Unionization efforts take center stage in Missouri cannabis
Last year, Greenway reported on the fledgling steps toward unionization in Missouri. While most of those efforts initially failed, the state has seen a renewed effort recently.
Earlier this month, employees at the SWADE dispensary on Cherokee Street filed a petition to seek a vote for unionization.
“SWADE fully supports our employees’ rights and decision to unionize,” said SWADE’s Director of Dispensary Operations, Jack Haddox.
Employees at SWADE, last year, were some of the first in the state to attempt to organize – while that effort ultimately fell short, the company announced changes shortly after to affect worker morale and create one of the state’s most hospitable work environments.
In June of 2022, SWADE announced changes that would see full-time employees move to a four-day work week offering 32 hours per week, additionally, employees received a pay bump, with starting wages for full-time employees moving from $15 to $18.75 hourly. SWADE also offered full medical, dental, and vision coverage with premiums paid, as well as a 401k match program, and an employee discount for those with their medical marijuana card.
While the change to the four-day work week has since reverted back to a standard 40-hour week, the other changes have remained in place according to Haddox. In fact, the increased pay rate was expanded as SWADE now offers an even higher starting rate based on previous cannabis experience, Haddox explained.
Last month, former employees of Shangri-La began picketing amid an ongoing labor dispute.
The company in turn filed suit with the National Labor Relations Board. The suit accuses workers of striking/picketing at a healthcare institution without proper notice.
At the beginning of the year, employees at Bloom in O’Fallon became the first unionized employees in the state to strike. Employees at the O’Fallon dispensary voted to become the second dispensary in Missouri to unionize in July 2022. The first dispensary to unionize, Root 66 on S. Grand voted in April 2022, choosing United Food and Commercial Workers (UFCW) Local 655 to represent the employees.
To date, neither of the two unionized dispensaries has reached a finalized labor agreement.
Dispensaries nationwide have seen an increase in unionization efforts and recent work stoppages have made national news. One of the most high-profile examples occurred on the eve of 420 as workers at three Illinois Rise dispensaries walked out. The strike lasted 13 days, and while the International Brotherhood of Teamsters issued a press release touting a reported 50% wage increase for workers to return, representatives of Green Thumb Industries GTI have publicly disputed that statement, saying that the company “did not offer a wage increase to end the strike or pay employees to cross the picket line,” and that “negotiations are still ongoing.”
From the outside, Missouri looks ripe for new unionization opportunities – with sales tripling or more at many retail locations around the state, while employees see an increase in work but in many cases have not seen a corresponding increase in pay.
While UFCW has started to spread recruitment efforts outside of the St. Louis area, the Teamsters have recently launched a handful of initial efforts as well.
So why aren’t dispensaries paying employees more?
While it’s true that Missouri dispensaries have seen an explosion of traffic and volume since recreational sales began in February, says one operator, that only tells part of the story. The rising cost of wholesale flower has resulted in price increases for both flower and manufactured products which feed into decreased margins for many of the state’s licensed retailers.
Greenway’s Missouri Cannabis Industry Operator Survey earlier this year, more than 60% of respondents said their operations did not meet initial expectations after launch. Additionally, 39% of the state’s licensed operators were still not profitable even post adult use legalization.
While many Missouri operators are seeing a rise in revenue, companies are still faced with additional burdens. Operators are working to expand operations to meet rising demand, and those who have already expanded operations or hired additional staff are now using new revenues to reinvest in their companies, pay off outstanding debts, or repay lenders and investors.
For dispensary operators in particular, these issues are perhaps the most significant. Dispensaries traditionally operate with lower profit margins than cultivators and manufacturers in legal cannabis markets. As prices on flower and biomass go up the wholesale prices to the dispensary inflate as well. While dispensaries can pass the additional cost on to consumers, prices that inflate too quickly cause consumer backlash and in a competitive market those sudden shifts can mean customer loss.
Additionally, cannabis businesses are adversely impacted by Section 280E of the Internal Revenue Service tax code which effectively disallows a majority of the deductions taken by a non-cannabis business for typical expenses due to the federal illegality of cannabis. This results in higher tax liabilities and challenges such as cash-based operations and disproportionately high effective tax rates.
“Let’s tackle the myth that dispensaries are now ‘flush with cash,” explained MOJO Dispensary’s Dana Sullinger. “That just means that people do not understand 280E taxation for dispensaries. 280E taxation disallows many deductions for dispensaries. Imagine running a business where you have no deductions. That makes the essential tax rate that you pay 70% vs 30% for a regular business. You can’t deduct what you pay your employees, rent, utilities, advertising, fees to the State, office supplies, etc. None of it is deductible. You can only deduct what you paid for product.”
“Let’s say that after deducting the cost of product from your sales for the day that you made $5000 profit. Now take away taxes of 30% ($1400) and you now have $3600 left. My daily expenses are $3800 for employees, utilities, rent, etc. Subtract $3800 from $3600 and I am left $200 in the hole.”
“A regular business would take their $5000 profit and subtract their expenses of $3800 leaving $1200. From that, subtract taxes of 30% ($360) and they have a profit of $840.”
“I went in the hole while a regular business made a nice profit,” Sullinger continues, “Most of the time dispensaries are just hoping to pay their employees and break even. You would have to do a lot of business to get to the point where a dispensary makes money. The only one making any money is the Federal Government, which is why they seem to drag their feet on removing cannabis from Schedule I status which would remove dispensaries from 280E taxation.”
All of this, while dispensaries are currently hiring additional help to compensate for the increased foot traffic and consumer demand.
While supply issues are temporary the increased need for additional labor and larger inventory orders are here to stay.
What is the cost to dispensaries?
The average pay rate for retail employees in Missouri as of May 31, is approximately $10.64 an hour according to ZipRecruiter. In the cannabis industry the average pay rate for retail workers is just above $15 per hour according to data collected by Greenway. In January, when workers at Bloom went on strike, part of their list of demands called for wages to be raised to $25.00 hourly and for salaried employee pay to be increased to $65,000 annually.
For a dispensary currently employing 10 hourly workers paid $15 per hour and two managers who make $40,000 annually, the cost to meet that demand would amount to more than $250,000 for that single location.
While dispensary operators and other licensees attempt to balance increased labor needs with higher overhead costs, those outside the industry look on with an incomplete understanding of what is happening.
As the industry itself pushes to recruit new talent, more than 30 open positions for dispensary staff currently list starting wages at or above $20 per hour, the cost to retain existing employees increases as well.
“As far as Unions go, I’m not sure it makes a whole lot of sense to impose Union rules on a dispensary,” Sullinger said. “If what you gain from negotiations just gets paid back out in Union dues, did you really benefit from it? If we no longer had to deal with 280E taxation, you would definitely see an increase in wages and benefits. Using a Union to force it could easily put a dispensary back in the red. It would probably mean the end of independent dispensaries as they would not have the resources to continue. That means that a lot of the brands that you find at independent dispensaries would no longer be available to you. Unionization could ultimately hurt the consumer’s choice,” she concluded.
Operators hope to see successful Unions become more proactive in partnership
One of the biggest takeaways from our conversations with dispensary operators in Missouri when discussing unionization is value.
Unions, historically, give members bargaining power, but they also provide needed resources and training, something that has yet to be fully developed in Missouri to date.
There are currently no formal training or educational programs specifically designed for cannabis employees in Missouri provided by unions.
Last year, Greenway spoke to Michael Kaemmerer of McCarthy, Leonard & Kaemmerer, and Robert Kaiser of Armstrong Teasdale, asking many of the questions that operators and employees are faced with regarding unionization in Missouri.
“Unionization is not necessarily common in new or emerging industries, but unions do look for inroads in particular industries in order to expand membership,” Kaiser said at the time. “Unions are in the membership business and members form the basis of their revenue stream. New or emerging industries may provide an opportunity to expand that revenue stream.”
Understanding the process
“The normal process is that a Union will, unbeknownst to the employer, collect ‘Authorization Cards’ from employees,” Robert Kaiser explained. “The Union can then approach the employer with those cards and demand that the employer voluntarily recognize the union.”
Kaiser cautions businesses against voluntary recognition, “The employer should not look at or accept the cards, but should require the Union to go to an election.”
The NLRB (National Labor Relations Board) requires at least 30% of workers to sign cards or a petition saying they want a union. “Most unions won’t seek an election at 30%, it’s numerical – why would a union think they would win an election if only 30% of the employees are even interested,” Michael Kaemmerer explained.
From there, the NLRB will conduct an election. It generally takes the labor board approximately six weeks to determine who is eligible to vote and schedule the election. During the time leading up to the vote, like any election, a campaign begins.
“Employers should expect union business agents to talk to their employees, often on a parking lot, or even at their homes. There is also typically at least one employee ‘insider’ who is also talking to coworkers,” Kaiser explained. “The employer should make sure all supervisors and managers understand the ‘Do’s and Don’ts’ in a campaign to make sure they express their perspective in a lawful way. This does involve training, typically from a labor lawyer,” Kaiser said.
“Employers should remember the old acronym, T.I.P.S., to succinctly describe the prohibited behaviors in that time,” advised Kaemmerer, “ T is for threaten, I for interrogate, P is for promises, S would be surveillance.”
“Employers can’t threaten employees or say things like, ‘If you unionize I’m closing this place down,” Kaemmerer explained. “Employers can’t interrogate employees. You can’t say, ‘Why are you doing this, who is behind this’ – the who, what, where, when, and why when asked by the employer of the employee is impermissible.”
Employers also can’t try to dissuade employees from organizing via promises, Kaemmerer said. “Promises are the exact opposite of threats, employers can’t go to employees and say ‘Sorry, you were doing this, but what if we gave you a raise?”
Employers can’t make efforts to observe employees, “I hear there’s a union meeting tonight, I can’t drive-by to count and identify cars,” Kaemmerer explained.
“Conversely, employers have free-speech rights, meaning as long as they don’t threaten or use restraint or coercion, they have the ability to produce facts and inform employees of what the employer perceives as the potential negatives of a union organization.
“That may be union dues or the fact that in most cases all matters proceed through the union and workers risk losing individuality for the collective. There is, of course, always the risk of strikes,” Kaemmerer said.
If a majority of eligible employees who vote choose the union, the NLRB will certify the union as their representative for collective bargaining.
Once a union has been certified or recognized, employers are then required to bargain over terms and conditions of employment with union representatives.
While many see employer opposition to unions as a move motivated purely by profit, Kaiser says that’s often not the case. “[Unionization can lead to] poor communication, less efficiency and flexibility, protection of poor performers, and increased costs, to name a few.”
Aside from the impact faced by employers, Kaiser explains that there can be negative impacts felt by employees as well. “Employees lose individualization, rewards that are individual and merit-based (as opposed to collective), and an open relationship with their supervisor. They may end up paying the union for things they get for free.”
“People believe, oftentimes, that they will get more or do better sooner, but that manifests no understanding of the system,” said Kaemmerer. “There is no such thing as a standard labor contract. Certainly not in this industry, and if there were it would be on an individual matter as each dispensary operates independently and uniquely. Unionization is hardly a guarantee of better circumstances, it’s a goal. In the end, you may like it better, it may stay the same, or you may like it less. There are no certainties.”
So why do employees unionize?
Kaiser says there are many reasons why employees may choose to unionize, “The most common include: fear or dislike of supervisors or management, seeking protection against discipline or work rules, pay or benefits, or a romanticized perspective on unions and ‘solidarity.”
Kaemmerer adds, “[Employees unionize when] they have employers who have little credibility, they have said or done things that at this point are beyond redemption. It has caused employees to lose trust. Sometimes there’s one precipitating occurrence that has so irritated the employees that they are livid.” Kaemmerer described a hypothetical situation where a sudden change to healthcare rates would be that lightning rod type of event. “An employer tells their employees, you were paying $10 per week for health insurance, I’m sorry I have to raise it to $60. That, to me, real-world is how it translates to what we see most often.”
What should Missouri’s cannabis operators do to prepare their businesses?
“The principal reasons [that employees do not unionize] often reflect the flip side,” Kaiser explained. “[Employees who] like or respect their supervisor, feel like they are being treated fairly, feel like they already have direct access to management [often don’t see a need to unionize].”
For Kaiser, unionization is often less about the industry and more about individual businesses and workplaces. Fostering a healthy and productive environment is key to mutual success he explains, “Open and transparent communication and expectations is not unique to combatting unionization; it reflects good business practices. Employees should understand expectations and managers should be approachable, consistent, and empathetic,” Kaiser said.
“Communication is crucial,” Kaemmerer said, “Employers who monitor situations, keep their ear to the ground and adapt to needs and changing ideas, and are forthright, honest, and fair in their dealings create an environment where people don’t expect you to do what they want, but to tell them what the rules are and even-handedly enforce them.”
Some quotes used in this story were taken from a previous interview with Michael Kaemmerer of McCarthy, Leonard & Kaemmerer, and Robert Kaiser of Armstrong Teasdale.
