OAKLAND: December 2nd, 2013

Part I
Program Overview & Coalition Intro
Why do this?
Issues
Legislative Process & Timeline
Clarifying Questions Q & A
Part II
Definitions and Standards
Multi-Stakeholder and Outside Investment Coops and Wonky
Wonky (Combined with Multi-Stakeholder)
Report Back
Closing & Next Steps
San Francisco: December 7th, 2013
Part I: Panel Presentation
Intro
Why do this?
Statute Issues
Legislative Process and Timeline
Clarifying Questions
Part II: Breakout Discussions
Definitions and Standards
Multistakeholder coops and outside investors
Wonky
Part III: Closing
Closing and Next Steps
OAKLAND: December 2nd, 2013
Part I
1. Program Overview & Coalition Intro
2. Why do this?
3. Issues
a. Explanation of Breakout groups
4. Legislative Process & Timeline
a. Dec 2013 - Feb 2014 is the legislative timeline for
i. the introduction of the bill into the legislature;
ii. find a legislative author
b. March - Aug 2014: Votes
c. September 2014: Governor signs bill into law
d. Jan 2015:
5. Clarifying Questions Q & A
a. How finalized does the bill have to be when it is introduced in Feb 2013?
i. There are spot bills where substantial changes can be made through the
spring.
b. Has the coalition shortlisted authors?
i. The Coalition has found one that we are actively pursuing
c. State funding: Would there be state funding appropriated (like the North
Country?) for this new entity?
i. This is not something that the coalition has considered.
ii. The more financial issues/tax breaks that the bill has, the more
committees in Sacramento that the bill would need to go through and be
scrutinized by.
iii. This bill is part of a longer term legislative strategy for cooperative
development, recognition, tax breaks, preferential procurement, etc.
Part II
1. Definitions and Standards
!"#$#%&: loresLa, uenls, Crace, uave karoly, Marc, 8ashke
lolks look over Lhe varlous lLems on Lhe llsL of deflnlLlons.
uenls noLes LhaL Lhe lssue of '()(%' %+&(,# -#.+"# / 0##&(%' ls noL necessary for mosL
worker-cooperaLlves. MosL worker cooperaLlves have a seL day/daLe LhaL Lhey have
meeLlngs, and so glvlng noLlce ls redundanL. 8ashke shares LhaL aL 8alnbow Lhe
meeLlngs are posLed way ln advance and lL allows for everyone Lo make arrangemenLs
Lo be able Lo be Lhere. She Lhlnks LhaL lL ls very valuable for Lhere Lo be noLlce, and
maybe necessary Lo have ln Lhe law Lo prevenL abuslve slLuaLlons.
1he group debaLes wheLher or noL Lhls would aLLracL abuse of Lhe law. Marc polnLs ouL
LhaL for a coop of 3 people, especlally a newer coop, Lhls can be unreallsLlc. 8ashke
polnLs ouL LhaL a meeLlng aL whlch Lhere ls no voLe belng Laken Lhen Lhe noLlce ls less
lmporLanL. lL could also be speclflcally for larger cooperaLlves.
1(%(020 %20-#" +. 0#0-#"$ /33+4#5 (% / 4+"6#" ,++78 loresLa explalns LhaL aL Lhe
sLarLup cooperaLlve LhaL she ls worklng wlLh rlghL now Lhere has been flucLuaLlon
beLween 3 and 2 members over Lhe lasL 12 monLhs and LhaL Lhls would be problemaLlc
lf Lhere was a mlnlmum of 3 members, she wonders lf [usL puLLlng Lhls ln Lhe bylaws
would be sufflclenL. uenls expresses LhaL Lhls could open up for abuse lf one or Lwo
people own a buslness and have employees LhaL are noL members. Marc polnLs ouL
LhaL Lhls can be counLered ln some of Lhe oLher deflnlLlons such as mlnlmum percenLage
of employees LhaL can be members, and Lhe base compensaLlon deflnlLlon.
9/$# ,+07#%$/&(+%8 Crace explalns LhaL we're Lrylng Lo preserve Lhe baslc values. 1hls
varles LhroughouL dlfferenL cooperaLlves, uave polnLs ouL LhaL all of Lhe nobawc
workplaces have no more Lhan 2:1, Mondragon ls now 10:1. Marc polnLs ouL LhaL Lrylng
Lo geL Lhls law passed wlLh Lhls provlslon mlghL lnsplre crlLlclsm of lL as promoLlng
soclallsm, uenls noLes LhaL aL hls coop Lhere was senlorlLy so LhaL Lhose who had been
Lhere Lhe longesL were maklng Lhe mosL maybe up Lo 3:1. 1hls became an lssue when
Lhe coop wasn'L dolng Loo well and ln Lhe end Lhe board declded Lo reduce Lhe lncome
of Lhe hlghesL pald people. 8ashke shares LhaL aL 8alnbow Lhe raLlo ls noL more Lhan 2:1.
She polnLs ouL LhaL coops do run lnLo sysLems of oppresslon especlally when Lhere are
roles of auLhorlLy, and she Lhlnks LhaL Lhls could be somewhaL conLrolled by havlng a seL
raLlo. uave polnLs ouL LhaL Lhls would also lnclude Lhe wage of non-member employees.
1#0-#"$:(7 ;/%5(5/,< !#"(+5: uenls Lles Lhls ln Lo Lhe lasL sub[ecL, LhaL by havlng long
candldacy perlods could be abused by members who don'L wanL Lo pay paLronage ouL
Lo Lhe new people. 8ashke polnLs ouL LhaL lL's an lmporLanL value LhaL a coop promoLes
Lhe membershlp of Lhelr employees and encourages everyone LhaL works Lhere Lo
become a member. loresLa polnLs ouL LhaL as Lhe movemenL grows, lL becomes dlfflculL
Lo hold everyone Lo Lhe values LhaL we Lake for granLed ln Lhe coop communlLy now.

2. Multi-Stakeholder and Outside Investment Coops and Wonky
a. Explanation of differences between LLC and Corporation Code
i. LLC
1. Allows org to define whether the worker would like to be treated as
employees or owners/managers
2. ? Are there restrictions to scale if a company is an LLC?
a. No inherent restriction as an LLC to scale, but you usually
dont see LLCs with hundreds of employees.
3. LLCs can create multiple classes within their company
4. ? What are the disadvantages currently under the LLC statute?
a. You can not use the name cooperative
b. It inhibits
c. There is no protection for the workers to retain control of
the business.
i. Our provisions would maintain worker sovereignty.
ii. Corporation
iii. Can LLCs or Cooperative Corps be 501(c)3s?
1. It would be very difficult (almost impossible) for a coop to have
nonprofit
2. Ownership is the main difference between nonprofits and for-
profits:
a. Nonprofits have NO owners and profits are never
distributed to the employees of the nonprofit
i. aka Public Benefit Corp
b. For-profits does have owners and can distribute profits or
surplus.
b. Definition of patron: A patron is a member who provides labor to, purchases
goods from, or uses the services of the cooperative. A patron may also be a
person who uses the cooperative to market, process or handle their products or
services. The cooperatives primary class of patrons shall be the worker-
members.
i. LLCs can have business accounts.
ii. Distributions: When a member actually receives the money from the
cooperative.
iii. Allocation: When surplus is allocated to a members internal capital
account but not received by the member.
c. Definition of worker: A worker is a natural person who provides labor to the
cooperative with the expectation of receiving compensation.
d. ? Should we go into the definition of what labor means?
e. Outsider Investors:
i. How should we deal with that?
1. Should we let coops decided individually?
2. Should outside investors have any voting rights?
a. Ex. Equal Exchange: has outside non-voting investors
3. Should outside investors have limited voting right?
a. Such as on demutualization, bankruptcy, etc?
ii. ?What do lenders think?
1. Arizmendi Association actually has equity in the Bakeries.
iii. ?Does limited voting give lenders assurance to lend?
1. Yes. Limited voting rights does give lenders the confidence to lend
money.
iv. ?Would DPOs be available to the new coop bill?
1. Yes. And the DPO could be structured as debt or royalty
arrangements and not equity.
v. We would like this bill to clarify the ownership of the employees so it does
not raise flags with securities laws.
vi. We also want to propose a $300 exemption in the
1. ?Is it advantageous to put a fixed amount vs. adjusted for
inflation/CPI?
a. Coalition could do that. Would need to do research on it.
vii. ?If we leave the bill with more flexibility, would that be more beneficial
than having more regulations?
1. We want more restrictive regulations/codifications for a specific
worker coop legal entity.
2. Coalition should consider the ESOP
viii. ?Quorum: Should 20% be the quorum rule if coops are going to scale?
1. ?Should proxies and delegates be considered for larger coops?
a. PROPOSAL: Strike the quorum rule.
b. PROPOSAL: Lower quorum to 5%.
3. Wonky (Combined with Multi-Stakeholder)
Report Back
! Time is of the essence: We have a Democratic supermajority in congress now so we
would like to propose it while this is still the case.
Closing & Next Steps

San Francisco: December 7th, 2013
Part I: Panel Presentation
Intro
1. Began at the Ella Baker Center to bring together the social justice, economic justice, and
racial justice organizations.
2. Look toward coops as a way to build solidarity and just economies
Why do this?
1. Current statute is written for larger cooperatives
a. 10 Day notice
b. 4 Yr Term Limits
c. Individual Liability exists in current statute
2. What we want
a. Lower the barrier to entry
b. Defining a cooperative for potential preferential procurement policies
c. Affecting Labor Laws and Securities Law
d. Influence Federal Governement
i. Tax laws
Statute Issues
Legislative Process and Timeline
! Now - Feb: Get legislature as author
! Jan/Feb: Bills get inroduced
! March-August: Goes through various committees; voted on by both houses of CA
legislature; then goes through reconciliation process
! September: Bill goes to governor
! January 2015: Bill goes into effect
Clarifying Questions
Part II: Breakout Discussions
Definitions and Standards
! Provision 11: Minimum number of workers
! Provision 12: Percentage of workers required to be worker members
! Provision 9: Equal Voting Rights
! Provision 19: Quorum
! Provision 8: Patron - clarification
! Providing 23 & 24: Availability of membership to all workers and time-bound nature of
provisional membership status
" ? Should membership candidacy be amended? To allow each individual coop to
define this provision?
! Base Compensation Ratio:
! Clarifying Provisions 4 - 8:
" Prov. 4) Definition: A worker cooperative (hereinafter cooperative or company)
is a business majority-controlled by its worker-members.
" Prov. 5) Definition of member: A member has the same meaning as member in
Section 17701.02(p) of the California Corporations Code. A member may also be
a patron of the cooperative.
" Prov. 6) Definition of worker: A worker is a natural person who provides labor to
the cooperative with the expectation of receiving compensation.
" Prov. 7) Definition of worker-member: A worker-member is a worker and a
member of a cooperative whose patronage consists of, but not limited to,
providing labor to the cooperative.
" Prov. 8) Definition of patron: A patron is a member who provides labor to,
purchases goods from, or uses the services of the cooperative. A patron may
also be a person who uses the cooperative to market, process or handle their
products or services. The cooperatives primary class of patrons shall be the
worker-members.
! Clarifying Provisions 27 - 29:
" Prov 27) Dividend Distributions: Dividend distributions on individual member
accounts, not including patronage distributions, shall not exceed 15% in any
fiscal year. A dividend is a return on member capital.
" Prov 28) Patronage distributions: Patronage distribution means any transfer of
the companys earnings made to a member of the company, the amount of which
is computed with reference to the members patronage of the company.
" Prov 29) Patronage: Patronage of a member is primarily measured by the
volume or value, or both, of the members contribution of labor to the cooperative.
Contribution of labor may include hours worked, wages earned, jobs created, or
other measures of value. Patronage shall be distributed solely to worker-
members unless the worker-members elect to distribute patronage according to
other members on the basis of their patronage of the cooperative.
! COMMENT: Patronage refund has been confusing to IRS: Should use distribution
instead of refund and distribution.
! QUESTION: Would the partnership be antithetical to the Cooperative Principles?
! Clarifying Provision 31b: Member and Capital Accounts
" A cooperative may designate a portion of its cooperative account as an
indivisible reserves account. A cooperative may only distribute or allocate non-
member-sourced income to the indivisible reserve account. Indivisible reserve
accounts are prohibited from being distributed to members and are dedicated to
the cooperatives use. Upon dissolution, the indivisible reserve account shall be
allocated to an International Cooperative Alliance-approved national federation or
its designated regional body in California.
Multistakeholder coops and outside investors
! Arizmendi Association as an example of outside investors
" Having outside investors protecting against demutualization
! Is equity really the worst aspect to worker ownership, or is debt currently the most
oppresive force toward coop development?
! DPOs and their effect on the cooperative movement:
" Could be notes (debt), royalties, and/or equity shares. Coops are currently using
DPOs as notes and royalties without any shareholder interest by the investors
! Prov 34) Securities exemptions: Worker-member capital contributions to the cooperative
do not constitute securities under California law.
" a. Investments by non-worker-members qualify for the exemption found in
25100(r) of the Corporations Code (which provision shall be amended to reflect
this change).
Wonky
! Options for entity: LLC and Corp
" Corporations: governed by shareholder ownership and shareholder profit
maximization
# In terms of voting, defined by how many shares one owns
" Consumer Coop Corp: governed by one member, one vote
# Defined the difference between dividend distributions and patronage
distributions
# Employment and Securities Laws are triggered by Corp Code
" LLC Worker Coop option
# No assumption of employment status
# Give people flexibility to define themselves as partners and employees
# Immigrant owned cooperatives would have the ability to file without
showing documentation status
# ? What about protections after the coop becomes successful?
! Coop can elect to be taxed as a corporation and the worker-
members would be put on payroll and protected by employment
law
Part III: Closing
Closing and Next Steps