Worker Cooperative Statutes for ESOPs and Coops

While legislation is not necessary to set up a worker cooperative, these statutes create legitimacy, legal certainty and structural guidance for worker coops. In contrast to a typical corporation, which allocates profits on the basis of capital investment, these laws authorize the allocation of profits in accordance with the amount of work performed by members. The laws also provide for internal capital accounts in which members get their profits while the cooperative gets funds for capital investment.

After a certain number of years or when workers leave they are paid the balance of their capital account. This gets around the main problem that has prevented worker coops from maintaining their ownership structure. Under this system new workers will continually be able to afford to buy into the cooperative, assuring that it will always be owned by its workers, rather than by former employees. Thus local ownership is maintained from generation to generation, and jobs and capital are retained in the community.

Rules:

Connecticut - Worker Cooperative Corporations Act

Maine - Cooperative Statutes

Massachusetts - Employee Cooperative Corporations General Law

Vermont - Worker Cooperative Corporations Statute

Resources:

The U.S. Federation of Worker Cooperatives

University of Wisconsin Center for Cooperatives