BILL ANALYSIS Ó
AB 816
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CONCURRENCE IN SENATE AMENDMENTS
AB
816 (Bonta)
As Amended July 6, 2015
Majority vote
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|ASSEMBLY: | | (May 22, |SENATE: |39-0 | (July 13, 2015) |
| |55-17 |2015) | | | |
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Original Committee Reference: B. & F.
SUMMARY: Renames the Consumer Cooperative Corporation Law to
the Cooperative Corporation Law. Specifically, this bill:
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 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.
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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 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.
b) In a worker cooperative with fewer than four
worker-members, special meetings may be called by one
worker-member.
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 of a worker cooperative
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
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cooperative.
11)Defines "candidate" as a worker who is being considered for
membership in a worker cooperative, as defined in the
corporation's articles or bylaws.
12)Defines "worker" as a natural person contributing labor or
services to a worker cooperative.
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 only derive from
non-patronage-sourced income, 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 to every worker-member.
17)Increases the investment limitation for Consumer Cooperatives
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under California's Corporate Securities Law of 1968 exemption
from qualification from $300 to $1,000.
18)Makes finding and declarations.
The Senate amendments:
1)Make clarifying changes to the definition of worker,
worker-member and patronage.
2)Provide a work cooperative membership shall not be divided
into partial memberships.
3)Clarify that funds in the indivisible reserves account shall
only derive from non-patronage-sourced income.
4)Specify that in a worker cooperative with fewer than four
worker-members special meetings may be called by one
worker-member rather than 5% of the worker-members.
5)Make other technical and clarifying changes.
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
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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 states:
"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 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
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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.
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
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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.
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
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Corporation Law.
Need for this 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."
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 (CICOPA).
Almost any business can be organized as a worker cooperative.
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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 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:
0001205