BILL ANALYSIS Ó
AB 816
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ASSEMBLY THIRD READING
AB
816 (Bonta)
As Amended May 14, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Banking |9-3 |Dababneh, |Travis Allen, Hadley, |
| | |Achadjian, Brown, |Kim |
| | |Chau, Gatto, Low, | |
| | |Perea, | |
| | |Ridley-Thomas, Mark | |
| | |Stone | |
| | | | |
|----------------+------+--------------------+----------------------|
|Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, |
| | |Bonta, Calderon, |Gallagher, Jones, |
| | |Daly, Eggman, |Wagner |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Renames the Consumer Cooperative Corporation Law to the
Cooperative Corporation Law. Specifically, this bill:
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1)Defines "worker cooperative" or "employment cooperative" as a
corporation formed that includes a class of worker-members who
are natural persons whose patronage consists of labor
contributed to, personal services performed for, or other work
performed for the corporation. Election to be organized as a
worker cooperative or an employment cooperative does not create
a presumption that workers are employees of the corporation for
any purposes.
2)Requires at least 51% of the workers shall be worker-members or
candidates.
3)Authorizes a worker cooperative to apportion and distribute its
net earnings and losses at the time and in the manner specified
in the articles of incorporation or bylaws.
4)Requires a worker cooperative to only make patronage
distributions to the worker-member class.
5)Defines the patrons of a worker cooperative as worker-members
and authorizes their patronage to be measured by work performed
or personal services contributed, including wages earned, number
of hours worked, number of jobs created, or some combinations of
these measures.
6)Allows a worker cooperative to call a special meeting in a
worker cooperative:
a) With more than four worker-members, a special meeting may
only be called by the greater of three worker-members or 5%
of the worker-members.
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b) In a worker cooperative with fewer than four
worker-members, special meetings may be called by 5% of the
worker-members.
7)Defines a "capital account cooperative" as a worker cooperative
in which the entire net book value is reflected in member
capital accounts, one for each member and an unallocated capital
account, if any.
8)Defines a "collective board worker cooperative" as a worker
cooperative in which there is only one class of members
consisting of worker-members, all of whom are members of the
board.
a) The collective board worker cooperative is not required to
hold an annual meeting of the members.
9)Defines "worker-member" as a member who is a natural person and
also a patron of a worker cooperative.
10)Defines "community investor" who is not a worker-member and who
holds a share or other proprietary interest in a worker
cooperative.
11)Defines "candidate" as a worker who is being considered for
membership, as defined in the corporation's articles or bylaws.
12)Defines "worker" as a natural person contributing labor or
services. A worker who is being considered for membership, as
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defined in the corporation's articles or bylaws, shall be
referred to as a "candidate."
13)Provides community investor voting power in a worker
cooperative shall be provided in the articles or bylaws and is
limited to approval rights only over a merger, sale of major
assets, reorganization, or dissolution. Approval rights shall
not include the right to propose any action.
14)Allows a worker cooperative to create an indivisible reserves
account that shall not be distributed to members. Funds in the
indivisible reserves account shall, in a manner provided in the
articles or bylaws, or by the board, be used as capital for the
cooperative.
15)Provides that a worker cooperative that has not revoked its
election to be governed as a worker cooperative shall not
consolidate or merge with another corporation other than another
worker cooperative. Two or more worker cooperatives may merge
or consolidate in a manner consistent with this chapter.
16)Requires a worker cooperative to provide notice of a meeting
not less than 48 hours before the meeting if the meeting
involves only worker-members and provided that the notice is
delivered personally.
17)Increases the investment limitation for Consumer Cooperatives
under California's Corporate Securities Law of 1968 exemption
from qualification from $300 to $1,000.
18)Makes finding and declarations.
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EXISTING LAW:
1)Establishes the Consumer Cooperative Cooperation Law which
allows corporations to form as a cooperative corporation.
(Corporations Code Section 12200 et seq.)
2)Provides that it is unlawful for any person to offer or sell any
security in this state, unless such offering or sale has been
qualified by the commissioner, as specified, or unless the
offering or sale is covered by an express exemption. Caps the
maximum aggregate investment that may be made by a shareholder
in shares or by a member in memberships in a consumer
cooperative corporation. As long as this cap is not exceeded,
sales of those shares or memberships are exempt from state
securities permitting laws. The cap of $300 was placed in
California law, effective January 1, 1984. (Corporations Code
Section 25110)
FISCAL EFFECT: According to the Assembly Appropriations
Committee, minor and absorbable costs to the Secretary of State,
though these costs could increase if the number of cooperative
corporations increases significantly; minor and absorbable costs
to the Department of Business Oversight.
COMMENTS: The findings and declarations in this bill state:
A worker cooperative has the purpose of creating and
maintaining sustainable jobs and generating wealth in
order to improve the quality of life of its
worker-members, dignify human work, allow workers'
democratic self-management, and promote community and
local development in this state.
The purpose of this act is to amend the Consumer
Cooperative Corporation Law to clarify that the law
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applies to cooperatives in general, not just consumer
cooperatives, and to create more visibility for worker
cooperatives. This act is intended to provide a
definition of worker cooperative for purposes of this
act, and not for purposes of other laws.
Cooperatives:
This bill makes substantive and historical changes to the
California Consumer Cooperative Corporation Law. The Legislature,
in 1982 created the Consumer Cooperative Law which provides a
framework for establishing and operating cooperatives. California
cooperatives can trace their history back to 1844, when a group of
cotton mill weavers in England organized, called themselves the
Rochdale Society. The Rochdale Society adopted several principles
that have become the basis of most cooperatives. These principles
include: open membership; one member, one vote; cash-only trading
at market prices; patronage refunds proportional to each member's
use of the cooperative's services; and limited return of interest
on contributed capital.
Cooperatives are enterprises in which individuals or businesses
organize to furnish themselves services that the members need.
They seek to provide services more efficiently and at lower cost
compared to paying third parties or to each member's performing
the service individually. Unlike corporations, in cooperatives,
ownership and control are equal among members. Cooperatives
operate according to the democratic principle of one member, one
vote. Unlike business corporations, cooperatives do not seek to
generate profit but rather seek to save money for their members.
Similarly, members do not seek or obtain increased capital value
but rather cost savings and efficiency. In contrast to stock in a
corporation, membership in a cooperative is not a saleable
commodity. Cooperatives exist in many forms such as agricultural,
financial institutions, housing, utility, consumer to name a few.
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Cooperatives generally share the following principles:
1)Democratic Governance - Cooperatives generally have a one
member, one vote rule. This is different from traditional
business models, which often weight each owner's vote by the
amount of that person's stake in the business. However, some
cooperatives have an elected board of directors to oversee the
day-to-day operations of the business, leaving strategic
decisions to members as a whole.
2)Consensus Building - While each member has one vote,
cooperatives encourage members to work with one another in their
decision-making progress. If members want the cooperative to
take a certain action, they must collaborate and gather most, if
not, all members to agree.
3)Community-Centric - Most cooperatives have members from the same
area. Because members live where they work, they are more
likely to invest there. As cooperatives become a significant
part of a community, they have less incentive to leave.
4)Member Satisfaction Superior to Capital - Cooperatives must earn
a profit in order to survive as a business. However, member
wellbeing is valued above earning more money. Many cooperatives
have rules that keep the workplace fair, and preserve the
workers' due process rights and safety.
5)Self-Determination - Members are more likely to invest their
time and energy in the cooperative because they have input in
its decisions and would share any wealth that comes from it.
While traditional business models limit decision-making to its
senior leadership, cooperatives give each member a stake in its
future.
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6)Training - Cooperatives usually have an apprenticeship program
or other training that prepares new members to participate in
the business. For cooperatives to survive, they must recruit,
train, and continually develop their members.
7)Open Membership - Cooperatives generally allow any person to
join regardless of gender, race, religion, political, or social
status. To become a member, many cooperatives require an
entry-level training program, an initial capital investment, and
final approval by the membership.
Although worker cooperatives are currently regulated and created
under the Consumer Cooperative Corporation Law, this bill attempts
to create a new framework specific to worker cooperatives within
the existing Consumer Cooperative Corporation Law.
Need for the bill:
According to the author:
California's existing cooperative law is the Consumer
Cooperative Corporations statute. Although worker
cooperatives may form under that statute, it contains no
provisions specific to the formation and governance of
worker cooperatives. The existing statute does not
include labor in its definition of patronage, it does
not provide for member capital accounts, and its lengthy
notice requirement for member meetings does not suit
worker cooperatives. Further, the current $300
securities exemption for members is too small to allow
worker cooperatives to raise capital for their business.
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Background:
A worker cooperative is a business democratically owned and
governed by its worker-owners. A worker cooperative is distinct
from other kinds of cooperatives (consumer, producer, housing,
financial, etc.) in that its members are its workers. Worker
cooperatives are well established throughout Europe and Latin
America but they are less common in the United States. The United
States Federation of Worker Cooperatives estimates that there are
currently about 350 worker cooperatives in the United States,
employing over 5,000 people and account for $500 million in annual
revenue. According to the United States Federation of Worker
Cooperatives, California has approximately 50 established worker
cooperatives.
The United States Federation of Worker Cooperatives determines
whether a cooperative is a worker cooperative based on basic
standards for worker cooperatives established in the World
Declaration on Cooperative Worker Ownership (also known as the
Oslo Declaration) at a meeting in Oslo, Norway in 2003 of the
International Organization of Industrial, Artisanal and Service
Producers' Cooperatives.
Almost any business can be organized as a worker cooperative.
Examples include restaurants, bakeries and retail stores. Some
well-known worker cooperatives are Equal Exchange headquartered in
Massachusetts, a fair trade importer of chocolate and coffee and
MONDRAGON Corporation located in Spain, one of the world's largest
worker cooperatives, that employs over 80,000 workers.
Other States:
Eleven other states have enacted worker cooperative specific
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statutes. These states include: Alabama, Connecticut, Delaware,
Maine, Massachusetts, Oregon, Vermont, New York, Washington,
Pennsylvania and Colorado.
Analysis Prepared by:
Kathleen OMalley / B. & F. / (916) 319-3081 FN:
0000398