On Tuesday May 20, 2025, U.S. District Judge for the District of Oregon, Michael H. Simon issued a decision in Casala LLC, d/b/a Bubble’s Hash and Rec Rehab Consulting LLC, d/b/a Ascend Dispensary v. Tina Kotek, in her official capacity as Governor of the State of Oregon, et al., Case No. 3:25-cv-244-SI (D.Or. May 20, 2025), striking down Oregon’s United for Cannabis Workers Act and holding that the law is preempted by the National Labor Relations Act (“NLRA”) in violation of the Supremacy Clause and the First Amendment of the United States Constitution.
Shortly after Oregon’s United for Cannabis Workers Act took effect, two cannabis employers Bubble’s Hash and Ascend Dispensary (collectively, “Plaintiffs”), filed suit for declaratory and injunctive relief, and sought a permanent injunction to enjoin the Oregon Governor, Oregon Attorney General, Chair of the Oregon Liquor and Cannabis Commission (“OLCC”), and Executive Director of the OLCC (collectively, “Defendants”), from enforcing the United for Cannabis Workers Act against them.
Plaintiffs alleged that the law: (1) was preempted by the NLRA and its enforcement would be in violation of the Supremacy Clause of the United States Constitution; (2) was void for vagueness in violation of the Due Process Clause of the United States Constitution; (3) abridged Plaintiffs’ freedom of speech in violation of the First Amendment, as made applicable to the States by the Fourteenth Amendment; (4) infringed on Plaintiffs’ right to equal protection in violation of the Fourteenth Amendment; and (5) disrupts Plaintiffs’ contractual arrangements in violation of the Contract Clause of the United States Constitution.
Following hearing argument on the merits, the Court granted Plaintiffs’ requested declaratory and permanent injunctive relief, concluding that the law was preempted by the NLRA, violated the Supremacy Clause and violated Plaintiffs’ First Amendment rights, and that the requirements for permanent injunctive relief were satisfied. With this decision, the Oregon District Court became the first U.S. District Court to strike down a state law that required cannabis employers to enter into labor peace agreements in order to receive or renew a license to sell cannabis.
On May 29, the OLCC issued the following statement concerning Judge Simon’s May 20 decision: “Earlier this month, a federal judge issued a ruling barring the enforcement of Ballot Measure 119. Given this ruling and in consultation with the Oregon Department of Justice, the OLCC will no longer require labor peace agreements as part of cannabis license application and license renewals.”
United for Cannabis Workers Act
The United for Cannabis Workers Act was passed by an initiative approved by Oregon voters in November 2024 as Ballot Measure 119 (“Measure 119”) and took effect December 5, 2024. Measure 119 requires businesses licensed to sell or process cannabis to enter into labor peace agreements with labor organizations or sign an attestation affirming that the business has entered into such agreement. The businesses must submit such agreements or attestations with their applications for a license, certification of renewal of a license, or certification to dispense cannabis. Oregon law defines a “labor peace agreement” (“LPA”) as “an agreement under which, at a minimum, an applicant or licensee agrees to remain neutral with respect to a bona fide labor organization’s representatives communicating with the employees of the applicant or the licensee about the rights afforded to such employees.
Plaintiffs had both been unable to enter into LPAs at the time of filing.
The District Court’s Decision
As an initial issue, the Court determined that the NLRA likely applied to cannabis businesses and does not limit its jurisdiction to “lawful commerce” or “legal substance” as some other federal laws do. Judge Simon pointed out that the National Labor Relations Board (“NLRB”) has issued advisory memoranda back to 2013 which stated that the medical marijuana industry is within the NLRB’s jurisdiction if the business meets the NLRA’s jurisdictional monetary requirements.
The Court determined that Measure 119 is preempted by the NLRA under Garmon preemption because it does not distinguish between permissible employer speech and threatening or coercive speech and thus impermissibly conditions a state license on an employer “refraining from conduct protected by federal labor law,” which “chills one side of the ‘robust debate which has been protected under the NLRA.’” In other words, Measure 119 chills an employer’s right to speech under section 8(c).
In terms of Machinist preemption, the Court held that by seeking to regulate and forbid certain truthful, non-deceptive, non-coercive speech about unionization and by conditioning license renewal on signing an LPA, Measure 119 sought to regulate the relationship between unions and employers, upsetting the balance Congress struck in passing the NLRA. Thus, it is preempted under Machinist preemption.
With respect to the First Amendment, the Court determined that because Measure 119 requires Plaintiffs to remain neutral with respect to labor organization’s representatives communicating with employees of the applicant or licensee and does not limit its restrictions to only threatening, coercive, false, or misleading speech, it violates Plaintiffs’ First Amendment rights to free speech.
Other States With Similar Labor Peace Agreement Requirements
While not binding on other courts outside of Oregon, given that the decision is the first to strike down a law that requires LPAs for licensure, the decision is likely to be utilized by cannabis businesses in other states with similar requirements, such as California, Rhode Island, New York, New Jersey, Connecticut, and Delaware, among others.[1]
The decision acknowledged and Defendants cited to a recent decision analyzing the California version of Measure 119, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) Ctrl Alt Destroy v. Elliott, 2025 WL 790963 at *7 n.8 (S.D. Cal. Mar 12, 2025) which held that Garmon preemption did not apply because of the local responsibility exception. Judge Simon rejected this conclusion of Ctrl Alt Destroy, pointing out that Measure 119 and MAUCRSA regulate only labor relations of cannabis businesses and do not regulate the sale or use of cannabis. Similarly, Judge Simon rejected the conclusion from the Ctrl Alt Destroy decision on Machinists preemption. Judge Simon reasoned that Machinists preemption seeks to protect balancing only in the labor relations context, not to regulation of the underlying market. Thus, Measure 119 regulates an area that Congress intended to leave to the free play of economic forces.
Takeaways
The OLCC will no longer require labor peace agreements as part of cannabis license application and license renewals in Oregon.
Employers seeking to challenge similar state LPA licensure requirements in other states are encouraged to speak with experienced labor counsel to discuss their options. We will continue to monitor similar challenges as they are filed, and provide additional updates.
FOOTNOTES
[1] Additionally, states including Illinois and Pennsylvania grant preferential treatment to businesses with LPAs when applying for licensure.