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AB-1319 The Cooperative Economy Act.(2021-2022)

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Date Published: 03/26/2021 04:00 AM
AB1319:v98#DOCUMENT

Amended  IN  Assembly  March 25, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1319


Introduced by Assembly Member Lorena Gonzalez

February 19, 2021


An act to add Division 6 (commencing with Section 10000) to the Labor Code, relating to worker cooperatives.


LEGISLATIVE COUNSEL'S DIGEST


AB 1319, as amended, Lorena Gonzalez. Worker cooperatives. The Cooperative Economy Act.
Existing law authorizes and regulates the formation and operation of various corporations, including a nonprofit mutual benefit corporation. Existing law , the Nonprofit Mutual Benefit Corporation Law, provides that subject to any other provision of law of this state applying to the particular class of corporation or line of activity, a corporation may be formed as a nonprofit mutual benefit corporation for any lawful purpose, except when a corporation’s assets are irrevocably dedicated to charitable, religious, or public purposes and which as a matter of law or according to its articles or bylaws are required, upon dissolution, to distribute its assets to a person carrying on a charitable, religious, or public purpose.
Existing law creates in the Department of Industrial Relations, the Division of Labor Standards Enforcement. Under existing law, the Division of Labor Standards Enforcement is under the direction of the Labor Commissioner, who is authorized to investigate employee complaints and charged with the enforcement of labor laws.
This bill would require the Labor Commissioner to organize, and members to maintain, a corporation under the Nonprofit Mutual Benefit Corporation Law named the “Federation of California Worker Cooperatives” (federation) or a substantially similar name. The bill would require the federation to function as a membership organization for worker cooperatives. This bill would require the Governor to appoint the initial board of directors, to serve for one year or until the first regular meeting of the members, whichever comes later.
This bill would provide that the federation is a nonpublic entity, does not constitute a public agency or state employer for any purpose, and that once the Labor Commissioner organizes the federation as a nonprofit mutual benefit corporation and the Governor chooses the first board of directors, there shall be no further involvement in the operation of the federation by any governmental entity.
This bill would require the members in the federation to be restricted to legal entities with certain characteristics, including, but not limited to, uniform hiring and ownership eligibility criteria and for whom a majority of the work is performed by worker-owners, at least 51% of the workers are worker-owners, and a majority of the voting ownership interest is held by worker-owners. The bill would also require the federation to set labor policies of the members and provide all management to the members. The bill would provide that the federation is the employer for purposes of federal law and that the federation and the member are both employers of the workers for purposes of state law.

Existing law, the Cooperative Corporation Law, governs the organization and operation of cooperative corporations and authorizes a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation.

This bill would state the intent of the Legislature to enact legislation that would encourage the formation of worker cooperatives in the state of California.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Division 6 (commencing with Section 10000) is added to the Labor Code, to read:

DIVISION 6. The Cooperative Economy Act

CHAPTER  1. General Provisions

10000.
 This act shall be known, and may be cited, as the Cooperative Economy Act.

10001.
 The Legislature finds and declares that the formation of a Federation of California Worker Cooperatives will promote equitable economic development, reduce inequality, and increase access to living-wage jobs. This legislation has no effect on existing worker cooperatives that do not elect to become members of the federation.

CHAPTER  2. Definitions

10005.
 (a) “Employ” means to meet the requirements of Section 2775.
(b) “Federation” means the Federation of California Worker Cooperatives as described in Section 10007.
(c) “Member” means a worker cooperative who holds membership in the federation.
(d) “Total federation workforce” means the total number of worker-owners in the employ of all of the members of the federation that meet a uniform threshold of hours of work to be established by the federation.
(e) “Worker” means a natural person contributing labor or services to a worker cooperative. Unless otherwise specified, worker does not include worker-owner.
(f) “Worker-owner” means a worker that holds an ownership interest in a worker cooperative.
(g) “Worker voice expert” means an organization dedicated to advocating on behalf of workers, one or more of which shall be designated in the federation’s bylaws.

CHAPTER  3. Federation of California Worker Cooperatives
Article  1.  Organization and Membership

10007.
 (a) The Labor Commissioner shall organize, and the members shall maintain, a corporation under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) operating under the name “Federation of California Worker Cooperatives” or a substantially similar name.
(b) The federation shall function as a membership organization for worker cooperatives.
(c) (1) The federation is a non-public entity, and shall not constitute a public agency or state employer for any purpose, including, but not limited to, under Section 3501 or 3513 of the Government Code, nor shall it constitute an employer pursuant to any statute administered by the Public Employment Relations Board.
(2) Once the Labor Commissioner organizes the federation as a nonprofit mutual benefit corporation and the Governor chooses the first board of directors, there shall be no further involvement in the operation of the federation by any governmental entity.
(d) The federation is not subject to Section 7240 of the Corporations Code.
(e) Whenever a provision of this chapter applicable to the federation is inconsistent with a provision of law applicable to nonprofit mutual benefit corporations generally, the provision of this chapter shall control.

10008.
 (a) Membership in the federation shall be restricted to legal entities that comply with all of the following:
(1) Have uniform hiring and ownership eligibility criteria and for whom a majority of the work is performed by worker-owners.
(2) At least 51 percent of the workers are worker-owners.
(3) A majority of the voting ownership interest is held by worker-owners.
(4) A majority of voting power is held by worker-owners.
(5) Worker-owners exercise their vote on a one-person, one-vote basis.
(6) The majority of earnings is distributed or allocated based on the quantity or value of work performed rather than ownership interest.
(b) Each member shall maintain the requirements of subdivision (a) as a condition of continued membership in the federation.
(c) The federation’s board of directors may set forth additional rights and responsibilities for its members in its bylaws.

10009.
 On any matter brought to the members for a vote, including election of the board of directors, members are allocated voting power proportionate to their worker-owners’ share of the total federation workforce, provided that no member shall have greater than 30 percent of the voting power. This 30 percent threshold shall be enforced as follows:
(a) If there are one to three members, each shall exercise 30-percent of the vote share and the remaining vote share shall be exercised by one or more worker voice experts.
(b) If there are four or more members, each member’s vote share shall be capped at 30-percent and the remaining voting power shall be distributed pro rata among the other members, subject to the same 30 percent cap.

Article  2. Board of Directors

10015.
 (a) The initial board of directors shall have three voting directors, at least one of whom is a worker or worker-owner, and all of whom are appointed by the Governor. The term of office of the initial board of directors shall be one year or until the first regular meeting of members, whichever comes later.
(b) The initial board of directors shall set forth rules in the bylaws for the composition of future boards of directors. Those rules shall provide, at a minimum, all of the following:
(1) That there is an odd number of voting directors.
(2) That following the term of the initial board of directors, no voting directors can be appointed by the Governor, the Legislature, or other governmental entities.
(3) That except as provided in this division, nonmembers and nondirectors shall not have voting power with respect to election of directors, amendment of the bylaws, amendment of the articles of incorporation, or any other decision of the members or board of directors.
(4) Directors shall be elected by member votes weighted pursuant to Section 10009.
(c) Subsequent boards of directors may amend the sections of the bylaws governing the composition of the board, provided that those amendments comply with subdivision (b).

Article  3. Powers and Duties of the Federation

10020.
 (a) Subject to the provisions of this chapter, the federation shall set the labor policy of the members, including, but not limited to, policies for hiring, firing, promotion, discipline, compensation, and assignment of work.
(b) The federation shall provide all management to the members. A member shall not directly employ its own managers. Any manager shall be an employee of the federation, provided to the member via a management contract between that member and the federation.
(c) Management provided by the federation shall be responsible for executing the labor policy set by the federation. Members are authorized to implement labor policy under the direction of management.
(d) The federation shall be deemed the employer under federal law, regardless of whether a member is so deemed. Under state law, workers are employees of both the federation and the applicable member.

10021.
 The federation and a member, for the duration of its membership in the federation, shall receive the same tax exemption as state-chartered credit unions as provided in Section 23701y of the Revenue and Taxation Code.

CHAPTER  4. Severability

10025.
 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SECTION 1.

It is the intent of the Legislature to enact legislation that would encourage the formation of worker cooperatives in the state of California.