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Employee-owned Businesses Propel Good Job Growth

In employee-owned businesses, employees own part or all of the company where they work. From big ones, like Publix and King Arthur Flour to community-based start-ups, they outperform traditional businesses in job creation, profits, and benefits for workers and communities. To grow these businesses, the Grow Jobs Through Employee Ownership Act helps entrepreneurs start more employee-owned businesses while making it easier for existing businesses to become employee-owned and take advantage of newly available federal small business loans targeted to these businesses.

The National Landscape

Passed in:

California (12), Colorado, Vermont, Ohio, Iowa

Introduced in:

New Jersey, New York

In The News

“‘To work in a co-op means higher rates and secure work. The contract is secure and fair,’ [Luis Eduardo] Lozano says . . . . ‘A percentage of the fees will be paid to the co-op, and at the end of the year members will earn extra. We all gain from the success of the co-op.’”
“New research released this week lends even more objective evidence that employee-owned companies are key economic contributors across the country, and state-level programs promoting employee-ownership have a major impact.”
“Today, according to the nonprofit National Center for Employee Ownership, about 7,000 U.S. companies are substantially or entirely owned by their employees. These are not tiny co-ops or buyouts of bankrupt firms; they are conventional profit-seeking businesses, most of them thriving.”

Partners

  • Small-business owners
  • Owners looking to create succession plans for their businesses
  • Workers
  • Social impact entrepreneurs

Opposition

None noted
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FAQ

Who does this help?
Entrepreneurs and employees, by creating sustainable, growing businesses, with higher worker retention and better wages. Employee ownership is often appealing when business owners are looking to retire; they find that selling to their employees leads to short-term benefits and long-term growth.
How does this state investment drive economic growth?
Supporting employee-owned businesses is a cheap and impactful policy. For example, the Ohio Employee Ownership Center retained over 15,000 high wage jobs for $772 in state investment per job—and because employee-owned businesses are more productive and pay better than average, the long-term benefits and repayments to the state are significant.
How do we know this works?
There are employee-owned companies in every state and many countries including Spain and Australia. Numerous studies demonstrate the long-term success of employee-ownership in creating and retaining jobs, providing workers with increased wages and benefits, and avoiding layoffs.
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Model Policy

SECTION 1 (TITLE):
This act shall be known as the Grow Jobs Through Employee Ownership Act.

SECTION 2 (PURPOSE):
This act supports the growth and expansion of employee-owned businesses which create jobs, wage increases and economic growth.

SECTION 3 (PROVISIONS):

(a) State-university-based center for employee ownership. The Chancellor/Director of the STATE University System is hereby directed to, within 100 days of the effective date of this legislation, establish a state-university-based Center for Employee Ownership, “the Center.” The Center shall:
  • (i) Provide education and outreach to inform business owners about the benefits of employee ownership and employee ownership in succession planning;
  • (ii) Organize workshops and conferences on employee ownership and employee ownership in succession planning;
  • (iii) Prepare and distribute materials concerning employee ownership and employee ownership in succession planning with the goal of increasing and expanding employee owned businesses;
  • (iv) Provide consultation to business owners exploring the possibility of transferring full or partial ownership to employees;
  • (v) Provide a referral service to help business owners find legal, financial, and technical advice in connection with employee ownership successions;
  • (vi) Partner with key organizations, such as professional and trade associations, financial institutions, unions, economic development organizations, and other non-profit entities, to promote employee ownership successions;
  • (vii) Conduct investigations, research, studies, and analyses on the subject of employee ownership;
  • (viii) Support the growth of associations of employee-owned companies; and
  • (x) Provide support and access in government relations, including providing access to information regarding rules and regulations that relate to employee ownership and develop proposals for changes in policies to promote employee ownership.
  • (xi) Ensure awareness in STATE of the new availability of U.S. Small Business Association loans to employee-owned businesses and leverage and coordinate with Small Business Development Centers to ensure maximum growth of employee-owned businesses in STATE.
  • (xii) Within one year of its establishment, the Center shall issue a public report, delivered to the Governor and Legislature and made available on its website, assessing whether there is a need for additional low-interest loans to support employee-owned businesses in STATE and if so, make recommendations regarding how to amend state law to expand existing small business revolving loan funds to include employee-owned businesses, and making other legislative changes or appropriations as appropriate.

(b) Tax incentive for employee-owned businesses. There is hereby added to the list of deductions from gross income under the tax law a deduction for [50%] of the gains from sale of a business to employees or conversion of a business to employee-ownership, if after the transfer (a) employees or a qualified ESOP own at least 50% of all outstanding securities issued by the corporation after completion of the transaction and the corporation is domiciled in STATE.

(c) Ensure state laws encourage the creation of employee-owned businesses. The Department of [State/Economic Development] in cooperation with the Center established in section (a) above, is hereby directed to, within 100 days of the effective date of this legislation, issue a public report, delivered to the Governor and Legislature and made available on its website, assessing whether there is a need for changes to the corporation, tax, or other laws of STATE to facilitate the creation or expansion of employee-owned businesses in STATE.