Law Change Sought For Worker Co-Ops

New Haven city officials, with the help of Yale Law students, are seeking to leverage the buying power of major nonprofits to boost business and job creation. But first, they say, the state’s law on worker cooperatives has to change.

Toward that end, Mayor Toni Harp went to Hartford Tuesday to ask the members of the General Assembly’s Commerce Committee in support of a bill that would allow nonprofits to provide funding for resources and participate in governing decisions of such worker-owned businesses.

Harp told lawmakers that she sees such businesses as a potential part of the city’s strategy for lifting people out of generational poverty, particularly for those who encounter barriers to traditional employment such as single-mothers, the formerly incarcerated and those without a high school diploma.

“Every year major employers throughout the state spend millions on services they cannot readily access,” she told lawmakers. ​“These contracts are for nuts-and-bolt type services like uniform repair, floor mat rental, laundry where the profit margin is so slim investors might not be interested but for the workers in these jobs it can change their lives and their standings in the community.”

Harp said she envisions worker-owned cooperatives — businesses where the employees are also the owners and make all governing decisions democratically — filling these needs with the help of money from deep-pocketed foundations who want to provide start-up funds for equipment and other capital investments. She’d witnessed such collaborations in Cleveland, she told lawmakers, when KeyBank was moving from Connecticut to Ohio.

KeyBank Foundation had collaborated with worker cooperatives in that city to establish a laundry that supports Cleveland Clinic hospitals, a hydroponic garden that provides produce to supermarkets in the Cleveland metro area, and a solar and weatherization business. Harp said cooperatives create jobs. And because the worker-owners are invested in the success of the business and share profits, they don’t outsource their work. They also don’t pick up and move to another state with more attractive tax incentives. After five years, 90 percent of the Cleveland cooperatives are still in business, she said.

Harp said the city, in tandem with Yale University and Yale-New Haven Hospital, is now working with the Cleveland-based Evergreen Cooperatives on business models for worker cooperatives in New Haven. And it was looking at such models that prompted the need for a bill.

Current state law governing worker-cooperatives does not allow nonprofits or institutional partners to be voting members of in the cooperative, according to Lauren Hobby, a Yale Law Community and Economic Development Clinic student.

Hobby testified before the committee that these partners can provide access to not just capital resources but also legal and human resources support. Hobby also said it is an option for local businesses to stay local when the owner is ready to retire. Instead of selling the business or simply shuttering it, a worker-cooperative model is an option that allows the employees to become the new owners. (Read here about how the owner of Fair Haven-based Vespoli USA used a different model known as an employee stock ownership plan (ESOP) to turn his company over to his workers.)

Hobby said that New Haven’s Long Wharf district has a number of businesses that are preparing for an ownership change and cooperatives could play a vital role in keeping those businesses local and that section of the city stable.

The 2018 Agenda