FAQs
What is the Cooperative Economy Act?
The Cooperative Economy Act (CEA) promotes the formation and growth of worker co-ops and establishes additional incentives for working with co-ops. Worker co-ops can serve as staffing firms that are designed to employ workers, including in the gig economy.. Workers at worker co-ops are designated as W2 employees and also own and govern the business.
The Act also creates the Federation of California Worker Cooperatives, which serves as a membership organization for worker co-ops. The Federation is organized as a private, nonprofit mutual benefit corporation with the purpose of establishing new worker co-ops, overseeing worker co-op compliance with democratic governance standards, and establishing the labor policy of worker co-ops.
Why do we need the CEA?
California has lost an estimated 1.5 million jobs since March 2020, with women, immigrants, and people of color bearing the brunt of these losses. A nationwide study conducted by the Federal Reserve System Banks found that 1 in 3 small businesses will not survive the pandemic, and that businesses owned by people of color were faring worse. 57% of firms overall characterized their financial condition as “fair” or “poor,” but this increased dramatically to 79% for Asian-owned firms, 77% for Black-owned firms, and 66% for Latinx-owned firms. California’s economic recovery requires an equity driven, worker-centered redesign of the relationship between company and worker.
What are the benefits of starting a worker co-op?
Worker co-ops are eligible for tax, permitting fees, and licensing fee relief if they join the Federation of California Worker Cooperatives (Federation), a new entity created by the Act to support worker co-ops. In addition, the Federation proactively develops new worker co-ops in specific industries. The Federation can also offer technical assistance, governance expertise, and other administrative support to member co-ops.
Are worker cooperatives already part of California law?
Yes, California has a cooperative corporation act that allows companies to elect to be worker cooperatives. Companies that incorporate under this act will have safe harbor for demonstrating their compliance with democratic worker control.
How is CEA good for workers?
In addition to having employment protections, workers in a worker co-op are the majority owners of the business with the financial and governance rights that come with ownership. With a worker co-op, workers can set policies (like benefits and PPE provision, for example) that make for more predictable pay and better workplace conditions.
How do worker cooperatives work?
The financial and ownership structure at most companies is designed to maximize profit and benefit to shareholders. Worker cooperatives are different. While worker cooperatives can be very profitable, they are ultimately accountable to their workers and therefore do not maximize profit at workers’ expense. There is evidence that worker cooperatives are more resilient than other forms of business, with lower failure rates and an ability to better survive political and economic crises. The long-term perspective with multiple generations of owners to consider contributes to their longevity and the stability they provide to their members and the community.
Why would companies contract with worker co-ops for labor?
Companies that contract with worker co-ops do not have to employ workers themselves. In order to access these benefits, the worker co-op must be a member of the Federation.
Why combine unions and worker ownership?
When workers in a worker cooperative are also represented by a union, worker voice is reflected at multiple levels. While it may seem counterintuitive that a business owned and controlled by rank-and-file workers would need a union, there are multiple roles that the union can play, including in enforcing democratic decision-making, grievances, policy advocacy, as well as access to benefit plans and training resources.