New York City Sets Aside Over $1 Million for Worker-Owned Cooperative Businesses

teamwork-382673_640.jpgThe New York City Council approved its fiscal year 2015 budget (PDF file) in late June. The new budget includes $1.2 million for the support and development of worker-owned cooperative businesses, commonly known as “worker cooperatives.” The defining feature of a worker cooperative is that the employees own all, or at least a substantial majority, of the company. Advocates for worker cooperatives state that they can benefit local communities by keeping ownership close to home and promoting good employment practices. The allotment of funds by the City Council is reportedly the largest investment ever by a city government in this type of business.

The U.S. Federation of Worker Cooperatives (USFWC), the only nationwide organization for worker cooperatives, defines the business form as an entity that is “owned and controlled by [its] members, the people who work in [it.]” Worker cooperatives have two “central characteristics,” according to the USFWC: (1) investment in and ownership by “worker-members,” who receive distributions of profits; and (2) a democratic decision-making process involving one member, one vote. Profits are often known as “surplus,” which is one of many ways that worker cooperatives seek to distinguish themselves from other models of business ownership.

Article 5-A of New York’s Cooperative Corporation Law allows businesses incorporated in the state to elect to be governed as a worker cooperative. Businesses that make this election are subject to parts of both the business corporation law and the cooperative corporation law. New Jersey does not have a specific business form for worker cooperatives, but businesses can choose to form as a corporation under subchapter C or S, as a limited liability company (LLC), or as other business forms.

The largest worker cooperative in the country is located in New York City, according to the USFWC. Cooperative Home Care Associates, based in the Bronx, reportedly employs more than 2,000 home care providers. Members’ wages have increased considerably in recent years, and the company has a significantly lower turnover rate than other businesses in its industry. Worker cooperatives are appearing in a wide range of industries and areas all over the country, including a 60-member cleaning company in Brooklyn and an eight-member marketing company in rural southern California. A New Jersey insurance company is taking advantage of several recent trends, selling insurance plans under the Affordable Care Act and making plans to convert ownership to that of a worker cooperative.

New York City’s 2015 budget, approved by City Council on June 25, 2014, sets aside $1.2 million for the Department of Small Business Services’ (SBS) Worker Cooperative Business Development Initiative. The program targets “cooperative entrepreneurs,” as well as “unemployed, underemployed and discouraged workers.” It will support the creation of 28 new worker cooperative businesses and assistance to 20 existing businesses, outreach to over 900 cooperative entrepreneurs, and 234 new jobs in worker cooperatives.

Business attorney Samuel C. Berger represents New York and New Jersey businesses and entrepreneurs. We offer fixed-fee packages of legal services, covering a wide range of issues, to help businesses, business owners, and entrepreneurs understand their rights and obligations, and to allow them to grow and run smoothly. Contact us today online or at (212) 380-8117 to schedule a confidential consultation to discuss your legal matter.

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Photo credit: geralt [Public domain, CC0 1.0], via Pixabay.