The 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.