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What To Expect When Your Cannabis Business Is Expecting A Union Campaign

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Businesses entering the provisional license stage in Connecticut’s nascent adult-use cannabis market are beginning to grapple with labor and employment issues. In addition to hiring a workforce, prospective cannabis businesses must also consider the role of organized labor. The Responsible and Equitable Regulation of Adult-Use Cannabis Act (the “Cannabis Act”) contains specific requirements for cannabis businesses pertaining to labor unions. Unionization of cannabis employees is a growing trend across the country. This may be unfamiliar territory, particularly for new cannabis business owners and supervisors, and it is important that employers know what they can and cannot say and do when expecting, or responding to, employee efforts to form or join a union.

State Labor Agreement Requirements

The Cannabis Act gives a nod to organized labor in two ways. First, a cannabis business must enter into a Labor Peace Agreement (“LPA”) with a labor union as a condition of final licensure. While this agreement does not require the cannabis business to employ unionized workers, it does require neutrality, meaning, among other things, that the cannabis business agrees not to lock out employees, and the labor union is prohibited from engaging in picketing, work stoppages and boycotts. LPAs must also provide that binding arbitration by a neutral arbitrator is the only available remedy to address an alleged violation of the agreement. Many cannabis businesses in Connecticut have signed LPAs with little fanfare.

Cannabis businesses are also required to enter into a Project Labor Agreement (“PLA”) with contractors and subcontractors for construction and renovation projects valued at $5 million or more. The $5 million threshold refers to the total contract price quoted. PLAs establish uniform terms and conditions of employment for all construction labor on the project; prohibit strikes, lockouts and similar job disruptions; and allow contractors and subcontractors to compete for contracts without regard to whether they are parties to other collective bargaining agreements.

A Growing National Trend Toward Unionization of Cannabis Workers

There has been substantial union activity in states where cannabis has been legalized for recreational use and retail sale. For example, cannabis workers in Colorado, Illinois, Massachusetts, California, Rhode Island, New York, New Jersey, Maryland and Washington, D.C. have joined unions in waves. Consistent with this trend, Connecticut labor unions have been proactive in trying to recruit Connecticut cannabis workers and increase their membership. This activity can be overwhelming to businesses that are already struggling to manage an ever-changing legal landscape, comply with complex regulations, and finance a new business. Nevertheless, cannabis businesses must ensure they do not interfere with employees’ right to form a union under the National Labor Relations Act or Connecticut State Labor Relations Act.

Maintaining Neutrality Between Cannabis Employers and Cannabis Workers

To steer clear of an unfair labor charge, cannabis businesses should be mindful of what the term “neutrality” means. Although the Cannabis Act does not explicitly define the parameters of what it means to be neutral, here are several considerations based on typical neutrality agreements, which are likely contained in LPAs that have already been signed by cannabis businesses:

  • Neither party should conduct itself or communicate about the other party in a manner that is negative, derogatory or demeaning during any organizing effort;
  • Neither party should conduct itself or communicate about labor unions or employers generally in a manner that is negative, derogatory or demeaning during any organizing effort;
  • Neither party should engage in conduct or delay tactics, nor make threats or misrepresentations, which may frustrate or interfere with employee efforts to select union representation;
  • Neither party should provide support to any person, group or entity opposed to the neutrality principles of the agreement;
  • Neither party should commit any unfair labor practice, such as coercively questioning employees about their union sympathies or prohibiting employees from talking about a union during work time when they are otherwise permitted to discuss other non-work related topics; and
  • The employer, and the employer’s agents, should not campaign to oppose union representation.

Cannabis businesses may look at these neutrality provisions and wonder what they can say or do amid a union campaign. Ultimately, the terms of the LPA will govern what employers are able to say and do, but here are some examples of activities that are generally acceptable:

  • Offer facts or opinions that cannot be perceived as negative, derogatory or demeaning toward any labor union;
  • Share verifiable factual information with employees, such as sharing the costs associated with being a part of a union;
  • When asked, communicate that it does not object to the unionization efforts;
  • Take reasonable steps to ensure that their workers do not feel threatened or harassed by a union representative;
  • Provide equal access to labor unions seeking to represent its employees; and
  • Truthfully respond to misrepresentations by any labor union.

This list provides some guidance about what cannabis businesses can do with respect to union campaigns, but is not exhaustive. Shipman’s experienced team of labor and cannabis lawyers is available to answer any questions cannabis businesses may have, and provide more information about navigating the union petition process from the employer’s perspective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

SOURCE MONDAQ



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Minnesota Office of Cannabis Management Issues Rejections to Majority of Social Equity Applicants

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The Minnesota Office of Cannabis Management (“OCM”) has begun issuing final denials to the overwhelming majority of previously qualified social equity applicants (“SEA”s) ahead of its first statewide cannabis lottery on December 2 for 280 available “preapproval” cannabis licenses.

Flag of Minnesota in Marijuana leaf shape. The concept of legalization Cannabis in Minnesota. Medical cannabis illustration.

Per reporting from MJ Biz Daily, “The applicants who are barred from the lottery failed to complete the application process or acted improperly by submitting multiple applications or disguising the true investors in their companies, according to [OCM].” Obviously applying for more licenses than is allowed and/or concealing owners or financial interests are clear grounds for SEA application rejection. Other alleged “deficiencies” though may not be so cut and dry.

While state law does not permit appeals from denied applicants (which is not uncommon for states with cannabis licensing programs), impacted SEAs can still secure a review of their records submitted to the OCM within seven days of the rejection decision (by logging into their Accela Citizen Portal and pulling the internal record there).

The main issue emerging as a result of these rejections is the fact that the OCM did not consistently issue deficiency notices to rejected applicants if there was a material problem with their submitted applications (although as of October 16, the OCM had sent out deficiency notices to over 300 SEAs). In turn, there are instances here where SEAs were rejected for minor, seemingly non-material deficiencies in their applications (things like submitting incorrect corporate documentation that still contained the same information the OCM sought, or re-submitting documents upon request by the OCM only to be rejected for lack of the same document after-the-fact, or even blank denials altogether with no stated reason for rejection).

In an interview with the Brainerd Dispatch, Charlene Briner, the interim director of the OCM, cast these denied SEA applications into four categories:

  • Failure to meet the basic qualifying standards under state law (i.e., social equity applicant owning at least 65% of the business among others)
  • Failure to provide the requisite verification documents (i.e., legitimate business plans, source of funds, ID, etc.)
  • Hidden or inconsistent ownership or true parties of interest
  • Fraudsters (i.e., those trying to game the system by flooding it with multiple applications via proxy or otherwise by using the same address or phone number tied to the same person on multiple applications)

The first and second bullet points above are going to be the ripest ground for rejected SEAs to try to stop the OCM prior to the December 2 lottery, but that’s only if those rejected SEAs can very quickly obtain copies of their submitted documents (within 7 days of the rejection) and start the administrative litigation process and/or seek injunctive relief at the same time against the OCM.

What was once more than 1800 qualified social equity applicants for the lottery has been winnowed down to around 640. The OCM rejected applicants for a multitude of reasons, some of which are clearly legitimate and some of which appear to be questionably enforceable from the perspective of complying with Minnesota’s state constitution and its administrative procedure act.

If you’ve been impacted by an OCM rejection, you do not have much time to act ahead of the December 2 lottery. If you have questions about your potential civil or administrative claims against OCM due to a questionable SEA rejection, contact Jeffrey O’BrienHilary Bricken, or Nick Morgan.

Minnesota Office of Cannabis Management Issues Rejections to Majority of Social Equity Applicants



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Wait? My CBD Business May Be Racketeering? A Potential Existential Crisis We Have Been Warning About

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Even the most responsible hemp operator should understand that it operates in a world full of risk. But I doubt many of them believe they might be accused of racketeering. Last week, the U.S. Supreme Court heard arguments about whether to sanction a commercial trucker’s attempt to bring a racketeering claim against CBD companies, whose allegedly mislabeled products the trucker claims led to his firing.

As always, Sam Reisman at Law360 distills the issue nicely:

The case concerns an allegation that companies sold CBD products with detectable amounts of THC, purportedly costing plaintiff Douglas J. Horn his job as a commercial trucker after he tested positive on a drug test. Oral arguments on Tuesday hinged largely on whether Horn’s claims stemmed from a personal injury — which would be excluded from the Racketeer Influenced and Corrupt Organizations Act, or RICO — or whether his firing was an economic injury and therefore redressable under RICO.

In taking the case, the U.S. Supreme Court could resolve a 3-2 circuit split over whether the civil prongs of the RICO statute allow a plaintiff to seek damages for economic harms stemming from injuries to their person.

Again, from Reisman:

During oral arguments on Tuesday, the liberal wing of the high court expressed skepticism with the CBD companies’ rendering of the case, which they said foregrounded Horn’s ingestion of the product as the source of the injury, as opposed to his firing for a positive drug test.

Lisa Blatt, an attorney for the CBD companies, told the justices that agreeing with Horn’s interpretation of the statute would open the door for virtually limitless personal injury cases under civil RICO, as long as plaintiffs could allege some connection between their ingestion of a product and a loss to their business or property: “Respondent’s rule also leaves the personal exclusion [in civil RICO] toothless, since virtually all personal injuries result in monetary loss,” Blatt said. “It is utterly implausible that Congress federalized every slip-and-fall involving RICO predicates. Personal injuries are serious and may support state tort claims, but they are not the stuff of RICO.”

On the other side, conservative justices attempted to discern how to draw a line between bona fide economic claims and personal injury claims pleaded as economic claims.

Easha Anand, arguing on behalf of Horn, said the vast majority of personal injury claims, such as those alleging pain and suffering or emotional distress, would still be excluded even if Horn was permitted to pursue his RICO claim against the CBD companies: “In your average slip-and-fall case, you’re not going to be able to prove a predicate act, let alone a pattern of predicate acts, let alone a pattern carried on through a racketeering enterprise,” Anand said.

Justice Neil Gorsuch observed, “There’s a failure to warn that this product contains ingredients that your client didn’t know about and should have known about and had a right to know about. I would have thought that that would have been kind of a classic personal injury.”

The Takeaway

This is pretty scary stuff for CBD and other hemp operators. RICO is no joke and carries very serious penalties (both civil and criminal depending on who is bringing the suit).

From the perspective of a CBD manufacturer, it seems unfair to hold the manufacturer responsible to control how its products are used and, as in this case, the implications of that use (here, an alleged economic injury).

If the Court rules that CBD and other hemp manufacturers are subject to RICO charges simply by selling their products to people who do things outside of the manufacturers’ control, it could pose an existential crisis to the industry with potentially unlimited civil (and maybe even criminal) liability. We have warned about this before.

That said, while it’s always difficult to predict how the Supreme Court will vote on any issue, I do not believe the Court will push the hemp industry to the brink. I suspect the Court will either rule that the claims in the present case are personal injury claims excluded from RICO and/or provide guidance for how lower courts should examine such “mixed” claims.

We’ll of course provide additional information once we hear from the Court. Stay tuned.



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What ‘material’ about therapeutic goods is considered advertising?

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It is important to note that advertising health services is subject to different regulations than advertising therapeutic products. Consequently, advertisers, manufacturers and sponsors must evaluate whether their business name could be interpreted as an advertisement for therapeutic goods. If so, they should consider whether the business name, including company or trading names, could be viewed as a ‘reference’ that draws the audience’s attention to medicinal cannabis, as any mention or similar terms to ‘cannabis’ are likely to have that effect. It is essential to recognise that the impact of promoting the use or supply of medicinal cannabis does not depend on a single promotional element but rather on the overall promotion. This includes all components of the promotional information and materials that accompany the name or branding. Advertising can result from the combination of separate statements, images or designs that collectively promote the use or supply of therapeutic goods.

Advertising

The prohibition on advertising medicinal cannabis to the public is determined by the context in which the material is perceived. When evaluating whether information about therapeutic goods qualifies as advertising, it is essential to consider the broader context of the material’s presentation. This encompasses various factors that influence the conveyed message, including the context of the information or activity, the intended audience and their likely interpretation of the message, as well as the presence of non-verbal and unwritten cues, such as visual elements. These factors can significantly affect communication and may alter the message perceived by consumers. 

For example, if an advertisement for a health service, such as a pain treatment service, includes references to medicinal cannabis, even in the company name or trading name, a reasonable consumer may conclude that the advertisement seeks to promote both the use of medicinal cannabis for pain relief and the pain treatment service itself. Including a disclaimer, such as advising the consumer to consult a health professional regarding suitable treatment options, does not exempt the advertiser from complying with legislative requirements.

The distinction between promoting a health service and the therapeutic product utilised in its delivery can be nuanced. Therefore, it is crucial for advertisers to consider how a typical consumer might perceive their advertisement in relation to the promotion of the therapeutic product.

Legal Compliance

To ensure legal compliance in promoting a business or service, advertisers should focus on the health services they provide and avoid referencing medicinal cannabis. For instance, stating “Our clinic offers consultations related to pain management” is a more compliant approach. The Therapeutic Goods Administration’s interpretation of advertising for medicinal cannabis is broad, covering all methods of promoting its use or supply. This includes company names, product names, abbreviations such as CBD and THC, colloquial terms, and any imagery related to cannabis. Any combination of statements or images that implies medicinal cannabis can be considered advertising, even in the absence of explicit promotional language.

Summary

In summary, it is prohibited to mention prescription medications in advertisements for therapeutic goods. If content discusses health conditions and consumers can reasonably infer, either from the context or through direct or indirect references, that medicinal cannabis or any other prescription medication is intended for use concerning these conditions, the content may be deemed an unlawful advertisement for therapeutic goods. Not all information related to therapeutic goods is classified as advertising. However, if the content aligns with the definition of ‘advertise’ as outlined in the Therapeutic Goods Act 1989 (Cth)—which includes anything that is directly or indirectly intended to promote the use or supply of therapeutic goods—then the relevant legislative requirements for advertising such goods must be complied with.

“Indirect intent” in this context does not refer to the explicit intention of the party responsible for the content, but rather to what a reasonable consumer might infer as the intent behind the content. Terms such as “plant-based medicine,” “plant medicine,” “cannabidiol” and “CBD oil,” which relate to medical cannabis products, may be considered promotional if they suggest a connection to medicinal cannabis. Businesses promoting a health service must ensure they do not inadvertently advertise a prescription medicine in their marketing materials. If the consumer is encouraged to seek out a health service based on the therapeutic goods available, the content is likely to be regarded as an advertisement for those therapeutic goods.

For additional information, the Therapeutic Goods Administration has established the Medicinal Cannabis Hub, accessible at https://www.tga.gov.au/products/unapproved-therapeutic-goods/medicinal-cannabis-hub, and has also provided advertising guidance for businesses involved in the medicinal cannabis sector, which can be found at https://www.tga.gov.au/sites/default/files/advertising-guidance-businesses-involved-medicinal-cannabis-products.pdf. These resources are designed to assist both consumers and industry professionals in understanding their obligations.



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