Can a criminal enterprise commit an unfair labor practice?

Today, the United States Court of Appeals for the D.C. Circuit ruled on a case involving allegations of unfair labor practices at Curaleaf Arizona, a medical marijuana dispensary. In Absolute Healthcare v. NLRBThe court granted Curaleaf’s motion challenging certain NLRB findings that the company committed unfair labor practices under the National Labor Relations Act.

The fact that Curaleaf is a medical marijuana dispensary makes this case interesting. Although Curaleaf’s activities are legal under Arizona law, they are criminal under federal law. Curaleaf is therefore engaged in a criminal enterprise. It is therefore interesting to say the least that a federal agency (the NLRB) controls Curaleaf’s treatment of its employees. (For an exploration of other curiosities brought about by state-level legalization of the distribution and sale of marijuana, see my book, Marijuana Federalism: Uncle Sam and Mary Jane.)

Judge Millett wrote the committee’s opinion, granting Curaleaf’s motion to the extent it challenged the NLRB’s findings. (Some of the NLRB’s findings were not disputed.) Senior Justice Ginsburg and Justice Walker joined the opinion. Judge Walker also wrote a separate opinion raising the question of whether the NLRA reaches into allegedly unfair labor practices by employers engaged in businesses that remain illegal under federal law.

Congress has authorized the National Labor Relations Board to protect the labor rights of certain employees of certain employers that affect interstate commerce. This is an undeniably broad skill. But it may not be as broad as the NLRB assumes.

Consider the facts of this case. The NLRB ordered a criminal enterprise called Curaleaf Gilbert to pay a drug dealer to sell illegal drugs. This is a curious order from the branch of government charged with faithfully executing federal law.

I can think of three arguments for the NLRB’s jurisdiction over marijuana dispensaries like Curaleaf, but each has its flaws.

First, many people think marijuana should be legal. There are thoughtful people on both sides of this political debate, and the momentum may well be in favor of legalization. But for now, marijuana remains illegal at the federal level, despite the Justice Department’s failure to enforce the law.

Second, Arizona law allows Curaleaf to sell marijuana.6 But federal criminal prohibitions preempt conflicting state laws. And these bans cannot be moved by an advisory memo from the agency.

Third, the NLRB generally retains jurisdiction even after an employer violates a law. Indeed, Congress charged the NLRB with holding employers accountable when they violate federal labor law. But that’s when the business is otherwise legitimate – not necessarily when its sole purpose is to sell an illegal product or provide an illegal service.

This distinction may be more important than the NLRB realizes. After all, networks of bookmakers and counterfeiters affect interstate commerce, but the NLRB appears unwilling to adjudicate their labor disputes. Ditto for street gangs.

Why does this change when a local boy calls himself a “budtender” and his team forms under state law?

For me, at least, the answer is unclear.