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On June 30, 2022, Governor Gavin Newsom signed AB 195 into law as a budget trailer bill. The new law took effect immediately and makes wide-ranging changes to California’s cannabis policy. Some of the key changes include: (1) elimination of the cannabis cultivation tax; (2) capping the cannabis excise tax at 15% for the next three fiscal years; (3) increasing penalties for unlicensed cannabis operators; (4) new tax benefits for social equity cannabis businesses; (5) new tax credits in the amount of $40 million; and (6) the creation of a $20 million Cannabis Retail Access Grant Program to encourage more localities to permit commercial cannabis.
In addition, the new law makes substantial changes to the labor peace agreement requirements for commercial cannabis businesses, including the following:
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Lower Employee Threshold for Labor Peace Agreements. Currently, applicants for a commercial cannabis license with 20 or more employees must sign and abide by a “labor peace agreement” with a bona fide labor organization. Those with less than 20 employees must provide a notarized statement promising that they will enter into a labor peace agreement within 60 days of employing their 20th employee. Under the new law, the employee threshold will be lowered as of July 1, 2024 to just 10 employees. The Department of Cannabis Control (“DCC”) will not renew a license unless the licensee provides a statement that it has already entered into a labor peace agreement and promises to abide by its terms.
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Labor Peace Agreement Compliance To Be An Ongoing Condition Of The License. The new law also makes compliance with the terms of a labor peace agreement an ongoing condition of a commercial cannabis license. Furthermore, licensees seeking license renewal will be required to attest under penalty of perjury that they are in compliance with their labor peace agreement.
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Labor Involvement In License Enforcement Matters. To ensure compliance with the licensee’s labor peace requirements, the new law gives unions and current or former employees the right to initiate formal complaints with the DCC alleging that the licensee has not complied with their labor peace agreement. Moreover, if the complaint is found to have merit, the DCC may fine the licensee, suspend or revoke the license, or place the licensee on probation. In addition, those same parties are now explicitly authorized to file formal complaints with the California Agricultural Labor Relations Board if they believe that a licensee has entered into a labor peace agreement with a labor organization that is not bona fide. The ALRB will issue a report within 90 days. If the allegations are substantiated, the labor peace agreement will be deemed null and void and the licensee will then have up to 180 days to enter into a new agreement with a bona fide union.
A Labor Peace Agreement is an important business agreement with wide ranging implications. Licensees and license applicants alike should consult with experienced cannabis labor counsel to understand the ramifications of entering into a Labor Peace Agreement and the consequences for non-compliance. When the Labor Peace requirements of the new law go into effect on July 1, 2024, the stakes are even higher.
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