Effective January 1, 2016, California has a worker cooperative statute. However, a separate piece of code permits the use of bond financing to facilitate the acquisition of property for or on behalf of private enterprise. One of the criteria used in determining whether such financing be made available is whether a business that has closed or is in danger of closing is transferred to its employees for the purpose of formation of an "employee-owned corporation," as defined below to include a "worker-owned cooperative." In addition, California used to have a statute for Employee-Owned Businesses. All the provisions of the Employee-Owned Businesses statute were repealed, except for the legislative findings and declarations.
California Corporations Code
Title 1. Corporations
Part 2. Cooperative Corporations
§ 12253.5. Worker cooperative; employment cooperative
“Worker cooperative” or “employment cooperative” means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members or candidates.
California Government Code
Title 10. California Industrial Development Financing Act
Chapter 1. California Industrial Development Financing
Article 1. General Provisions and Definitions
(c) For purposes of this section, “employee-owned corporation” means a corporation that is under employee ownership. “Employee ownership” means the majority ownership of a business in this state by a majority of its employees under either of the following methods:
(1) Establishment of an Employee Stock Ownership Plan (ESOP) pursuant to the federal Employee Retirement Income and Security Act (ERISA). All stock initially issued at the time of formation of the employee-owned corporation shall be allocated to the employees and become fully vested within five years of the date the employee-owned corporation begins operation. Voting rights of the employees are established in accordance with Section 409A(e) of the Internal Revenue Code as effective on January 1, 1983.
(2) Establishment of a worker-owned cooperative.
Title 1. Corporations
Division 3. Corporations for Specific Purposes
Part 6. Employee-Owned Businesses
§ 14200. Legislative findings and declarations
The Legislature finds and declares that the formation of employee-owned businesses and the participation of employees in the management of businesses in this state will promote the stabilization of local economies, anchor business activity, and increase productivity. The Legislature further finds that the encouragement of employee-owned businesses will increase and broaden community investments in this state and encourage new capital formation through employee ownership.