The Green Collar Community

Advancing green jobs and resilient communities through cooperative enterprise.


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BREAKING NEWS: LIMITED LIABILITY WORKER COOP STATUTE INTRODUCED INTO CALIFORNIA ASSEMBLY

BREAKING NEWS:

Worker-Owned Job Creation on the Rise: Assemblymember Bonta Introduces California’s First Limited Liability Worker Cooperative Act to Facilitate Worker-Owned Business Development

 Bill introduced in the California State Assembly would eliminate cumbersome requirements of existing law so that local worker-owned and managed businesses can thrive.

 Oakland (February 21, 2014) – The Arizmendi Association of Cooperatives, the East Bay Community Law Center, the Sustainable Economies Law Center and a broad coalition of worker-owned businesses, entrepreneurs, business developers, and community-based organizations championed AB 2525, which would create a new business entity in California tailored to the needs of worker-owned, democratic businesses. Joined by Assemblymember Marc Levine as co-author, Assemblymember Rob Bonta (D-Alameda) introduced the bill stating, “I am proud to work together with this strong coalition in introducing a first-of–its-kind bill to grow jobs and develop our economy by removing barriers to the creation of new cooperatives in California. Worker owned businesses are a central piece to a full economic recovery. AB 2525 will benefit working Californians by not only providing jobs but a means to build long-term wealth and assets for individuals who have traditionally been denied these opportunities.”

“This bill would have been extremely useful if it had been adopted when we were starting our cooperative,” says Alejandra Escobedo, an owner and member of Richmond, California-based cooperative Fusion Latina. “We wanted to use the word ‘cooperative’ in our name to increase awareness about this type of alternative business that benefits disadvantaged communities, but we weren’t allowed to because of existing law. Especially during tough economic times, the Limited Liability Worker Cooperative Act would help immigrants and low-income families to become economically self-sufficient.”

Workers trying to create their own cooperatively-managed businesses face a choice: create a Limited Liability Company (LLC), or use the existing consumer cooperative statute. The LLC does not guarantee that workers will own and control the business over the long-term, and the consumer cooperative requires workers to treat themselves as employees and comply with cumbersome meeting notice requirements. The new bill will create a special purpose LLC, in which workers can be partners in their business, or employees of it. The bill will provide much more flexibility for tax and employment law purposes, to meet workers needs. In addition, it mandates that workers own, and control the business democratically, while allowing them to bring in outside capital investment.

Local entrepreneur Marc Swan founded Local Flavor Catering, as a traditional small business in Berkeley, California in 2003. He converted it to a worker cooperative business structure in 2013. “I believe strongly in worker cooperatives,” says Swan. “I see how in a worker cooperative my co-workers and I are inspired to take entrepreneurial initiative and build our business when we have a real stake in both the risks, rewards and decision-making that goes into building a successful business.”

From our work with community-based entrepreneurs, we have come to recognize the benefits of a dedicated legal structure for cooperatives,” says Sushil Jacob, attorney at the Green-Collar Communities Clinic of the East Bay Community Law Center in Berkeley, California. “The Limited Liability Worker Cooperative Act would provide low-income workers with a clear pathway to create local businesses that will create jobs, address income inequality and stabilize the community.”

The effort is the latest step in a growing movement to strengthen local economies through the creation of small businesses that are democratically owned and operated by their workers. As low-income communities continue to struggle with the dual problems of high rates of unemployment and low-wages, worker-owned, worker-managed small businesses have emerged as an effective way to rebuild the local economy and address economic inequality.


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Richmond’s Immigrant Entrepreneurs On the Rise

Through her work with low-income Latino families at the resource center behind Richmond High, Maria Resendiz has realized that the key to autonomy for the families she serves lies in reaching economic stability and independence.  This was her main motivation in helping a group of women from the city of San Pablo organize and develop a business plan for a worker-owned food business. For help with structuring the cooperative she reached out to us at the Green-Collar Communities Clinic (GC3) of the East Bay Community Law Center.

GC3 has partnered with the group in order to provide the legal assistance necessary to get the project off the ground. Students in the clinic are helping the San Pablo women navigate the licensing and permitting process, draft a partnership agreement, and adapt to the challenges that inevitably arise while launching an enterprise.

Maria’s hope is that the San Pablo women’s business will serve as a model for the rest of the community.  Currently, all of the women are in single income family households, with the majority of their husbands employed in construction and custodial work. By providing free legal services to the San Pablo women, GC3 will help increase their autonomy by facilitating the creation of their own source of income. GC3 will also simultaneously help inspire others who will see a local and tangible example of community members taking the reins of their economic destiny through entrepreneurship and solidarity.

The group plans on making mole, a traditional Mexican sauce, and packaging it for sale to small shops and markets who will then sell it to the end consumer. Though the women had originally envisioned the project as a catering service serving a variety of foods, they soon realized that a focus on a single packaged product would provide a more reliable source of clients and require less labor. GC3 is currently in the process of researching the permits required for the group to sell their mole—prepared in a commercial kitchen—to shops and specialty supermarkets. With a renewed business plan, newfound determination, and the help of GC3, the San Pablo group hopes their mole will be able to hit the market in the near future.

The group will then join a long legacy of immigrant entrepreneurs that have historically created businesses at greater rates than the general U.S. population. According to the U.S. Small Business Administration’s report “Immigrant Entrepreneurs and Small Business Owners, and their Access to Financial Capital” immigrants have higher business ownership and formation rates than non-immigrants and roughly one out of ten immigrants owns a business.

This project is a prime example of the work we strive to do here in our clinic. The mission of GC3, a community-economic development clinic at the East Bay Community Law Center, is to advance green jobs and resilient communities through cooperative enterprise. We are the first legal clinic in the country that focuses on incubating cooperatively-owned or cooperatively-managed businesses in low-income communities. Recently, we have expanded our services in order to directly reach low-income micro-enterprises, particularly in the City of Richmond’s Latino community. GC3 endeavors to help these entrepreneurs overcome the unique challenges they face due to language barriers and immigration status. We do this by advising clients on how to legally own a business, obtain required business permits, and protect their personal assets.

GC3’s involvement goes beyond permitting and entity formation, however. The clinic regularly makes cross-referrals to other EBCLC practices which have helped our clients with health benefit and immigration issues, such as applications for Deferred Action for Childhood Arrivals (DACA), which allows for a discretionary grant of relief for certain undocumented youth that came to the U.S. as children. GC3 also aims to be a source of referrals to other valuable Bay Area resources like La Cocina, a food business incubator and the Women’s Initiative, which helps women create their own jobs. By focusing on clients that are promoting collective entrepreneurship and providing wrap-around business and legal support, GC3 is increasing the community’s resilience, one startup at a time.

Brian Ortiz is a second-year law student at Berkeley Law and a former law clerk at the East Bay Community Law Center, working with GC3.


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So you think you can COOK?

Come to our food workshop!

 

Come to a free workshop to learn how to navigate the legal issues that might affect your project, and to get other resources to help you get started.

 

Here’s the info:

Legal Eats Workshop

Saturday, October 19, 2013, 12:30pm-5:30pm

HUB Oakland

1423 Broadway

Oakland, CA 94612

To RSVP, or to learn more about the workshop, visit https://legaleats5.eventbrite.com/


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Dig Deep for Food Justice

Not too many decades ago, Cherryland—an unincorporated community between San Leandro and Hayward—was fittingly known for its cherry orchards.[1] Neighboring Ashland comprised swaths of farmland that produced fresh food for the Bay Area. But that era is long over. After years of race and class dynamics that funneled low income people of color towards the edges of Alameda County, these neighborhoods are a very different place. Ashland and Cherryland now have some of the largest housing densities in the East Bay, rampant unemployment, and average life expectancies that are up to 10 years shorter than those in wealthier Alameda County cities like Emeryville and Piedmont.[2] The very same land that used to produce food for the Bay Area now does not have a single supermarket (though there are plenty of corner stores that sell liquor and canned foods).

Dig Deep Farms & Produce is on to a solution to those problems: community-owned urban agriculture.

Dig Deep is currently cultivating nine acres of land in Ashland and recently planted 140 fruit trees to create their first orchard. They are employing five community residents as urban farmers. They have a modified Community Supported Agriculture program with over 200 subscriptions to provide “Grub Boxes” to the community at an affordable price.[3] They have set up produce stands in Ashland and Cherryland so that residents finally have a place where they can buy fresh, healthy, local food.

Beyond Just Food

But Dig Deep, like all food justice enterprises, is about more than just the food itself; Dig Deep is working to build community control. They are providing job training to their urban farmers who are not only improving their farming skills but also assuming responsibility for packing and delivering food and financially managing Dig Deep’s CSA program and produce stands. They are gearing up to provide business incubation services for food enterprises that will serve Ashland and Cherryland and other vulnerable neighborhoods. They are even helping to reduce crime.

Dig Deep is a project of the Deputy Sheriff’s Activities League (DSAL), a nonprofit whose goal is to reduce crime and enhance the lives of Ashland and Cherryland inhabitants. The link between Dig Deep’s urban agriculture project and crime reduction is not necessarily an obvious one, but founders Hank Herrera and Marty Neideffer explain that Dig Deep’s focus is providing jobs to the reentry community, i.e. people with law enforcement records, which is a key recidivism reduction strategy.

What’s Next for Dig Deep Farms

With help from EBCLC’s Green-Collar Communities Clinic, Dig Deep Farms & Produce aims to spin off its farming and retail activities from the nonprofit to the workers, by forming a worker-owned cooperative. The low-income worker members of the cooperative will benefit from the growing business that Dig Deep is catalyzing in the form of increased produce sales, both to residents and local restaurants, and the establishment of a commercial kitchen.  Dig Deep’s long-term vision is to create a local food system that will be owned and controlled by the community —one of the benefits of turning the farm into a worker cooperative is that its profits will go to local workers rather than distant shareholders, giving members a very real stake in their food enterprise and the community it fosters.

Thanks to Dig Deep Farms & Produce, it looks like Ashland and Cherryland might see a return to their roots, housing the farmlands and orchards for which they were once known.

Dilini Lankachandra is a Law Intern at EBCLC’s Green-Collar Communities Clinic and a second-year law student at UC Berkeley Law (Boalt Hall).


[1] Castro Valley/Eden Area Chamber of Commerce. http://www.edenareachamber.com/history-of-cherryland. Accessed 6/17/2013.

[2] Alameda County Public Health Department. The Health of Alameda County Cities and Places: A Report for the Hospital Council of Northern and Central California, 2010. Oakland, California. July 2010.

[3] In collaboration with People’s Grocery in West Oakland.


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An Alternative to the Growth Economy

On my first day as a student in the Green Collar Communities Clinic (GC3) at EBCLC, my supervising attorney Sushil Jacob challenged me and the other clinic participants to define capitalism. I struggled to come up with a definition that covered my mixed emotions about the word. I saw capitalism as an unsustainable economic system that perpetuated environmental degradation and widened economic inequalities. But another voice in me said perhaps capitalism done right could be a tool to lift people out of poverty: after all, at GC3 we work with low-income entrepreneurs starting sustainable local businesses.

From the discussion that ensued I came to realize that what I really take issue with is this particular form of capitalism: an economic system based on relentless growth.

Growth itself is value-neutral: it creates both costs and benefits. Expansionist corporate growth has led to the shuttering of small, local businesses in our communities and around the world, as the mega-chains and retail giants find new markets to peddle their cheap goods. But when a filmmaker friend of mine interviewed local shopkeepers in southern Mexico who were struggling after a Wal-Mart came to town, she was surprised to learn that they actually shopped at the Wal-Mart themselves. They had access to a greater variety of products that were much cheaper than their fellow local artisans could afford to produce. This means that, despite the costs to the local economy, we can’t necessarily label the effect of Wal-Mart and other corporate chains as absolutely negative.

So while it’s debated whether economic growth is inherently neutral, it is extremely problematic for one simple reason: unending growth is not sustainable in a system of finite resources. The drive for constant economic growth, without valuing natural resources, creates a constant pressure on the environment. From climate change to increasing concentrations of toxic pollution, the ecological consequences of unyielding global economic growth are readily apparent. According to data from the Global Footprint Network, the world’s footprint exceeded the biological capacity of the planet in the mid- to late 1980s. In other words, for virtually my entire lifetime we have been living in a way that is beyond what the earth is capable of supporting.

So it is not really surprising that there is a growing movement in economics, under the banner of “ecological” or “steady-state” economics, which reminds us of an age-old adage: we must live within our means. The basic theory behind “steady-state economics” is that our economy can only be truly sustainable in the long-run if we consume at stable and sustainable levels (i.e., if we live within our means). A steady-state economy is dynamic – it changes and develops over time, but it remains balanced with the natural environment. Sounds great, right? But how do we get there?

To realign our economic activity with what the natural environment can support, we actually have to de-grow certain aspects of our economy and focus growth in other aspects. We need to produce (and consume) less of what is resource-intensive, and produce (and consume) more of what is resource-friendly. What would this look like? According to a recent conversation with my old economics professor, we should consume more poetry and symphonies, and produce fewer airplanes and iPads (and alleviate the resource-intensive processes they require). Tim Jackson, a professor of sustainable development and author of “Prosperity Without Growth: Economics for a Finite Planet,” explained recently in the New York Times that being “less productive” can actually lead to a greater sense of wellbeing and fulfillment. By placing greater value on activities that require more human care (and less environmental damage), like education, social work, medicine, and the craft and cultural sectors, we can keep people employed and “de-grow” our natural resource consuming economy to reach sustainable levels.

At the heart of this is finding a new way to measure economic wellbeing. The traditional measurement of Gross Domestic Product (GDP) is too narrow and focuses too much on material wealth, measuring only the production and consumption of goods and services of a given country. GDP does not encompass non-economic indicators of societal wellbeing, like the value of a long and healthy life or personal satisfaction. In Bhutan, a small country in the Himalayas where I had the privilege of teaching before coming to law school, they measure the wellbeing of their people in terms of Gross National Happiness. The concept approaches economic development from a holistic perspective, giving equal weight to non-economic aspects of wellbeing, like psychological wellbeing, cultural diversity, good governance, community vitality, and ecological diversity and resilience. In his recent EBCLC blog post, Bren Darrow envisions measuring our economy in “Gross Domestic Chances,” where success would mean a ripple effect giving people the opportunity to turn things around. These and other creative ways to measure success and wellbeing are important to counter our tendency to see all things through the narrow lens of GDP and economic growth.

Finally, to achieve a steady-state economy, where both people and the planet prosper, we also have to reshape our ways of doing business. This is where GC3 comes in: we support low-income entrepreneurs starting worker-owned cooperatives that value the health and vitality of their people and their environment. We work with social businesses that aim to create a more just and equitable society and exist harmoniously with their community and the environment. This is the Next Economy that Sushil described recently: where there is emphasis on both economic and environmental sustainability. In important ways, GC3 and our partner organizations like the Sustainable Economies Law Center are replacing the dominant form of growth-oriented, resource-intensive capitalism, and I’m incredibly excited to be a part of it.

Jen Barnette is a second year law student at Berkeley Law and a law clerk in the Green-Collar Communities Clinic of the East Bay Community Law Center.


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Crowdfunding: The Democratization of Capital or an Unfinished Journey?

There is a lot of excitement, intrigue and confusion swirling around the issue of crowdfunding, which uses the power of social media to raise capital. Some call it the democratization of capital, others see a messy and inefficient regulatory system that may well prevent its success. While some enthusiastically watch as websites like Kickstarter and Indiegogo raise thousands, and sometimes millions, of dollars through the crowd, others fear that easier access to investors via the Internet will encourage the posting of fraudulent projects that could trick unsavvy investors, who may lack disposable income, out of their money. For better or worse, most agree with the claim that investing or donating through the Internet is fundamentally changing the landscape of start-up finance. What is apparent for the community economic justice movement, and the Green-Collar Communities Clinic’s (GC3) work, is that crowdfunding has the potential to create resilient, local economies by allowing small businesses and entrepreneurs to raise capital from neighbors who choose to invest in their local businesses.

The current crowdfunding websites, such as Kickstarter and Indiegogo, have already demonstrated the power of people to advertise their ideas online and garner significant support from the community to fund their endeavors. This new form of advertising has the potential to transform not only donation-based fundraising, but also local investing and small business financing. But a host of issues often go unrecognized or at least not addressed by both attorneys and non-attorneys alike:  the legal framework underpinning these online portals; why currently they can only offer donation-based opportunities where investors are not offered a financial return; why average-income people are not able to choose where to directly invest their money, thus left to placing their money in retirement or pooled money market accounts that typically avoid investing in local businesses; and why small businesses face difficult barriers to traditional financing in the first place. Without providing an exhaustive history of securities law the answers to these issues find their roots in the U.S. Securities and Exchange Commission (SEC)’s mission to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The SEC is charged with both protecting investors and the market, while also creating avenues for raising capital and managing financial markets.  On balance, the agency has interpreted its mission as favoring big business over small, and, in the name of investor protection, excluding (or at minimum strongly discouraging) low-income investors.

For example, if you wanted to open a small grocery store in a low-income neighborhood to provide a healthier alternative (or in some cases the only alternative) to fast food franchises and corner stores and you needed more financing, the current regulatory system would likely prevent you from approaching your neighbor to invest if she is not already an accredited investor. An accredited investor must have annual income in excess of $250,000 or $1 million net worth (excluding your home). Translated, these requirements mean that only 3% of the population is qualified to invest directly in their local store! Walking into a bank hoping to convince a banker to provide a loan would also be very difficult, as banks do not often lend to just a merely good idea, with no history of success, even more so if the store is to be located in a traditionally low-income neighborhood. Your two remaining options would be to either convince a wealthy investor to help finance the business or to raise donations on a website like Indiegogo, both of which take a lot of luck.

In the Jumpstart Our Business Startups (JOBS) Act, Congress tried to remedy these constraints imposed by the regulatory system by directing the SEC to draft a crowdfunding exemption to allow funding portals, including Internet websites, to offer investments to the public. In an ideal setting, an exemption from securities law would allow lower- and middle-income individuals to pool their capital through equity, debt, or other financing mechanisms and fund start-up businesses that will positively impact their communities. By utilizing an online funding portal such as Kickstarter, rather than merely providing philanthropy, these community members could receive a return on their investment, have control over where their money flows and generate capital in their community. In short, if your neighbors wanted to invest in your grocery store, they could.

Through this lens, crowdfunding does offer the potential to democratize capital and open small investment opportunities. However, most academics and scholars agree that the exemption is so focused on investor and market protection that it will not be able to achieve this goal. The JOBS Act was micro-legislated, meaning that Congress included specific provisions that the SEC must implement, such as: individuals with an annual income or net worth less than $100,000 can only invest up to $2000 or 5% of their annual income or net worth; those with annual income or net worth over $100,000 may not invest in excess of 10% of their annual income or net worth, not to exceed a maximum aggregate investment of $100,000; the requirement that businesses targeting offerings of more than $500,000 require audited financial statements; and, that the funding portals be highly regulated and approved by the SEC. Many agree that this level of investor protection would make it cost prohibitive for small businesses and the portals to comply. However, until the regulations are announced, we cannot gauge their actual effect.

In the meantime there is an already-existing, perhaps even more effective, method to raise small capital investments for your grocery store idea. A direct public offering (DPO) is a state-based offering that is exempt from compliance with federal securities law because the offering takes place solely within one state. A DPO allows start-ups to sell securities directly to the public without the use of an intermediary, which would otherwise help deter fraud and protect investors. California calls a DPO “qualification by permit” and, once approved, the startup can publicly advertise the investment opportunity through a variety of channels including the Internet and newspapers. While the offering is limited to in-state investors, some people argue that the DPO has fewer restrictions overall and may be a more effective capital-raising mechanism than the anticipated crowdfunding exemption.

A DPO may allow you to realize your grocery store dream through raising small investments from the community and leverage the buying power of the residents of your state. In fact, People’s Community Market (PCM) is doing just that, raising over $325,000 to date. PCM seeks to open West Oakland’s first full service grocery store in over a decade. West Oakland is a predominantly African American and Latino community with an overabundance of liquor stores and mini-marts, but no comprehensive fresh food market. The neighborhood’s 25,0000 residents must travel over a mile to reach the nearest Pak n’ Save or Safeway discount market. PCM’s mission is to bring fresh foods and groceries as well as a “health resource center and community hub . . . that supports local families to attain healthier and more socially connected lives.” By offering investments through a DPO, PCM is allowing the neighborhood to choose where their money goes, help build a much-needed grocery market in the community, and become founding investors in the store.

Some people may question whether a public interest law practice such as GC3 should include providing assistance to businesses that seek to raise start-up capital from their community. This sentiment seems rooted in the fact that much of the legal profession’s pro bono services focus on litigation, where the need for assistance is often more obvious and direct, and the results are more easily observed. Certainly some may legitimately question whether raising $300,000 or even $1 million is genuinely a public interest activity. Yet, the power of local business development to allow one’s capital to remain in the community, where community-based entrepreneurs have the power to launch a business, create stable employment and even provide ownership opportunities, is vital for the creation of thriving, productive, and healthy communities. Thus, the power and promise of crowdfunding can be harnessed and directed to serve the mission of community-based economic justice practices such as GC3.

Caroline Lee

Law Clerk, Green Collar Communities Clinic


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Think Outside the Boss Workshop, this Saturday in Berkeley!

Join GC3 and SELC as we present the third installment of Think Outside the Boss: How to Create a Worker-owned Business, at St. Paul’s AME Church in Berkeley, this Saturday, March 23rd from 10:30 am to 3:30pm.

What is a worker owned business? How do you start one?

If you are interested in creating worker-owned businesses in your community or if you are a non-profit organization hoping to incubate worker-owned businesses, come to Think Outside the Boss Workshop on Saturday, March 23rd, from 10:30 AM -3:30 PM at St. Paul’s African Methodist Episcopal Church (2024 Ashby Avenue, Berkeley, CA 94703).

Register for the workshop here: http://www.eventbrite.com/event/5588742078#

Sponsored by the East Bay Community Law Center (EBCLC), the Sustainable Economies Law Center (SELC), and the Cooperative Center Federal Credit Union, this workshop will empower you to navigate the laws around starting and maintaining a worker-owned business as well as understanding the relationships between cooperative corporations, credit unions, and worker-owned business development!

Attorneys, law students, and experienced cooperative professionals will give short presentations on legal issues, governance structures, fundraising, and more! You can get resources and information on:

  • what worker-owned businesses are and the advantage of forming one,

  • how to convert a traditional business to a worker-owned business,

  • how to run your business democratically,

  • how to spread ownership and control across a group of people,

  • the tax and accounting issues in a cooperative,

  • how to raise money from your collective, your community, and even the bank,

  • laws about how to treat your workers,

  • and more!

After the presentations, there will be an opportunity to network with real worker-owners, financial institutions, and other cooperative resource providers.  And, the first 60 attendees will receive a manual on “How to Start a Worker-Owned Business!”

Food: A light breakfast will be provided before the presentation, followed by a delicious lunch!

Want to attend? Please RSVP here: http://www.eventbrite.com/event/5588742078#, or call (510) 548-4040, ext. 340.

Need legal assistance? Free follow-up legal consultation! Two follow-up legal clinics will be held after the workshop for attendees seeking to start or incubate worker-owned businesses. If you are interested, please fill out an application at the workshop.

Questions? For more information call 510.548.4040 ext. 340 or email greencollarcommunities@gmail.com

We hope to see you there!

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