Published August 1, 2026
A Fight Most Operators Don’t Know They’re In — Until Their License Depends On It
Here’s a requirement buried in the licensing rules of most big legal-cannabis states that rarely makes headlines but shapes the industry more than almost anything: to get or keep a license, you often have to sign a labor peace agreement.
An LPA isn’t a union contract. It doesn’t force you to hire union workers or pay union wages. What it requires is neutrality — you agree not to lock out employees, not to interfere with organizing, and, critically, to give unions early access to your workforce and management. In practice, it’s a powerful thumb on the scale for unionization, baked into the price of doing business. California, New York, New Jersey, Connecticut, Oregon, and Rhode Island all have some version of it.
And right now, that requirement is the subject of a quietly ferocious legal war playing out across the federal courts — one that’s produced contradictory rulings, turns on a genuinely mind-bending paradox about cannabis’s federal illegality, and could reshape the balance of power between operators and unions across the entire industry. Almost nobody outside labor-law circles is tracking it. Here’s what’s actually happening.
Why States Require LPAs in the First Place
Start with the “why,” because it explains the whole fight.
Normally, private-sector union organizing is governed by one federal law — the National Labor Relations Act (NLRA) — enforced by one federal agency, the National Labor Relations Board (NLRB). States generally aren’t supposed to legislate in that space; it’s federal turf.
But cannabis is federally illegal, which left a vacuum. As legal weed grew, unions — led by the United Food and Commercial Workers (UFCW), which now says it represents more than 11,000 cannabis workers across some 400 dispensaries and 60 production facilities — pushed states to write labor peace into cannabis licensing itself. The political logic was clean: the industry needs state licenses to exist, so make union-friendly neutrality a condition of the license. States, receptive to union pressure and building brand-new regulatory regimes from scratch, largely obliged. LPA mandates became one of the ways cannabis was supposed to be a “better,” more worker-friendly industry than the ones that came before it.
The Challenge: “This Is Federal Turf, and You’re Trespassing”
Operators have started fighting back, and their core legal argument is preemption.
The claim goes like this: union organizing is exclusively the federal government’s domain under the NLRA. When a state forces cannabis businesses into labor peace agreements — dictating neutrality, mandating union access, chilling an employer’s federally protected right to speak against unionization — the state is regulating labor relations that federal law reserves to itself. Under the Supremacy Clause, that state overreach should be preempted — struck down as unconstitutional.
There’s real precedent behind this. Back in 1976, the Supreme Court held that states can’t regulate labor-management matters that Congress deliberately left unregulated under the NLRA. LPA mandates arguably do exactly that. Several attorneys have long believed a well-built preemption challenge has a genuine shot — and in at least one state, it just landed.
The Split: Oregon Says Yes, California Says “We Can’t Even Look”
Here’s where it gets genuinely strange, because two federal courts looked at essentially the same argument and reached opposite results — for reasons that have nothing to do with labor law and everything to do with weed’s federal status.
Oregon — the operators won. In Casala, LLC v. Kotek, the U.S. District Court for Oregon ruled in 2025 that Oregon’s LPA requirement “is preempted by the NLRA in violation of the Supremacy Clause and violates Plaintiff’s First Amendment rights.” The court enjoined enforcement against the plaintiffs. That’s a clean, powerful win for operators — a federal court agreeing that forcing cannabis businesses into labor peace tramples both federal labor law and free-speech rights. It’s now on appeal to the Ninth Circuit, which makes the Ninth Circuit’s eventual ruling one of the most important things in cannabis labor law.
California — the court refused to decide. Months earlier, a challenge to California’s nearly identical LPA mandate was dismissed — but not on the merits. The Southern District of California ruled it couldn’t even reach the preemption question, invoking the equitable “unclean hands” doctrine: because the entire cannabis industry is technically federally illegal, a federal court wouldn’t grant relief to a federally illegal business. In plain terms: you’re breaking federal law just by operating, so you don’t get to come to federal court asking us to enforce federal law on your behalf.
Sit with that contradiction. In Oregon, cannabis’s relationship to federal law got the mandate struck down. In California, cannabis’s federal illegality is the very reason the court wouldn’t touch it. Same industry, same type of law, opposite logic.
The Paradox at the Heart of It All
This is the part that makes the whole fight almost philosophical, and it’s the thing no mainstream coverage has drawn out clearly.
Cannabis’s federal illegality is being wielded as both the sword and the shield — by both sides, depending on which serves them.
Operators use federal illegality as a sword. In the New York challenge to the MRTA’s LPA mandate, the cannabis retailer made a striking move: it argued that New York can’t claim the kind of proprietary interest in cannabis businesses it uses to justify the LPA requirement — because having a proprietary interest in a federally illegal enterprise would itself violate the Controlled Substances Act. In other words: your own justification for this rule is illegal under federal law. The business is using weed’s illegality as a weapon against the state.
Courts and states use federal illegality as a shield. California’s court used that same illegality to slam the courthouse door — you’re illegal, so we won’t help you. A state can effectively say: the NLRA preemption argument assumes you’re a legitimate federally-cognizable business, but you’re not, so the federal framework you’re invoking doesn’t protect you.
The same fact — “cannabis is federally illegal” — simultaneously strengthens and destroys the operators’ case depending on which court, which doctrine, and which angle. It’s one of the purest examples of how the state-federal cannabis contradiction warps every legal question it touches.
The Wild Card: The NLRB Isn’t Even Functioning
Now layer on the fact that quietly makes this whole area a mess: the NLRB currently lacks a quorum and may for the foreseeable future. The agency that’s supposed to be the sole authority on union organizing — the very body whose exclusive jurisdiction underpins the preemption argument — can’t fully operate.
That does two contradictory things at once. It strengthens the states’ practical position (if the federal agency can’t act, someone has to govern cannabis labor, so why not the states filling the void?). And it muddies the preemption claim (it’s harder to argue the NLRA occupies the field when the body enforcing it is dark). For operators and unions alike, it means there’s no clean federal answer coming soon — just a widening patchwork where the same conduct is legal in one state and enjoined in the next.
Complicating it further: even as courts debate whether federal labor law preempts state cannabis LPAs, an NLRB administrative law judge has separately exercised NLRA jurisdiction over a cannabis company — ruling it illegally laid off workers. So federal labor law reaches cannabis employers when it wants to hold them liable, even while its applicability is being litigated elsewhere. The inconsistency is the whole environment.
What This Means for Operators
Strip away the doctrinal tangle and here’s the practical reality for anyone running or investing in a licensed cannabis business.
Your LPA obligations depend entirely on your state — and they’re unstable. An Oregon operator has a court ruling in the industry’s favor; a California operator has a court that won’t even hear the argument; a New York operator is mid-fight. Same business model, radically different labor-law exposure by geography. If you operate across multiple states, you’re managing a patchwork that could shift with the next ruling.
Watch the Ninth Circuit. The Casala appeal is the case to track. A Ninth Circuit ruling upholding preemption would ripple across every LPA state in the circuit and hand operators a template; a reversal would re-entrench union leverage. Either way, it’s likely the most consequential cannabis-labor decision on the horizon.
Don’t stop complying while it’s unsettled. However sympathetic the preemption argument, LPA mandates remain enforceable in most states right now, and losing a license over a bet on a future ruling is a catastrophic way to be right too early. The move is to track the litigation and keep counsel close — not to preemptively defy the requirement.
Understand what’s really being decided. This isn’t a narrow technicality. It’s a fight over whether unions keep the structural advantage states handed them, or whether cannabis employers get the same right to resist organizing that every other private employer has. Billions in labor costs and the entire balance of workplace power in a maturing industry ride on it.
The Bottom Line
The cannabis industry was supposed to be different — cleaner, fairer, more worker-friendly than the industries before it, and mandatory labor peace was part of that promise. Now that promise is colliding with federal labor law, the First Amendment, and the same maddening federal-illegality paradox that distorts everything else about this business.
The outcome will quietly shape cannabis for a decade: who holds power in its workplaces, what it costs to operate, and whether “federally illegal” ends up being the industry’s greatest vulnerability or, bizarrely, one of its most creative legal weapons. Most operators don’t know this war is being fought. The ones who win it will be the ones who saw it coming.
Tracking the legal fights that will define cannabis as a mature industry — follow the rest at our Cannabis Business hub.
Sources:
Shipman & Goodwin LLP (the NY MRTA challenge, the federal-illegality-as-sword argument, CA dismissal): https://www.shipmangoodwin.com/insights/a-new-challenge-to-mandatory-labor-peace-agreements-is-filed-while-another-is-dismissed.html
The Blunt Truth / Foley (the Casala v. Kotek Oregon ruling — NLRA preemption + First Amendment, the state-by-state landscape): https://www.blunttruthlaw.com/2025/11/update-on-lpa-requirements-for-licensure-in-legal-cannabis-states/
Shipman & Goodwin LLP (NLRB exercising jurisdiction over a cannabis company; the five-state LPA list; the preemption strategy): https://www.shipmangoodwin.com/insights/nlrb-exercises-jurisdiction-over-cannabis-company.html
Bloomberg Law (UFCW’s 11,000-worker/400-dispensary footprint, the NLRB-power context): https://news.bloomberglaw.com/daily-labor-report/cannabis-dispensarys-court-loss-delays-attack-on-nlrb-power
Labor Relations Law Insider (the NLRB-quorum problem and its effect on preemption): https://www.laborrelationslawinsider.com/2025/09/update-labor-peace-agreements-the-cannabis-industry-and-the-nlrb/