Following does not work:

rule StateMatch
when
$ca:CandidateAssociation(nurseDetails.stateLicensures excludes patientDetails.state )
then
retract( $ca );
end

public class CandidateAssociation {
private PatientDetails patientDetails;
private NurseDetails nurseDetails;
private int overlapHours;

public CandidateAssociation( PatientDetails patientDetails, NurseDetails nurseDetails)

{ super(); this.patientDetails = patientDetails; this.nurseDetails = nurseDetails; overlapHours = participantDetails.getNumberOverlapHourCnt(nurseDetails); }

[...]
}

public class NurseDetails

{ private Set stateLicensures = new HashSet(); [...] }

public class PatientDetails

{ private String state; [...] }

Edson suggested that the problem is that "not contains" is not a valid operator for MVEL.

Also Noticed that the following workaround did not work:

rule State
dialect "mvel"
when
$ca:CandidateAssociation( eval ( ! nurseDetails.stateLicensures.contains( patientDetails.state ) ) )
then
retract( $ca );
end

This produced this Exception:
org.drools.rule.InvalidRulePackage: Unable to determine the used declarations : [Rule name=State, agendaGroup=MAIN, salience=0, no-loop=false]
at org.drools.rule.Package.checkValidity(Package.java:408)
at org.drools.common.AbstractRuleBase.addPackage(AbstractRuleBase.java:288)
at [...]