On May 15th, Rep. Dean Phillips (D-MN) and Senator Van Hollen (D-MD) led the effort to introduce this bipartisan, bicameral legislation to reduce barriers to small business owners who are transferring ownership to worker co-ops and ESOPs.
In recent years, there has been an uptick in interest in conversions to worker co-ops and ESOPs. Nearly half of all private businesses are owned by individuals who are at or near retirement age, and together, those businesses employ more than 32 million workers across 2.9 million businesses. Fewer than 15% of owners who are expected to retire over the next decade have a succession plan in place, leading to loss of jobs and businesses because the business closes or is merged into a larger business that is not anchored in the community. The Employee Equity Investment Act (EEIA, HR3383, S1618) will preserve jobs and build wealth for workers by converting those businesses to worker ownership.
The EEIA would mobilize Small Business Investment Companies (SBICs) to reduce the burden on seller financing to create more worker co-ops and ESOPs by allowing a zero-subsidy, or zero interest, investments in businesses formed under one of these two business models. The vision of this bill is to double the number of U.S. employee owners over the next decade creating a more dynamically competitive, inclusive, and resilient American capitalism.
- creates a special type of SBIC called an Employee Equity Investment Company (EEIC) that requires 50% or more of their investments must be transactions that create new employee-owned businesses, and requires that those investments do not exert any control over the business they have invested in
- creates a training program for SBICs that are new to worker co-ops and ESOPs to become an EEIC
- requires the EEIC to work with an advisor with 5+ years experience of working with worker co-ops or ESOPs
- requires an annual report on this program
- affirms the Main Street Employee Ownership Act by creating an office of Employee Ownership within the Small Business Administration (SBA) to provide education, outreach, and technical assistance resources for conversions, as well as assist in conversions.
- Additionally, the EEIA requires reporting on this program as well as evaluation of barriers to access to procurement programs for employee owned businesses.
“My family taught me that business is a means to an end; and that end is ensuring success is shared with the people and communities who help create it,” said Rep. Phillips, whose great-grandfather, Jay Phillips, created one of the first employee profit sharing plans in the country in 1944. “Over the coming years, millions of small business owners will reach retirement age and sell to competitors or other buyers in the mergers and acquisitions market – which often results in jobs leaving the communities that rely on them. Expanding opportunities for employee ownership will help keep businesses and jobs in local communities, allow American workers to build wealth for their families, and result in more sustainable and resilient communities. Employee ownership is both good business and good for business.”
“American workers are the true power behind our economy. By investing in employee ownership, we’re investing in our workers and putting more of their hard-earned dollars back in their pockets, instead of sending U.S. profits overseas. This bipartisan bill will offer up-for-sale businesses the tools to transition to employee ownership – empowering workers and keeping jobs and opportunity here at home,” said Senator Van Hollen.
“Worker co-ops are often overlooked when it comes to financial products and business opportunities in the U.S., usually because government and financial institutions don’t have much familiarity with the model.” said USFWC Executive Director, Esteban Kelly. “It is exciting to envision a U.S. small business landscape that centralizes worker ownership and voice. We thank Rep. Phillips, Senator Van Hollen, and the bipartisan team of legislators who recognize the importance of building wealth for workers, saving jobs, and investing in small businesses that anchor our communities and make local economies strong.”
The EEIA is cosponsored by Sens. Chris Van Hollen (D-MD), Tammy Baldwin (D-WI), Todd Young (R-IN), Jeanne Shaheen (D-NH), Mike Braun (R-IN) and Marco Rubio (R-FL), and Reps. Blake Moore (R-UT-1), Chrissy Houlahan (D-PA-6), Jill Toduka (D-HI-2), Brian Fitzpatrick (R-PA-1), Mark Pocan (D-WI-2), Dan Meuser (R-PA-9) and Dusty Johnson (R-SD)