think it goes with the idea that by submitting to arbitration which is generally viewed as a better way to resolve disputes between a labor union and an employer, that they're trying to avoid these things happening and have a more stable operation involved. I want to make a distinction though, and because the statute doesn't say anything about a labor neutrality agreement and there another concept in the labor world, which is a neutrality agreement, I would say if a union is organizing or trying to organize a group of employees that the employer would agree not to oppose the union. So what normally happens in organizational campaigns is that the employer can run an anti-union campaign which says, we don't think our employees need to join a union. There's nothing that I found in the statute. Have you seen anything different that requires that neutrality piece?

Sarah Westby: I have not.

Gabe Jiran: Okay. So I don't think that's what they meant by the labor peace agreement, but we'll have to see if there's any changes to the legislation on this. So the normal rules would apply. If you own a cannabis business and the employees tried to unionize, the employer can make a choice whether they want to run a campaign that says that the employees don't need a union or not, and that's not a requirement of the statute, but it appears that if you get to the point where you're actually having a union that's going to represent your employees, you have to have this labor peace agreement. I think that would be important for these employers to look at as they move forward. There's this question that's eating at me though, which is these are going to be private entities under the statute, which is governed by federal law, but marijuana is still illegal or cannabis is still illegal under federal law. So how does that all jive?

Sarah Westby: It's a great question and it's unclear. Typically, the NLRA would govern unionized activity in the private sector. However, as you know, cannabis is still legal on a federal level. There actually have been some cases in which employees challenged their cannabis employers' practices under the Fair Labor Standards Act and the courts in those situations held that, even though cannabis was still illegal on the federal level, that doesn't give an employer license to violate other federal laws like the FLSA. That argument of, well, this is an illegal industry and so no federal law should govern, has not gone anywhere in the few cases that have looked at this issue. And so I think we can expect that in addition to the NLRA and the FLSA, other federal statutes like the anti-discrimination statutes in title seven, and the Americans with Disabilities Act should also apply to employers and employers should expect that they'll have to abide by those laws. But on the other side of the coin is the preemption question of these state laws that address labor peace agreements in cannabis. And the question is, if these state laws are imposing requirements that are conflicting with, or somehow inconsistent with the NLRA, are they preempted by the NLRA? And it's an open question. Some cannabis workers might fall within the agricultural exception to the NLRA in which the statute doesn't cover those workers. Other states might take the position that because they're regulating the industry, they are market participants and so there's an exception to the NLRA in that sense. But we don't have any clear case law on point.

Gabe Jiran: Just for the sake of our audience, the NLRA is the National Labor Relations Act which applies to private entities on the federal level and governs the relationship between unions and employers. It also though has provisions that apply to non-unionized employees if they're engaging in concerted protected activity. This issue of preemption is if you've ever dealt with a preemption question legally, it's extremely complex and so I'm sure that there's going to be some cases that talk about this and we'll have to see how those play out. But, something you said was interesting about the other laws, you used the anti-discrimination laws. I think it would be a stretch to say a cannabis business can discriminate just because cannabis is not legal at a federal level, don't you agree?

Sarah Westby: Absolutely. And of course, in Connecticut we have the Connecticut Fair Employment Practices Act which would also apply.

Gabe Jiran: Fair enough and that's something to keep in mind too, is that if there are state equivalents and the state has made the cannabis industry legal, then you would still have protections from our state law. And that, you know, I'm just trying to think here, but with only a few exceptions probably, any protective rights for employees often have a state equivalent.

Sarah Westby: Particularly within the state of Connecticut. And I think the main takeaway here is that employers should not assume that just because cannabis is still illegal on a federal level, that they don't need to comply with the federal laws that would otherwise govern their business.

Gabe Jiran: Just think, aside from anti-discrimination thing about the Americans with Disabilities Act, we have a state law that's similar, a little bit more generous than the federal law here in Connecticut. And certainly if you had an employee who was working in your cannabis business and said, "I need an accommodation because I have some sort of disability," I think you're going to have to look at that and treat it as you would for any other employee.

Sarah Westby: Definitely.

Gabe Jiran: Okay. Well, there's a lot of questions I think that have yet to be resolved, but we'll watch this very closely. Something we haven't talked about that we're going to discuss in our next episode, part two of this discussion will be for employers who are not in the cannabis industry, what is the effect of this new law with recreational cannabis and how can an employer regulate it and what rules apply, that sort of thing. So, Sarah, if you would join me for that, we can talk about that on our next episode.

Sarah Westby: Yes.

Gabe Jiran: Looking forward to it.

Okay, great. Well that, concludes our episode for today. I want to thank everybody for listening again, and we want to make sure that you join us for our future episodes. In addition to the episode I just mentioned where Sarah will be coming back, we have some others that will be upcoming and we hope that you listen soon. Thank you.

HOST: Thank you for joining us on this episode of From Lawyer to Employer: A Shipman Podcast. This podcast is produced and copyrighted by Shipman & Goodwin LLP, all rights reserved. The contents of this communication are intended for informational purposes only and are not intended or should not be construed as legal advice. This may be deemed advertising under certain state laws. Subscribe to our podcast on Spotify, Apple Podcasts, Google Podcasts, or wherever you listen. We hope you will join us again.