A History of the Worker Cooperative Corporation Statute

In the summer of 1982, the Commonwealth of Massachusetts enacted a new law exclusively for worker cooperatives: Massachusetts General Laws Chapter 157A. This statute authorizes a democratic corporate form, drawn in part from the successful model of the Mondragon cooperatives in Spain. Since its enactment, the new law provided legal certainty and structural guidance to worker cooperatives in Massachusetts. Moreover, it served as a prototype for parallel legislation in other states. The following is a legislative history of the original Massachusetts law from an early ICA (1982) publication entitled "The Massachusetts Law for Worker Cooperatives: MGL Chapter 157A":

Chapter 157A: Legislative History

August 11, 1981 — Representative Timothy Bassett (D-Lynn) requests ICA technical assistance in framing legislative response to plant closings and worker ownership.

September 15, 1981 — ICA agrees to provide technical drafting assistance in creating a worker cooperative bill.

December 2, 1981 — Representative Bassett introduces House Bill 1122, An Act Further Amending the Corporate Laws.

December 8, 1981 — Representative Bassett sponsors seminar at the State House on Cooperative Ownership and Employee Participation, and announces introduction of the bill for worker cooperatives.

February 25, 1982 — Economic Development Committee of the Boston Bar Association gives general endorsement of the policy of the bill.

March 9, 1982 — Joint House/Senate Committee on Commerce and Labor holds public hearing on H.1122 (first reading).

April 13, 1982 — Commerce and Labor Committee reports favorably on amended version of the bill, now H.6035.

April 30, 1982 — After second reading in the House, Committee on Bills reports the bill, now numbered H.6137 and entitled An Act Providing for the Establishing of Employee Cooperative Corporations.

May 4, 1982 — House of Representatives passes H.6137 (third reading), sending it to the Senate.

May 10, 1982 — Senate sends H.6137 (second reading) to Senate Committee on Bills, which reports the bill.

May 11, 1982 — Corporations Committee of the Boston Bar Association gives general endorsement of the bill.

May 13, 1982 — Senate passes H.6137 (third reading).

May 26, 1982 — Governor signs "An Act Providing for the Establishing of Employee Cooperative Corporations," which now becomes Chapter 104 of the Acts of 1982.

August 26, 1982 — The new Chapter 157 A of the Massachusetts General Laws becomes effective.

Chapter 157 A: Fact Sheet

1. Representative Timothy Bassett (D-Lynn) introduced House Bill 1122 in December 1981 to establish a new legal framework for worker cooperatives in Massachusetts. In May 1982 (after amendments as H.6035 and H.6137), it was enacted as Chapter 104 of the Acts of 1982, creating a corporate statute exclusively for worker cooperatives.

2. The new Employee Cooperative Corporations Law in Massachusetts (M.G.L. Chapter 157A) was the first statute of its kind in the United States. It authorizes a democratic corporate form in which:

—employees (management and labor) control the enterprise,
—profits are distributed equitably, and
—the ownership structure using internal capital accounts encourages long-term survival of democratic cooperative control.

3. Although unique, this new law draws concepts and language from other existing laws, such as the Federal Internal Revenue Code and the Massachusetts Business Corporation Law.

4. Over a century ago, in 1866, Massachusetts was the first state to require one-person/one-vote in election of directors of a corporate business. In 1982, it was the first state to enact a sophisticated statute exclusively for worker cooperatives.

5. Worker cooperatives exist today, both in the United States and abroad. Many northwest plywood companies are structured as worker cooperatives. Hundreds of other worker cooperatives are scattered throughout the country in businesses ranging from the lumber industry to garment manufacturers, and from home health care providers to taxi cab companies.

6. Worker cooperatives provide a business structure which ensures that the benefits of doing business accrue to the people who produce those benefits. By assuring local control, worker cooperatives can increase productivity and quality of employment, and can help keep jobs and capital within the community.

7. The new Chapter 157A of the Massachusetts General Laws provides needed structural guidance and legal certainty for worker cooperatives. It will facilitate cooperative development in Massachusetts, helping to save jobs and protect the local economy.

New York Times article from 1984 on the new worker cooperative laws—featuring quotes from ICA staff attorney Peter Pitegoff,
CHCA founder Rick Surpin, and Making Mondragon author William Whyte: