Worker-Owned Job Creation on the Rise: Assemblymembers Bonta and Levine Introduce Limited Liability Worker Cooperative Act to Facilitate Worker-Owned Business Development

Monday, February 24, 2014

AB 2525 would eliminate cumbersome requirements of existing law so that local worker-owned and managed businesses can thrive

(Oakland, CA) - Assemblymember Rob Bonta is proud to announce the introduction of AB 2525, which he is joint authoring with Assemblymember Marc Levine (D-San Rafael). This first-of-its-kind bill will remove unnecessary barriers to the creation of new worker cooperatives in California and provide workers the flexibility they need to operate a startup efficiently and effectively.

"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," said Assemblymember Bonta.

"It is important to look at innovative options for companies to use when they organize," said Assemblymember Levine, joint author of AB 2525. "This bill will help allow companies to create a business model that gives workers a larger stake in the business and creates a more productive, cooperative, and sustainable organizational structure."

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.

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. Bonta explained, "AB 2525 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 worker's 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."

Bonta concluded, "The California Limited Liability Worker Cooperative Act would create a new business entity in California tailored to the needs of worker-owned, democratic businesses. During tough economic times, it is more important than ever to make every tool available to help low-income and immigrant communities become economically self-sufficient and prosperous."

The bill is supported by 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.

CONTACT: Amy Alley, (916) 319-2018