Employee Ownership Policy Makes Major Gains—Next Up, Implementation

[W]e must be relentless in centering the needs and voices of workers. The worker cooperative model is one of our best tools for achieving that goal. — Representative Jamaal Bowman (D-NY)

The shape of government relations for worker co-ops has experienced a massive shift in the past five years. Not long ago, the idea of having several congressional champions of cooperatives, spanning the political spectrum, actively pushing employee ownership legislation, would have felt out of reach for our grassroots movement. 

A few years later, the world has changed. Indeed, 2022 saw the passage of two federal bills that could greatly boost worker ownership. 

As is often the case, these victories got enacted as riders to larger legislative packages. For instance, the WORK (Worker Ownership, Readiness, and Knowledge) Act, which sets aside $50 million to create a new Employee Ownership Initiative within the US Department of Labor, is hidden within a $1.7 trillion budget bill that was passed last December. The new DOL office offers a first-of-its-kind program that bolsters state initiatives for worker-owned businesses.

Even less visible are the provisions for worker ownership that are sprinkled into the $280 billion CHIPS and Science Act (HR 4346). Specifically, the bill positions worker ownership into three programs through the Economic Development Administration. 

But will policy victories lead to change on the ground? Five years ago, when the Main Street Employee Ownership Act passed—the first employee ownership legislative breakthrough in decades—movement activists were hopeful, but bureaucratic resistance at the US Small Business Administration has limited progress. 

As worker cooperative and employee ownership advocates look toward turning the two bills from 2022 into action, it’s important to look back to understand how these successes were made possible, how each federal and state win has become greater than the sum of its parts, and where implementation energy must be focused.

Employee Ownership as Economic Development

The CHIPS and Science Act aims to boost domestic research and manufacturing of semiconductors in the United States. It may not be immediately clear the connection between semiconductors and cooperatives; manufacturing makes up just a little over five percent of the worker co-op field. However, this legislation marks an important shift in strategy for driving an increase in worker co-ops. 

The worker co-op sector is exceptionally good at connecting within itself . . . What we lack is a coordinated effort to expand outside of our internal conversations.

The Regional Technology and Innovation Hubs program is a flagship initiative within the Act, meant to drive business growth and manufacturing jobs for US workers at all skill levels while centering equity and inclusion. Worker ownership is a natural fit to achieve these goals. 

How does this work? The program will develop hubs of businesses, communities, colleges and universities, and workers focused on accelerating innovation and technology deployment—and the worker co-op movement has a seat at the table to create those hubs. While in the past worker co-ops have focused advocacy primarily on legislation with a singular focus on creating cooperatives, the Regional Technology and Innovation Hubs program (informally called the Tech Hubs program) bakes in worker ownership as a tool for building wealth and preparing small businesses for continued success. Instead of depending on a government office to push the initiative forward, the Tech Hubs program provides a previously nonexistent entryway for the co-op movement to build relationships outside of our ecosystem. While there is a great deal of legwork to be done to see out these regional relationships, we have greater control over the outcomes.

The worker co-op sector is exceptionally good at connecting within itself; we see cooperators actively seeking out peer connections across regions, industries, and affinity groups regularly. What we lack is a coordinated effort to expand outside of our internal conversations to ensure worker co-ops are used as an economic tool for like-minded movements. In New York City, we see that the Worker Cooperative Business Development Initiative and the New York City Network of Worker Cooperatives have greatly benefitted from entering into spaces such as the campaign to create a public bank, which promises to enable city deposits to better support local economic development. Leveraging relationships in other spaces that focus on creating or developing small businesses is vital to achieving the education that needs to happen, which can, in turn, spur interest and more rapid growth. 

Using Federal Funds to Boost State Programs 

First introduced in 2009 by Senator Bernie Sanders (I-VT), the WORK Act has been a long time coming. Co-sponsored by Senator Jerry Moran (R-KS), the legislation appropriates $50 million over five years to create the Employee Ownership Initiative within the US Department of Labor to promote employee ownership, by supporting new and existing state employee ownership programs. The initiative will fund state projects to gather data and information, provide education and outreach about worker co-ops and employee stock ownership plan companies as a business succession strategy, and act as a clearinghouse for best practices. This is the first federal worker ownership grant program ever.

A straightforward call for worker ownership and worker voice, the WORK Act represents the culmination of over a decade of advocacy and education from the cooperative sector. The Main Street Employee Ownership Act passed in 2018 with much fanfare, and though there has been little movement from the Small Business Administration to put that bill into practice, that win has legitimized employee ownership in state capitals.

It is no accident that in the wake of the Main Street legislation, many states are creating or paving the way for employee ownership programs, including Pennsylvania, Colorado, and California—or in the case of Massachusetts, revitalizing an old program. In California, SB 1407 created a hub within the governor’s office to fund education and outreach for employee ownership. 

Each victory builds upon the next. In Colorado, the Employee Ownership office has supported an average of 20 to 25 businesses a year. While these numbers are just a drop in the bucket in the larger picture of small business, it illustrates that modest investments have already yielded strong results, justifying further investment. It’s clear that Colorado’s legislature agrees: an expansion on its state tax credit for worker owned businesses passed in May. 

Just this spring, the Washington state legislature passed an ambitious package of support for worker co-ops and ESOPs. This legislation builds upon the successes of Colorado and California as well as federal gains, pulling together the sharpest aspects of initiatives to create an Employee Ownership Program with several supportive facets. These successes, in turn, help pave the way for Congress to recognize the value of worker co-ops and ESOP business models and create the support needed to boost those efforts. 

These are just a few of the many state-level campaigns. Indeed, it is a full-time job simply to track the multitude of campaigns and legislative pushes that center worker cooperatives, and the close-knit group of advocates within our network are constantly iterating to ensure the best possible frameworks are introduced and passed. 

Paired with the growing infrastructure in place for state-driven strategies to promote worker ownership, the WORK Act takes these hard-won fights for recognition and funds their development from the federal level. The WORK Act institutionalizes an Employee Ownership Initiative that will become a clearinghouse for information and resources about worker ownership and provide federal grants toward state employee ownership programs like those active in Massachusetts, Colorado, and others. 

The Act includes a directive for education and outreach regarding financial education, employee teams, open-book management, and seeking greater employee input; all the ingredients for strong, healthy worker co-ops to be developed. Not only will the Employee Ownership Initiative provide vital funds to build up these state strategies, but the federal government will also build up important data and reporting to better understand the successes and challenges of bringing worker ownership to a wider audience. It will also provide an important avenue through which the Department of Labor can engage with worker cooperatives for the first time—and build institutional knowledge from the ground up. 

Caution: More Work Ahead

Of course, the new legislation just passed. Implementation has scarcely begun. While it is common for programs to become stalled for years even after passage, we see the Tech Hubs program moving into action, with a funding opportunity currently open, providing the opportunity for worker ownership advocates to apply as a part of regional coalitions to create tech-related business development strategies. 

The worker co-op movement needs to grow its capacity to educate, finance, and support the incoming wave of worker-owned businesses.

Celebrating the legislative successes achieved so far quickly gives way to understanding how funds are appropriated to stand up these programs as well as informing how they are implemented. Where worker co-ops have scarcely been players in regional government strategies in the past, the Tech Hubs program gives worker co-op advocates a foot in the door to building relationships with anchors that federal departments routinely tap into for their programming. 

While advocacy to get legislation passed can take years or even decades, that is only the tip of the iceberg in terms of the work required to make sure that funds and resources get into the hands of worker-owners. Education, outreach, and strategy are the central focus of many initiatives, including the two bills cited above. 

In short order, the worker co-op movement needs to grow its capacity to educate, finance, and support the incoming wave of worker-owned businesses. Building this capacity is critical to unlocking additional dollars. Future successes will heavily depend on engagement and proof-of-concept through the success of the state Employee Ownership Initiatives, the Tech Hubs program, and the WORK Act. 

This is a crucial moment to prove that worker ownership works, as investments are made into co-op education development. Worker co-op and employee ownership advocates must make the most of the current interest from elected officials.

At the same time, advocates must hold their representatives’ feet to the fire. The many years of advocacy to get the Main Street Employee Ownership Act passed have not yet seen their fruits, especially in light of the latest ruling from SBA that continues to lock out cooperatives from funds that are crucial to business success. 

Building infrastructure and capacities to create a thriving ecosystem for worker-owned and -controlled businesses is essential to power movements for racial justice and economic democracy. This requires defining priorities, pushing for favorable policies, ensuring those policies are implemented, and iterating on those experiences. 

At the same time, movement must continue to push for the just economy outside the realm of public policy—by organizing members, training up leaders, tackling hard questions, and reiterating values and priorities; all these actions build upon each other, and must inform each other.

The spirit of collaboration, education, and support is a keystone of the co-op movement. If co-ops lean into that spirit, then a true transformation in who owns our economy becomes possible.