Labor Peace Agreements in Minnesota Cannabis Licensing: Is the Requirement Lawful?

Co-authored by Nazeefa Nezami, Summer Associate

As Minnesota’s retail cannabis industry begins to take shape, businesses seeking to enter the market must navigate a complex regulatory framework. One of the requirements is the obligation to enter into and maintain a Labor Peace Agreement (LPA) with a bona fide labor organization. Under Minnesota Statute § 342.14, subd. 1(d), maintaining an LPA is not just a one-time requirement; rather it is an ongoing condition for holding and renewing a cannabis license. While the statute mandates that an LPA must, at minimum, prohibit the labor organization from engaging in picketing, work stoppages, or boycotts, it provides no further guidance on what the agreement must contain or what happens if the parties cannot reach a mutually acceptable agreement.

This lack of clarity creates serious concerns for cannabis entrepreneurs. The statute effectively gives unions disproportionate power in the negotiation process. Labor organizations are requiring employers to agree to broad concessions and waivers of their rights in these LPAs, including granting the union free access to the company’s workplace to attempt to organize the business’s workers, a commitment to remain neutral during an organizing effort, and agreement to waive a secret ballot election and voluntarily recognize the union based upon a card check. If a business rejects these terms, the union will not enter into the LPA. And without an LPA, the business cannot obtain the license. Likewise, only one or two labor organizations in any particular geographic area are entering into these LPAs, giving businesses no alternatives to negotiate a different agreement.  But Minnesota’s statute fails to establish any sort of dispute resolution or appeal process if a business is unable to come to reasonable terms with a labor organization. This puts employers in a difficult position, leaving them vulnerable to delays, uncertainty, and potential coercion.

Minnesota is not the first state, however, to enact such a statute. Several other states, including California, Oregon, and New York have very similar cannabis licensing laws that also include a labor peace agreement requirement. But cannabis businesses have started to push back, and a federal court recently found in the companies’ favor. In Casala, LLC v. Kotek, the U.S. District Court for the District of Oregon struck down Oregon’s LPA requirement, holding that it was preempted by the National Labor Relations Act (NLRA) and violated the First Amendment by compelling employer neutrality on union matters. The court emphasized that the statute improperly conditioned licensure on refraining from federally protected speech and labor practices, upsetting the balance of power Congress intended to preserve under the NLRA. Following the ruling, Oregon’s cannabis regulatory agency announced it would no longer enforce the LPA requirement, setting a strong precedent that could influence similar challenges in other states, including Minnesota.

Fredrikson’s Employment, Labor & Benefits Group is closely monitoring these developments and advising cannabis businesses on how to navigate this evolving legal landscape. If you have questions about labor peace agreements, licensing requirements, or your rights as an employer, we encourage you to reach out to our team.