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California Cooperative Economy Act

On February 19, 2021, California Assemblywoman Lorena Gonzalez introduced AB 1319, which included The Cooperative Economy Act (the “Act”).  The Act’s objective is to introduce a worker cooperative model into the gig economy by permitting workers to form worker cooperatives in order to staff gig companies.

The Act requires the California Labor Commissioner to organize, and for members to maintain, a nonprofit mutual benefit corporation called the Federation of California Worker Cooperatives (the “Federation”).[1]  “The Legislature finds and declares that the formation of the [Federation] will promote equitable economic development, reduce inequality, and increase access to living-wage jobs.”[2]  The Act would not affect existing cooperatives that do not elect to become a member of the Federation.

Once the Governor of California appoints the Federation’s initial board of directors, there would be no further involvement by a governmental entity in the Federation’s operations.  The Federation would function as a membership organization for worker cooperatives.  Membership in the Federation will be restricted to those worker cooperatives with certain characteristics, such as: (i) uniform hiring and ownership eligibility criteria; (ii) minimum fifty one percent (51%) of workers are worker-owners; (iii) worker-owners hold the majority of voting ownership interest; and (iv) earnings are distributed based on quantity or value of work.  The Federation must set labor policies (e.g., hiring, firing, promotion, etc.) for its members and provide management to its members.  For the purposes of federal law, the Federation would be the employer of the management professionals[3] and each member’s worker and worker-owners.  For the purposes of state law, the Federation and member are both employers of the workers and worker-owners.  The Federation and a member thereof, will receive the same tax exemption as state-chartered credit unions.

Although the Act is silent on how the workers and gig companies will interact, it appears that the Federation will act as the broker or staffing firm between the gig companies and the workers.  AB 1319 is currently in committee, and it is unclear whether it will move out of committee this year.

 

[1] The Federation would be organized under the Nonprofit Mutual Benefit Corporation Law of California.

[2] California Legislative Information – AB 1319 (2021-2022), Section 10001.

[3] The Act defines a management professional to be “an employee of the [F]ederation that provides management services to members of the [F]ederation pursuant to the management contract required by Section 10020.”