South San Francisco, CA September 29, 2022 Press Release
Want To Switch A Business To An Employee-Owned Model?
Well, Now There’s A Law To Help A Business Take That Big Step
Governor Signs Becker’s “California Employee Ownership Act” Into Law
“A win-win-win for business owners, workers and their communities” is how Senator Josh Becker (D-Peninsula) describes today’s signature by Governor Gavin Newsom on SB 1407 (Becker), the “California Employee Ownership Act.”
SB 1407 creates a hub within the Governor’s Office of Business and Economic Development, (GO-Biz) to focus on helping workers, business owners and other stakeholders learn about employee ownership. The hub will help them navigate resources and smooth the path to transition from a traditional business model to an employee-owned and worker-led model, such as employee stock ownerships plans (ESOPs) and worker cooperatives (co-ops).
“Employee ownership and cooperatives let working people build wealth while sustaining businesses for the long haul in their communities,” said Becker. “Data shows employee-owned businesses outperform their peers in profitability, productivity and resilience. Unfortunately, how businesses can make these transitions and seize these opportunities isn’t widely known. The new hub within GO-Biz will address those challenges.”
Project Equity, one of the bill’s sponsors, reports baby boomers own approximately 359,000 California businesses and employ 3.9 million people. With 85% of business owners lacking succession plans, many of these companies will close or be sold to non-local buyers who are likely to relocate or cut jobs. The departing owners are likely not aware of the opportunities available, such as employee ownership through ESPOs and co-ops, that can pay strong dividends for their retirement, leave workers in better shape to boost their own earnings and savings, and help the local economy thrive.
“Broad-based employee ownership, primarily in ESOPs and worker co-ops, is an effective strategy to help create a more inclusive and resilient economy,” continued Becker. “I’m grateful for the Governor’s signature on SB 1407, and I thank Burlingame Vice-Mayor Michael Brownrigg, an incredible advocate for employee ownership, as well as the WORC Coalition, Project Equity and Ownership America, who were the bill’s sponsors.”
“There is no better path to long-term wealth creation than owning a share of a successful business, and that’s what this legislation will help promote,” said Vice Mayor Brownrigg. “We salute Senator Becker’s commitment to helping close the racial wealth and opportunity gaps in our state. “
SB 1407 passed the Assembly and the Senate on unanimous, bi-partisan 76-0 and 38-0 votes, respectively, and will take effect on January 1, 2023.