Appendix II. Summary of Specific Employee Ownership Legislation by State

This appendix provides a summary of statutes concerning employee ownership for each state discussed in this study. Following each entry is a citation referring to the compiled law or source of the information. Furthermore, for statutes that have either been repealed or sunset they are designated "repealed." To facilitate comparison between state laws statutes have been categorized accordingly:

INCREASING AWARENESS

Policy declaration

Educational programs (employees and business community)

Interdepartmental awareness (annual reports and evaluations)

State employee ownership programs

FACILITATING EMPLOYEE OWNERSHIP

Method of notification

Tax credits for contributions to ESOPs

Other financial advantages

ESOP exemptions from securities regulations

Legal recognition of employee cooperatives

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance

Provide help in finding assistance

Provide financing for assistance

Provide actual funds for assistance

Types of assistance

-Feasibility studies

-Training and advice: financial, marketing, managerial, operational, accounting,

and legal

-Locating financial assistance

PROVIDING FINANCAIL ASSISTANCE

Types of financial assistance

Interest rate subsidies

Below market interest rates

Loan guarantees

Loans

Method of financing

Issuance of revenue bonds

Local non-profits

Revolving or Trust funds

Direct assistance from government agency

ENCOURAGING PARTICIPATION

Financing contingent of participation requirements

Legal recognition of cooperative structure

Definition of employee ownership specified

Special requirements on voting rights in ESOPs

Table of Contents

California *

Connecticut *

Delaware *

Hawaii *

Illinois *

Indiana *

Iowa *

Maine *

Maryland *

Massachusetts *

Michigan *

Minnesota *

Missouri *

Montana *

Nebraska *

New Hampshire *

New Jersey *

New York *

North Carolina *

Ohio *

Oregon *

Pennsylvania *

Texas *

Vermont *

Virginia *

Washington *

West Virginia *

Wisconsin *

California

INCREASING AWARENESS

Policy declaration: 1983

The legislation declares that encouraging a transition to employee ownership, in cases of plant closings, can prevent unemployment, increase productivity, and maintain businesses to benefit employees and community. (In the notes of Government §15330 and Cal Corp Code §14200)

Update of this legislation in the 1990s. "The state must meet the competitive challenges of the 1990s and provide sufficient employment opportunities for its population, and the mature sectors of the state's industrial base must be retrained and revitalized." (Government §15340-15344. See also Cal Gov Code §91502.1, Cal Corp Code §14200.)

Education programs: 1989.

Passed legislation directing the Department of Commerce to provide legislation to provide education and outreach regarding employee ownership. (AB 1482 became Part 6 of Div. 3 of Title 1) Such activities include seminars, workshops, and conferences. A library of resources is also to be made available. Contract out to do the following: public education, research, and technical assistance.

Interdepartmental awareness: 1983

The Department of Commerce is responsible for continual evaluation of policies affecting economic development (Government §15330)

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1983

(Government §91500).

ESOP exempt from securities regulations: 1982

Employee Stock Ownership plans are exempt from securities regulations provided that (a) it meets the requirements of IRC §401 and (b) employees do not make contributions. (Corporations §25102)

See also cal Rev & Tax Code §24611(b).

State tax law: 1988

Measure adopted conforming California tax law to federal ESOP tax law (IRS Code §1042). However this does to S-corporations (Rev & Tax Code §24611 (b)).

Employees seeking a buy out may not be denied unemployment benefits. (NCEO)¹

(See Cal Unemp Ins Code Government §10527).

PROVIDE TECHNICAL ASSISTANCE

Provide Actual Assistance: 1983

The Department of Commerce is responsible for coordinating federal, state and local relationship.

-responding to inquiries

-assisting in the formation of employee-owned corporations at the request of employees (of closing and closed businesses) by providing technical assistance, information and access to sources of financing. (Government §15330, also see Government §15344)

Funding for technical assistance: 1983

The responsibilities of the Department shall be permissive in the absence of state funds, unless state funds are authorized. (Government §15330)

1990 Amendment of California Unemployment Code § 10527 provides for coordination and special services plan (of Federal Job Training Partnership Act) to include provisions to facilitate employee ownership (SB 1033) (Amended Stats 1990: Ch 1667§17)

PROVIDING FINANCIAL ASSISTANCE

Issuance of Revenue Bonds: 1982

The authorities may provide alternative financing (issuance of revenue bonds) for the transfer of ownership of closed or closing businesses. The project must (1) serve the public interest, (2) be an employee-owned corporation which is (a) an employee cooperative or (b) an ESOP, pursuant to ERISA, stock issued in the beginning is fully vested in 5 years, voting rights in accordance with IRC §409A(e). (Government §91502)

Revenue bonds are generally limited to $10,000,000 for any one use and carry somewhat below market interest rates. (NCEO)

ENCOURAGING EMPLOYEE PARTICIPATION

Financing contingent on participate requirements: 1982

Alternate financing (revenue bonds) is available for employee-owned corporations which are majority-owned by a majority of employees in either:

A. An employee stock ownership (ESOP)

-pursuant to ERISA

-all stock issued at the formation shall be fully vested within 5 years

-voting rights in accordance with IRC §409A(e)

B. A worker-owned cooperative (Government §91502)

Connecticut

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1984

Corporation law establishes the one-person one vote nature of cooperatives. The cooperative can, establish its own membership requirements (provided they are employees), decide how to allocate earnings, and have internal accounting systems. The system avoids workers taking an equity position in the company and allows the use of the word "cooperative" in the name to qualify for federal tax incentives. (C.G.S.A. §33-418f et seg.)

PROVIDING TECHNICAL ASSISTANCE

Provide actual funds for assistance: 1985

Discretionary support for planning grants to distressed areas and special grants for projects involving closed or closing facilities. (Public Acts 85-50)

Administrative program started by the Department of Economic Development (1984) to assist buy out using existing funds for assistance for feasibility studies and partial support for buy outs. (NCEO).

PROVIDING FINANCIAL ASSISTANCE

Interest Rate Subsidies: 1985

The Commissioner of Economic Development administers a fund to be used by employees for the purchase of actual business. Eight million dollars was appropriated for this purpose (1985). Interest rates subsidy cannot exceed 5% relative to any loan for expenses related to purchase. (Public Acts 85-159 and 85-469)

Loans: 1986

A 1986 act broadened the fund's scope to permit it to make direct loans to employee groups for purchase of the operations or stock.

In 1988, consolidation of 6 funds, including the Employee Ownership Trust Fund, into the Connecticut Growth Fund took place. (Title 32 Ch. 579 Sec 32-23u)

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: 1984

Cooperatives must be controlled on a one member one-vote basis. Only employees may be members. Cooperatives can apportion earnings and losses on the basis of members’ work. (C.G.S.A. §33-418f et seq.)

Delaware

INCREASING AWARENESS

Policy Declaration: 1981

It is the policy of the state to encourage the broadened ownership of capital through the use of ESOPs. (29 Del. C. §6508 (c)). Repealed.

Interdepartmental Awareness: 1981

State agencies must report annually on what they have done to comply with policy and explain why. (29 Del. C. §6508 (c)). Repealed.

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1996

Delaware's Workers Cooperative Act. (6 Del. C. §1401)

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: 1996

Voting shall be one member one vote.

Delaware's Workers Cooperative Act. (6 Del. C. §1401)

Hawaii

INCREASING AWARENESS

Policy declaration: 1985

It is the policy of the state to encourage employee ownership. (Employee Stock Ownership Act of 1985) (HRS @226-103)

Interdepartmental awareness: 1985

The Department of Planning and Economic Development will conduct a study and hold a conference to develop a plan for implementing the project. (NCEO)

Educational programs: 1987

Work Program for 1988: continue to inform businessmen, labor unions, legislators, and academicians about the advantages and pitfalls of employee ownership and participation through work place decision making; Continue to develop library holdings; Continue program of outreach. (Report to Fourteenth Legislature, 1987, State of Hawaii, Employee Stock Ownership Advisory Committee, 1988)

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1985

Recognition of cooperatives. (§2 of part 1 of ESOP program chapter)

Method of notification: 1983

The legislature finds that there is a need for employment and training assistance for dislocated workers in Hawaii and that there is a need to protect employees from the effects of unexpected and sudden layoffs or terminations resulting from closings, plant closures, partial plant closures, and relocations. HRS § 394B-1.

PROVIDING TECHNICAL ASSISTANCE

Provide actual funds for assistance: 1987

Shall provide funds for assistance.

PROVIDING FINANCIAL ASSISTANCE

Loans: 1987

ESOP Loan program: Loans available for

-feasibility studies

-professional studies

Financial assistance (max. loan or guarantee $1,500,000).

Employee ownership groups eligible if

-threatened with shut downs or lay-off

-healthy plants but would like to convert to employee ownership.

-job creation/retention plans

-owner retirement

OTHER

In 1987 an amendment was passed which stated that proceeds of group life and disability insurance of individual employees may be paid to the employer if the monies are to be used to repurchase employee securities distributed to deceased or disabled employees from an employee ownership plan. (Rhode Island has a similar law).

In 1988 Employee Stock Ownership Advisory Committee changed to the Employee Ownership and Participatory Advisory Committee.

Illinois

INCREASING AWARENESS

Policy declaration: 1982

An act has been passed to encourage the employees of a plant that is closing or in danger of closing to acquire businesses with the consent of the owners and continue to operate them as employee-owned cooperatives which are 60% owned and controlled by employees. This act will strengthen the economy and retain jobs. (48 §1302)

Educational Programs: 1982, 1995

Department of Commerce and Community Affairs shall initiate educational programs relating to employee-owned enterprises. (1982: 48 §1304)

State employee ownership program: 1995

A 1995 act created the Center for Business Ownership Succession and Employee Ownership. It states that "there is created within the Department of Commerce and Community Affairs the Center for Business Ownership Succession and Employee Ownership. The purpose of the Center is to foster greater awareness of the most effective techniques that facilitate business ownership succession and employee ownership with an emphasis on the retention and creation of job opportunities." (§20 ILCS 609/2)

Several of the functions of the Center are (1) to develop and disseminate materials to promote effective business ownership succession and employee ownership strategies, (2) plan, organize, sponsor, or conduct conferences and workshops on business ownership succession and employee ownership issues and network and contract with local economic development agencies, business organizations, and professional advisors to accomplish the goals of the Center. (§20 ILCS 609/2)

It is important to note that this Center is yet to be established.

Company Participation: 1982

The present owners must give written consent before loans are approved. (48 §1302)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1982, 1995

The Department of Commerce and Community Affairs shall assist in, dealings with other parts of the government, streamline application process, receive complaints, develop proposals and conduct investigations. (1982: 48 §1304)

Provide counseling to individual companies and referral services to provide professional advisors expert in the field of business ownership succession and employee ownership. (1995: §20 ILCS 609/2.)

Provide help in finding assistance: 1982

The department shall assist in obtaining managerial, technical, and financial assistance. (48 §1304)

Provide financing for technical assistance: 1982

Technical, engineering, legal, and financial services are in included in "project cost." (48 §1303)

PROVIDING FINANCIAL ASSISTANCE

Below market interest rates: 1982

The Employee-Owned Enterprise Council and the Illinois Development Finance Authority can approve loans not exceeding 50% of the project cost. The Authority will pay for loan closing services by a financial institution. The loan must be repaid in 13 years, interest rate cannot be less 70% of the prime, and repayment may begin up to 3 years after the effective date. (48 §1306-§1311)

$500,000 was authorized for the start of this program (1982). (NCEO)

A 1994 amendment allowed for the Authority to enter into agreements or arrangements with federal or state agencies to carry out the purposes of this act. (20 ILCS 3503/7)

Issuance of revenue bonds: 1995

(§20 ILCS 3505/7)

ENCOURAGING EMPLOYEE PARTICIPATION

Definition of employee ownership specified: 1982

An employee-owned enterprise is a business controlled and at least 60% owned by its employees. (48 §1303)

A 1993 amendment established a task force to "study the scope and effectiveness of current and past efforts by and within the state of Illinois to encourage and assist with ownership succession and recommend any necessary changes." (House Bill 1746)

Indiana

PROVIDING FINANCIAL ASSISTANCE

Loan guarantees: 1986

Indiana has no specific legislation regarding employee ownership but they do have a program to assist employee buyouts through existing state business assistance programs. The Indiana Labor and Management Council also carries out workshops and seminars on employee ownership. The Employment Development Commission guarantees loans of up to 90% for buildings and land, and up to 70% for machinery for employee-owned companies. (1986)

Iowa

OTHER

Service available under Job Training Partnership Program will also be made available to assisting employee-owned business and employee ownership groups. Services include: on the job training, classroom training, work experience and remedial education, job search assistance, and tuition assistance. (7B.4 (subsection 9)): (1992)

Maine

INCREASING AWARENESS

Policy declaration: 1999

"An Act to Retain Jobs at Paper Production Facilities in the States" states "whereas, in the judgment of the Legislature, these facts create an emergency … and require the following legislation as immediately necessary for the preservation of the public peace, health and safety" (LD 2222, 10 §963-A).

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1983

Corporation law establishes the one-person one vote nature of cooperatives. The cooperative can establish its own membership requirements (provided they are employees), decide how to allocate earnings, and have internal accounting systems. The system avoids workers taking an equity position in company because each person controls own vote and earnings are allocated on the basis of work and seniority. It allows the use of "cooperative" in name to qualify for federal tax incentives. (13 §1970-1984)

ESOP exemptions from securities regulations: 1983

The registration fee for cooperative securities $10.00. (13 §1974)

PROVIDING FINANCIAL ASSISTANCE

Loans: 1997, 1999

Encourages employee stock ownership by creating a program whereby the Finance Authority of Maine must reserve a specified amount of its moral obligation to insure up to 90% of payments with respect to loans to employees to purchase an ownership interest in the business by which they are employed. (PL 217: 1997)

The Finance Authority of Maine may make loans for the paper industry job retention projects (LD 2222, 10 §963-A).

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: 1983

Cooperative must be controlled on a one member one-vote basis. Only employees may be members. Cooperatives can apportion earnings and losses on the basis of members' work. (13 §1977-1983)

Maryland

ENCOURAGE PARTICIPATION

Policy declaration: 1980

"Maryland Broadened Ownership Act" declared it the policy of The state to encourage the broadened ownership of capital and that ESOPs were important means of reaching that goal. (41 §14J)

Interdepartmental awareness: 1980

State agencies involved with economic development shall report annually on the steps that they have taken to encourage the broadened ownership of capital. (41 §14J)

FACILITATING EMPLOYEE OWNERSHIP

Method of notification: 1979

Corporations must give a twenty-day advance notice when taking over another corporation for the purpose of allowing an employee buy out instead. (Corporations and Associations §11-803)

Other Advantages to contributing to an ESOP: 1979

Public utilities with ESOPs are not required to pass on tax credits through to their consumers. (House Bill 270, 1979)

ESOP exemption from securities regulations: 1979

Employee Stock Ownership Plans are exempt from securities regulations. (Corporations and Associations §11-602)

Massachusetts

INCREASING AWARENESS

Interdepartmental awareness: 1984

The economic monitoring group shall prepare and update a state economic data book which contains statistical profiles of the state and its regions. (M.G.L.A. c.23A §45)

-Annual reporting to legislature: 1990

-Annual reporting on Industrial Services Program: 1996

Educational programs: 1990

Established Commission on Employee Involvement and Ownership. 1990-1991: $1 million earmarked for funding of employee buyout feasibility studies. To provide legal and marketing assistance and educational services.

State employee ownership program: 1990

Established Commission on Employee Involvement and Ownership.

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1982

Corporation law establishes the one-person one vote nature of cooperatives. The cooperative can establish its own member requirements (provided they are employees), decide how to allocate earnings, and have internal accounting systems. The systems avoids workers taking an equity position in company because each person controls own vote and earnings are allocated on the basis of work and seniority. It allows the use of "cooperative" in name to qualify for federal tax incentives. (M.G.L.A. c. 157A §1-11)

Method of notification: 1984

The Industrial Service Program shall oversee an early warning system to identify plant closures by collecting and analyzing declining growth rates, companies subject to competition in low wage counties, changes in ownership, layoff and employment patterns, and state tax payments. (M.G.L.A. c.23D §4(d))

Employee or Massachusetts residents are given the first chance to buy a closing facility. (M.G.L.A. c.23D §6)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1984

In cases of plant closures, displaced employees may be eligible for reemployment assistance benefits (supplementing unemployment benefits) while participating in a retraining program (subject to appropriation). this program will provide counseling, placement, training and other services deemed necessary to reemploy workers. (M.G.L.A. c.151A §71D)

Provide funds for assistance: 1984

If a distressed business is unable to pay for a feasibility study and other governmental agencies cannot provide the service quickly the director may contract with private consultants for the services. (M.G.L.A. c.23D §5)

Technical Assistance Fund established: 1989

Fund for contracting with private consultants for feasibility studies. (M.G.L.A. c.23D §5: amendment)

PROVIDING FINANCIAL ASSISTANCE

Various methods of assistance including a trust fund: 1984

Employees of Massachusetts residents are given first chance to buy a closing plant. The Industrial Service Program shall provide the same assistance in purchasing the business that other interested buyers have available to them. Financing is available for businesses likely to experience a large loss of employment. This financing is available through a trust (the economic stabilization trust) for high risk financing to implement change of ownership, corporate restructuring or a turnaround plan for an economically viable, but troubled business which faces large employment loss. (M.G.L.A. c.23D §11)

1989 amendments established the Employee Ownership Revolving Trust Fund, Start-up employee involvement program grants, and high risk financing. (M.G.L.A. c.23D §5 & 11)

ENCOURAGING EMPLOYEE PARTICIPATION

Specifications on voting rights of ESOPs: 1981

Corporations cannot directly or indirectly vote any share of their own stock. Voting rights of stock intended to be an Employee Stock Ownership plan may not be limited. (M.G.L.A. c.156B §41)

Legal recognition of cooperative structure: 1982

Cooperatives most be controlled on a one member one-vote basis. Only employees may be members. Cooperatives can apportion earnings and losses on the basis of members' work. (M.G.L.A. c.157A §6-10)

Definition of employee ownership specified: 1990

Employee owned businesses are defined as a cooperative organized and operated pursuant to the Employee Cooperative Act, Chapter 157A of the General Laws, or by a partnership of at least three persons which is owned or controlled by the partners on a cooperative basis, whereby the partners vote on partnership matters in a one-person, one-vote basis and the ratio of partners to non-partners is no less than one to one, or a business, the ownership of which is represented by shares and the governing body of which is elected by holders of shares in which fifty percent of the class of voting shares having the greatest combination voter power and dividend rights and more than fifty percent of the shares are owned by (1) not less than seventy (70) percent of the employees of such an enterprise, (2) an employee stock ownership plan maintained by such an enterprise, or (3) a combination of the foregoing.

Michigan

INCREASING AWARNESS

Policy declaration 1974

There exists in this state [Michigan] the continuing need for programs to alleviate and prevent conditions of unemployment, and the legislature finds that it is accordingly necessary to assist and retain local industrial and commercial enterprises, including employee-owned corporations, to strengthen and revitalize the economy of this state and its municipalities. MSA § 5.3520(2)

Educational programs: 1979

The Department of Labor and the Department of Commerce shall establish a program to assist and inform local government, business, and labor of available programs. (M.C.L.A. §450.751)

State employee ownership program: 1988

Establishment of the Center for Employee Ownership and Gainsharing

Provide information on designing and implementing employee ownership programs.

Interdepartmental awareness: 1979

One year after the law was initiated a report shall be submitted to the legislature describing the program; in two years a report shall be submitted on jobs saved.

FACILITATING EMPLOYEE OWNERSHIP

Method of notification: 1979

The Department of Labor encourages business considering relocation or closing to give notice of their decision as early as possible to the department, employees and community. (M.C.L.A. §450.751)

Legal recognition of cooperatives: 1979

(M.C.L.A. §450.99)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1979

The Department of Labor can

-do feasibility studies

-provide technical assistance

-coordinate governmental agencies

-assist in locating funding (M.C.L.A. §450.751)

Some of these functions were also carried out by the Center for Employee Ownership and Gainsharing: 1988

PROVIDING FINANCIAL ASSISTANCE

Issuance of industrial revenue bonds: 1985

An authorization for municipalities to issue revenue bonds to acquire industrial buildings (including employee-owned corporations) for economic development. (Public Act 153)

Local non-profits: 1985

Economic Development Corporations are authorized to issue tax exempt bonds to promote local economic development (money can be used for loans to employee-own corporations.) (Public Act 153)

Below market interest rates from a revolving fund: 1985

Employee Owned Revolving Fund used for buying and fixing facilities. Up to 30% of the fund can be used for working capital loans. Loans may not be used for financing speculation, financing employee-owned corporations that have relocated, or refinancing a debt. Priority is given to the most feasible and the projects that create the most jobs. Interest rates cannot be less than 6% of the current U.S. Treasury rate or the maximum rate permitted. The Department can make loans repayable after other loans have been paid. (Public Act 217)

In 1986, an act allowed for the assistance of healthy companies.

ENCOURAGING EMPLOYEE PARTICIPATION

Definition of employee ownership specified: 1979

Employee ownership means:

-Management rights are represented by voting stock which may be owned only by the employees of the operation, a non-profit CDC or an ESOP any portion of which is owned by not less than 50% of the employees.

-The operation shall be controlled by a board of directors which is selected by the shareholders on a basis of 1 vote per shareholder.

-This includes cooperatives described in §450.99 of M.C.L.A.

-This also includes businesses which not less than 3/4 of each class of voting security is owned by an ESOP trust set up under IRC §4975(e) (7), only if the plan requires pass through of voting rights on voting securities as they are vested in individual participation employee accounts. (M.C.L.A. §450.751)

Minnesota

INCREASING AWARENESS

Policy declaration: 1974

It is the intention of the legislature in defining and allowing for ESOPs that it will benefit all the people of Minnesota by 1) renewing a sense of human worth 2) recognizing the interdependency of human effort 3) providing direct economic advantage 4) reducing differences in the interests of labor and capital 5) relieving a primary cause of social tension. (In the notes of M.S.A. §290.01)

FACILITATING EMPLOYEE OWNERSHIP

ESOP exemption from securities regulations: 1974

Any interest in a common trust fund in connection with an employee's savings, pension profit sharing or similar benefit plan is exempt from securities regulations. (M.S.A. §80A.15)

Tax credits for contributions to ESOPs: 1974

Owners who might otherwise contribute stock to charitable organizations have the alternative of giving it to their employees. Qualified ESOPs are charitable organizations under state inheritance and gift tax laws. They can deduct up to 30% of covered payroll. Other persons will receive a charitable deduction, according to IRC §404 or §408K, for their contributions to an ESOP. (M.S.A. §290.26 subdiv.2) repealed

Individual retirement account exemption. Any individual retirement account that is exempt from taxation under the provisions of section 408 of the Internal Revenue Code shall also be exempt from taxation under the provisions of this chapter. (M.S.A. §290.26 subdiv.6)

Legal recognition of cooperatives: (1989)

(M.S.A. §308A.001-.985)

PROVIDE TECHNICAL ASSISTANCE

Provide actual funds for assistance

Grants for pre-feasibility studies for closing and dislocated workers and alternates to plant closures. (M.S.A. §268.9771-978: 1989).

OTHER

1993: Legislation allowing law firms to have employee ownership.

Missouri

FACILITATING EMPLOYEE OWNERSHIP

Method of notification: (1986)

Department of Economic Development: business locating outside side to be furnished information and alternative by request; determine if employee ownership is feasible and assist in implementing alternatives (620.020 RS MO).

Legal recognition of employee cooperatives: (1985)

(§357.010-.190)

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: (1985)

(§357.010-.190)

Montana

INCREASING AWARENESS

Policy declaration: 1989

(SB 215/Mont Code Anno @90-5-302 through -305) Repealed

Educational programs: 1989

Compile and provide information about employee ownership. Conduct seminars, workshops, and conferences to increase awareness (at least 1 seminar annually). Repealed

FACILITATING EMPLOYEE OWNERSHIP

ESOP exemption from securities regulations: 1989

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1989

Information, training, and technical assistance provided within existing programs. Repealed

Montana’s policy declaration, education programs, and provision of technical assistance were repealed on February 16, 1999. (Senate Bill 4)

Nebraska

FACILITATING EMPLOYEE OWNERSHIP

Exemption of ESOPs from securities registration: 1990

(§8-1110 subsect.11)

New Hampshire

INCREASING AWARENESS

Interdepartmental awareness: 1983

The Community Development Finance Authority must make an annual report. (R.S.A. 162-L:8)

Educational programs: 1983

The Authority is responsible for community education. (R.S.A. 167-L:7)

FACILITATING EMPLOYEE OWNERSHIP

Other financial advantages: 1983

Taxpayers who contribute to the Community Development Finance Authority and purchase common stock from CDFC equal to or greater than the Authority sum may credit 75% of the purchase price. (R.S.A. 162-L:10)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1983

The Authority shall provide technical assistance to people forming CDCs and employee-owned cooperatives; including organizational development, economic development, financial planning or packaging, training in accounting and legal practices, market research, and development of grant and other applications.

Provide funds for assistance: 1983

The Authority may award grants to fund their operating costs or other costs like planning and feasibility studies. (R.S.A. 162-L:7)

PROVIDING FINANCIAL ASSISTANCE

Loans through a community development finance company. 1983

The Community Development Finance Company may purchase capital participation instruments (common or preferred capital stock, convertible securities, evidence of a long term or short term indebtedness, warrants, subscriptions, royalties, and any other lawful derivation of the foregoing) if an employee ownership project meets the following requirements:

-helps target areas

-conform to environmental, zoning, etc., laws

-benefit public/maintain primary employment

-have a reasonable expectation of success

-sufficient capital for the project is not provided by private industry

-CDFC thinks that it is needed because funding is unavailable

-it is feasible

-CDFC cannot own more than 49% of the voting stock in any enterprise

-total investment by the CDFC cannot exceed 25% of its investments

-a majority of the board members shall be from the target community

-the project cannot increase employment (R.S.A. 162-L:6)

ENCOURAGING EMPLOYEE PARTICIPATION

Definition of an employee cooperative specified: 1983

An employee cooperative is a corporation in which the power to elect at least 2/3 of the corporation's directors is held by the employees and in which such elections are held one person, one vote.

New Jersey

INCREASING AWARENESS

Policy declaration: 1983

The Department of Labor issued a report finding that ESOPs can offer an indispensable method of keeping jobs threatened by closings. It found that the state should publicize the value of ESOPs; the Commissioner of Commerce and Economic Development shall disseminate information about the usefulness of ESOPs to avert closings and refinance successful businesses. (N.J.S.A. 52:27H-92)

Interdepartmental awareness: 1983

The Commissioner shall submit an annual report. (N.J.S.A. 52:27H-97)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1983

The Commissioner will give advise to employer or employee groups as to (1) procedures for establishing an ESOP, (2) available federal, state, and local assistance, (3) available private sector consultants or associations who can do analysis of potential profitability. (N.J.S.A. 52:27H-94)

Provide funds for assistance: 1983

In the event of a closure or pending closure the commissioner may request a municipality for the funds for a benefit/cost analysis of the potential profitability of the establishment of an ESOP. (N.J.S.A. 52:27H-95)

PROVIDING FINANCIAL ASSISTANCE

Direct assistance: 1983

Loan guarantees, interest subsidies or below market interest rate loans may be granted if the Commissioner determines that 100% purchase of the business through an ESOP will have a reasonable chance of creating benefits to the public. (N.J.S.A. 52:27H-96)

ENCOURAGING EMPLOYEE PARTICIPATION

Financing contingent on participation requirements: 1983

One hundred percent of the business must be purchased through an ESOP for any financial assistance. (N.J.S.A. 52:27H-96)

New York

INCREASING AWARENESS

Policy declaration: 1983

The legislature declares the general welfare is directly dependent on the economy and plant closures are a problem. The purpose of this act is to encourage employees of these plants to continue them as employee-owned enterprises thereby retaining jobs. (Public Authorities §1836a)

Educational programs: 1983

The department of Commerce shall cooperate with the Job Development Authority to initiate educational programs. (Commerce §104a)

State employee ownership program: 1987

FACILITATING EMPLOYEE OWNERSHIP

Method of notification: 1983

The Department and Authority shall identify businesses that are in danger of being permanently closed or relocated which results in loss of jobs and increasing unemployment. They shall provide the information regarding the option of employee ownership. (Commerce §104a)

Legal recognition of cooperatives: 1985

(Similar to Massachusetts cooperative law)

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1983

In cooperation with the Authority, the Department shall assist and counsel employee-owned enterprises, receive complaints and suggestions, conduct research projects and streamline application process. (Commerce §104a)

Provide help in finding assistance: 1983

The Department, in cooperation with the Authority, shall assist finding available managerial, technical, and financial assistance. (Commerce §104a)

PROVIDING FINANCIAL ASSISTANCE

Local non-profit: 1983

The employee ownership association may apply to a local CDC for n employee ownership assistance loan. Loan application must include group history and membership, plant history, financial and marketing projections, estimated jobs saved or lost, total cost, and a detailed financial statement of funding partner. Loan preferences given to projects with higher level of funding partners, directly save jobs, stimulate private sector and are least speculative. If the Authority approves the loan, it cannot exceed 40% of the cost, repayment secured by a mortgage shall not be a "junior encumbrance" by more than 50% and other loans cannot exceed 80% of cost. The state requires that loans be paid back. (Public Authorities §1836 and §1810)

J.D.A. loans are generally based on revenue bonds and are not subject to federal income tax. These loans therefore can be made at somewhat below market interest rates. (NCEO)

ENCOURAGING EMPLOYEE PARTICIPATION

Definition of employee ownership specified: 1983

An employee-owned enterprise means that employees are represented on the board of directors and employee control a majority of voting stock or if the business is held in trust which controls a majority of voting stock where trustees are elected by employees. (Public Authorities §1836)

Legal recognition of cooperative structure: 1985

(Similar to Massachusetts cooperative law)

North Carolina

INCREASING AWARENESS

Policy declaration: 1998

"North Carolina Government Competition Act of 1998". N.C. Gen. Stat. § 143-701

This piece of legislation is virtually identical to the Virginia Competition Act of 1995.

Ohio

INCREASING AWARENESS

Educational programs: 1988

Develop, collect, and disseminate information useful to individuals and organizations throughout the state in undertaking or promoting the establishment and successful operation of employee-owned corporations (§ 122.083, originally H.B. 676)

Interdepartmental awareness: 1988

Publication of the availability of the employee ownership assistance program and services to local governments and business and labor organizations and shall coordinate his efforts with such groups and other state agencies in obtaining information relating to the possible relocation of operations or closing of a business establishment. (§ 122.133(B)

The director of development shall prepare and submit a report to the governor and the general assembly annually on the services and activities of the employee ownership assistance program for the preceding calendar year. (§ 122.136)

State employee ownership program: 1988

Employee Ownership Assistance Act (§ 122.133)

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of cooperatives:

House Bill 600 effective 1998 (repealed 1729.30-34, which concerned worker-owned cooperatives.

PROVIDING TECHNICAL ASSISTANCE

Provide actual assistance: 1988

Assist in the evaluation of the feasibility and economic vitality of employee-owned corporation proposals received in this program. Provide technical assistance and counseling services to individuals who seek to form an employee-owned corporation. Provide assistance and counseling in the operation of an employee-owned corporation; (§ 122.13)

Types of assistance: 1988

-Feasibility studies (§ 122.13)

-Training and advice: financial, marketing, managerial, operational, accounting,

and legal. (§ 122.13)

-Locating financial assistance: Assist individuals in obtaining financing for the purchase and operation of an employee-owned corporation; (§ 122.13)

ENCOURAGING PARTICIPATION

Definition of employee ownership specified: 1988

"Employee-owned corporation" defined as "a business operation controlled by a board of directors that is selected by the shareholders on a basis of one vote per shareholder and in which the management rights are represented by voting stock that is owned only by employees of the operation, a nonprofit community development corporation, or an employee-owned stock ownership plan any portion of which is owned by not less than twenty per cent of those employees. An ‘employee-owned corporation’ also includes a business operation in which not less than fifty per cent of each class of voting security is owned by an employee stock ownership trust established under an employee stock ownership plan as defined in 26 U.S.C.A. 4975 (e)(7), if the employee stock ownership plan requires pass-through of voting rights on voting securities as the securities are allocated to individual participating employee accounts. (§ 122.13)

Legal recognition of cooperative structure

House Bill 600 effective 1998 (repealed 1729.30-34, which concerned worker-owned cooperatives.

Oregon

INCREASING AWARENESS

Policy declaration: 1987

Employee Ownership Opportunity Act: State policy to encourage employee ownership and extend business assistance to employee owned enterprises (ORS §285A.273).

Educational awareness: 1987

Legislation directed EDD to provide education services and to conduct research. (S.B. 701)

State employee ownership program: 1987

(ORS §285A.273)

FACILITATING EMPLOYEE OWNERSHIP

ESOP exemptions from securities registration: 1987

PROVIDING TECHNICAL ASSISTANCE

Providing financing for assistance: 1985, 1987

The Economic Stabilization and Conversion fund is created by the Economic Development Commission for the purpose of making grants to non-profit corporations whose purpose is providing financing for feasibility studies. Priority is given to depressed area.

PROVIDING FINANCIAL ASSISTANCE

Local non-profit corporations: 1985

The corporations described above shall be for the purposes of partially financing buyouts. Not more than 50% of the buyout can be financed in this manner. $2 million was appropriated for the program. (S.B. 666)

Pennsylvania

INCREASING AWARENESS

Intra-departmental awareness: 1984

The Secretary of the Department of Commerce shall submit a report on March 1 of every year the program is in existence to the legislature. (73 P.S. §396.8)

State employee ownership program: 1990

Employee-Ownership Assistance Program Act: 1990. Repealed

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1988

(15 P.S. §7102)

PROVIDING TECHNICAL ASSISTANCE

Provide financing for technical assistance: 1984

The Department can advance funds to local administrative agencies for loans to employees of a plant facing closure, existing firms considering conversion to employee ownership, and existing firms with employee ownership for feasibility studies, professional services. These contracts are approved by the Department. The project must provide future growth and can only be for 50% of the project (no more than $100,000). If the plant is purchased the entire amount of the loan shall be paid with interest in a lump sum. If not, the applicant must submit a final report on the feasibility of repaying the loan. (73 P.S. §396.4)

PROVIDING FINANCIAL ASSISTANCE

Local non-profits: 1984

The Department can advance funds to a local administrative agency for loans and loan

guarantees to employee ownership groups facing closure, or substantial layoff (no more than 1 year after feasibility study) for land capital and working capital (stock), in the absence of private financing. Loans shall not exceed 25% of the project (a maximum of $1,500,000 per firm). Loan guarantees shall not exceed 25% of the total loan value. Interest rates shall be at or above the rate on bonds to fund the act. A significant equity investment is required by the employee ownership group equal to at least 10% of the project cost (this may be wage concessions) and including 2/3 of the members. A feasibility study is required. Applications are evaluated on jobs saved, ability to repay, evidence of other private financial commitments and that employees are a significant portion of the community. (73 P.S. §396.5)

ENCOURAGING EMPLOYEE PARTICIPATION

Definition of employee ownership specified: 1984

Employee ownership is:

(A) A corporation in which the employees own the stock of the corporation through an ESOP as defined in IRC §4975(e)(7). Voting rights should pass through on corporate matters according to the requirements of IRC §409a(e).

Plan must be pursuant to ERISA.

(B) A worker-owned cooperative within the same meaning of IRC §1381 through §1388.

An enterprise that is organized in a manner involving substantial employee participation determined by the secretary. (73 P.S. §396.2)

Participation requirements for A, B, C:

1) A majority of voting rights are held by employees and all of the employees who have stock are entitled to vote. A majority of employees must control the majority of shares.

2) A majority of the board of directors are elected by employees.

Texas

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1991

Texas Cooperative Association Act (Article 1396-50.01, sect 1-46)

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: 1991

One member one vote. (Article 1396-50.01, sect 16)

Vermont

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of cooperatives: 1985

11 V.S.A. §981-1081 (-1092). (Similar law to those of Massachusetts, Connecticut, Maine)

ENCOURAGING EMPLOYEE PARTICIPATION

Legal recognition of cooperative structure: 1985

11 V.S.A. §981-1081 (-1092). (Similar law to those of Massachusetts, Connecticut, Maine)

Virginia

INCREASING AWARENESS

Policy declaration: 1995

The Virginia Competition Act of 1995. This act created the Commonwealth Competition Council (§ 9-342.). The Commonwealth Competition Council shall examine and promote methods of providing a portion or all of select government-provided or government-produced programs and services through the private sector by a competitive contracting program, and advise the Governor, the General Assembly, and executive branch agencies of the Council's findings and recommendations.

A study was done by the Commonwealth Corporation to assess the viability of privatization of government functions through the development of employee stock ownership plans. (Joint Resolution 284); (§ 9-342)

Interdepartmental awareness

The Council shall annually by December 1 report its findings and recommendations to the Governor, the General Assembly and the Small Business Commission created pursuant to § 9-336. The Council may make interim reports to the Governor, the General Assembly, and the Small Business Commission as it deems advisable. (§ 9-349)

Washington

INCREASING AWARENESS

Policy declaration: 1985

The legislature declares it to be policy of the state to encourage the broadening of the base of capital ownership among a wider number of citizens and encouraging the use of ESOPs as one means to accomplish this. (46.63A RCW)

Interdepartmental awareness: 1985

The Director of Community Development shall report within one year on the department's study of the use of ESOPs for providing the partial or total acquisition of facilities which would be closed without employee ownership. (43.63A RCW)

Educational awareness: 1987

(43.63A RCW)

State employee ownership program: 1987

(43.63A RCW)

FACILITATING EMPLOYEE OWNERSHIP

Legal recognition of employee cooperatives: 1987

(23.78.010) Employee Cooperative Corporations.

PROVIDING TECHNICAL ASSISTANCE

Develop a plan: 1985

The Department of Community Development shall develop a plan to encourage and assist the formulation of ESOPs in cases of closings. (43.63A RCW)

Employee ownership initially targeted buyouts to plant closures, now also targeting retiring owners.

1987 legislation also created a special provision allowing companies to register under rules similar to Massachusetts.

West Virginia

FACILITATING EMPLOYEE OWNERSHIP

Tax credits for contributions to ESOPs: 1983

Manufacturers may deduct contributions to an employee stock ownership plan from gross income reportable under "business and occupation" tax. An ESOP means a plan as defined in IRC §5975(7)(e). A qualified contribution is the amount of employer contributions during the taxable year to an ESOP which are deductible by the corporation for federal income tax purposes under IRC §404(10)(a). (Business and Occupational tax §11-13-3a)

PROVIDING TECHNICAL ASSISTANCE

Providing financing for assistance: 1983

The Governor's Office of Community and Industrial Development may advance funds for technical assistance to develop or improve existing businesses facing a shutdown or layoff, an employee-owned firm, or a company considering conversion to employee ownership. Technical assistance loan may be used for feasibility studies or professional services. If the enterprise is not purchased within a year the applicant must submit a report on the feasibility of repaying the loan. (§5B-5(1) through §5B-5(3)) Repealed

Date: 2015-01-11; view: 1008