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.