If you have ever looked into worker cooperatives, a bill recently passed into law in California may be of special interest to you. Assembly Bill 816 has amended the law formerly known as the Consumer Cooperative Corporation Law and renamed it the Cooperative Corporation Law. The new Consumer Cooperative Corporation law establishes how corporations can be designated as cooperatives and lays out regulations for the operation of cooperatives.

Under the law, a corporation may be designated as a cooperative corporation in its articles of incorporation, and cooperative corporations may be designated as worker cooperatives. In addition, there is an option to designate worker cooperatives as capital account cooperatives or as collective board worker cooperatives.

Worker Cooperatives

The term “worker cooperative,” in the context of this law, refers to a corporation that includes “a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation.” A majority of the corporation’s workers must be worker-members or candidates.

The term “capital account cooperative,” in the context of the law, refers to a worker cooperative which allows a percentage of its earnings and losses to an unallocated capital account. Earnings in the account may be used for corporate purposes.

The term “collective board worker cooperative,” in the context of the law, refers to a worker cooperative in which all of the members are worker-members, and all of the worker-members are members of the board.

The provisions of the law include the following:

• Cooperative corporations are permitted to issue memberships with differing rights and privileges, so long as they are issued in accordance with the corporation’s articles and/or bylaws.
• Expulsions, suspensions, and terminations of members can only take place after 15 days prior notice is given, and they must be done in good faith, in a fair and reasonable manner. In addition, if members who are expelled, suspended or terminated want to submit a challenge, they must do so within a year of the decision.
• Worker cooperatives are permitted to create indivisible reserve accounts, and payments from these accounts do not have to be made to members.
• Corporations can be designated as worker cooperatives in their articles of incorporation, by including the sentence, “This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.”

The law is intended to promote workers cooperatives, and create more visibility for them. The law states that the purposes of a workers cooperative are to create sustainable jobs, and to improve quality of life for worker-members. Assemblymember Rob Bonta of Oakland, who introduced the bill, stated in a press release that worker-owned small businesses are “an effective way to rebuild the local economy and address economic inequality.” [Read more…]