(Transcribed from the video; see our blog post on the conversation.)

Introduction 

Loren Rodgers: I’m Loren Rodgers, the executive director of the National Center for Employee Ownership.

On April 30, 2024, the Assistant Secretary of Labor, Lisa M. Gomez, traveled to Tampa, to join the employee ownership community at the NCEO’s annual conference.

Assistant Secretary Gomez took office in September 2022 as the leader of a unit of the Department of Labor: the Employee Benefits Security Administration (EBSA). EBSA is the most important unit of the Department of Labor for employee ownership. That’s long been the case because EBSA is the home for enforcement of ERISA plans, including ESOPs. EBSA became even more central to employee ownership after the SECURE 2.0 Act became law. That law mandated the creation of a division of employee ownership, and it also directed the DOL to create final regulations governing the valuation of ESOP shares. Both of those efforts landed in EBSA.

As the head of EBSA, Assistant Secretary Gomez is at the center of some of the most important decisions affecting ESOPs and employee ownership, and she’s taking that responsibility seriously.

The NCEO does not lobby, but we don’t shrink from policy-relevant research or conversations, so while the Assistant Secretary was in Tampa, it was our pleasure to arrange for her to meet with the people who provide the most compelling proof of the impact of employee ownership: employee-owners from all levels of company members. She heard stories from around the country about the real-life impact of employee ownership.

Those stories are compelling: Assistant Secretary Gomez describes employee ownership with terms like “inspiring,” “life-changing,” and “solutions to many problems the administration is trying to address.” From my own conversations with her, I can say that Assistant Secretary Gomez has set an ambitious goal for herself, which is to shift the tone between the employee ownership community and the Department of Labor. As she says, when DOL investigators have conversations with employee-owners, it has a profound impact on how those investigators view ESOPs.

Also in Tampa, Assistant Secretary Gomez generously offered to talk with Steve Storkan, the executive director of the Employee Ownership Expansion Network, or EOX. Their conversation on stage in the main conference ballroom covered her listening tour, highlights of what she heard from employee-owners, her insights into inter-agency cooperation, the WORK Act, the new division of employee ownership, and even a few thoughts on rule-making for ESOP valuations.

We recorded that conversation, and in the excerpts that follow I heard something that I think you’ll hear as well – a sincere person, listening intently, who cares about working people and is eager to help ensure that employee ownership plays an increasing role in the economy of the United States. To my ears, she’s talking about changing the nature of the relationship between EBSA and employee ownership.

Let’s listen to the recorded conversation between Steve Storkan and Assistant Secretary Gomez.

Welcome

Lisa Gomez: Hi everyone, I’m really thrilled to be here. I’m so thankful to the NCEO for inviting me and giving me this opportunity to speak with so many of you and to talk about what the Department of Labor is doing.

Lisa Gomez: In answer to your questions of how I got here, I mean heck if I know, I don’t know! This – to be the AS of labor and work for EBSA– was never in my playbook or in my list of things where I think I might like to go with my career. One day I got a phone call, someone from Washington, DC, an unknown caller. And for some reason I answered my cell phone (I don’t usually do that) and lo and behold, it was someone saying “you’re being considered for this position, are you interested?” I thought it was a crank call, but it wasn’t. So that’s how I got there for this position. They were looking for someone to lead this agency who had experience in the field – and I’ll tell you a little bit about that – but my name came up and I’m very glad it did, because this has just been the highlight of my career.

Impressions of Employee Ownership

Steve Storkan: I want to ask you a question about your tour. We appreciate you going to see the employee ownership companies, I know you were with ESCA recently, I know you had some listening sessions today. What kinds of things would you tell the audience that surprised you or that you’ve learned the most in these conversations? You had no experience with employee ownership, I find it amazing that doing 30 years of benefits law and never running into an ESOP, which just tells us the work we have to do in outreach and education. What would you say you learned, what surprised you?

Lisa Gomez: In my almost 30 years, I did only one research assignment on an ESOP – probably about 25 years ago – and we didn’t do much outside of that. I didn’t have a lot of experience. I think the thing I came away with has been “Where has this been my whole life? And why aren’t more people thinking about this?” This area has not been getting a lot of attention to date and I also think it’s been a big learning experience for me to hear from a bunch of different companies and different industries, who all have different stories about how they came to decide to become an ESOP or to become employee-owned, how it’s worked for them and how they structure it for their own company.

Under ERISA there are certain basic requirements for retirement plans, but there are no requirements that say that if you’re going to start an ESOP, under the law, this is what you must do. So people do things differently and I’ve heard stories about different things working for different companies, for different employees. But the amount of support and excitement and entrepreneurial spirit that lives within these structures, has really been inspiring for me. Talking with employee ownership companies at this conference and others, I keep hearing so many of the same words that keep coming up. Someone explained to me that when I’m thinking about that, it’s a word cloud. The ones that kept coming up were “community, support, entrepreneurial, retirement”; all of these similar stories of people who didn’t really have this plan in front of them and learned about employee ownership and it’s been life-changing. And how so many people within these companies have a sense of ownership, and commitment and service to each other and their communities.

So many (of these companies) are from middle America. These companies mean so much not only to the employees but to the communities. If they were to sell off these companies, there’s such a risk to so many people within the communities losing their jobs and potentially entire towns being destroyed. Employee ownership has really just saved workers, saved communities, it’s really been inspiring. I felt like I was listening to 20 Hallmark movies.They are great, inspiring stories. It’s a shame that it has not been heard. I heard solutions to so many things we're trying to address – EBSA and the Administration and the country. Trying to think of the retirement crisis. So many people who don’t know how to save for retirement, either because they don’t understand the language of retirement or because they just can’t fathom how they could possibly be putting away money – either there’s not enough to spare or they’re nervous about having it held up in a 401K. ESOP is something where they don’t have to think about it and the retirement savings are accumulating for them.

So many communities where the sense of ownership means so much to them personally – success stories, fulfilling the American dream. There’s this possibility that no one really knows about. It’s not taught in schools, not even talked about outside these relatively small groups. It’s also not being connected within the government.”

What’s Happening Inside the DOL

Steve Storkan: We’re here today for a lot of different reasons, but the main thing that has happened recently – for those that don’t know – is that in December 2022, the WORK Act was passed by Congress, which authorized and created the office of Employee Ownership – or the employee ownership initiative within the DOL. It authorized funding for the DOL – $250k that was supposed to be appropriated last year – and then it also authorized $50 million to be appropriated for outreach & education at the state level. Could you talk a little about the office of employee ownership and just the general thing that you’ve been working on towards helping employee ownership – and just all the things you have in your mind? I’ll just give you the stage to share with everyone what you and I have talked about.

Lisa Gomez: Sure I’d be happy to. Coming into this position, there were a lot of things I didn’t know and didn’t expect. When I came into this position a couple months after SECURE 2.0 was passed (WORK Act included), I found out that there had been a lot of discussion about the WORK Act (& its provisions) and how they would be implemented, what agency/ies would be involved, and that it would be coming to the DOL and specifically to EBSA. I found that to be so interesting because this was a new area of work and hadn't been dealt with much at the DOL and certainly not at EBSA except in a very limited way. And that limited way is that one form of employee ownership (as you all know) is the ESOP, and an ESOP is a retirement plan, governed by ERISA.

Our job at EBSA is to administer, implement, regulate, and enforce the requirements of ERISA, including those that apply to retirement plans like ESOPs. Until that point, EBSA’s relationship and dealings with ESOPs were limited to the enforcement context. Hearing from people calling and telling us, “There’s a problem with this ESOP, and we need someone to help us.”

At EBSA, people had developed a deep technical knowledge about how ESOPs work, the different financial aspects of implementing, operating, and administering an ESOP. We had that knowledge, but it was only applied from the enforcement standpoint. As many of you probably know or even felt first-hand, I can only imagine that there were mixed feelings at the beginning where people were saying, “Oh yay, Work Act passed,” and/or, “It’s going to DOL” or “Oh gosh it’s going to EBSA.” “This is the worst possible thing that could happen.” And I had people calling me and saying, “No offense, but we don’t want it here and we’re gonna do everything in our power to take it away from you.

I’m like, “I just got here!” I get where folks were coming from. I think there was a lot of excitement and anticipation, but also some hesitation about how it was going to work to have this within EBSA.

Within EBSA people were really excited to have this new responsibility and also to learn about employee ownership in a different way and to use what we have learned as an agency about ESOPs in particular, to contribute to the purpose of the WORK Act. And so one of the first things that we did was to get started moving on one of the requirements of the WORK Act, which was to establish and lift up the employee ownership initiative. We did that by the end of June. WORK Act was passed in December 2022, and within 6 months we had set up, within EBSA’s office of outreach, education, and assistance, a division of employee ownership. That division has been created to not only satisfy the requirements of SECURE 2.0 but to really think about how we can implement the provisions of SE 2.0 and WORK Act that want there to be real movement toward promoting and educating both EE and ERs about employee ownership.

And [we are] bringing together state organizations that are fostering and promoting employee ownership, working with other federal agencies that are involved with employee ownership – or should be involved with employee ownership – and making a concerted effort to educate and to put out materials to connect people and bring employee ownership to life.

In the time since we set up the division of employee ownership, we have been meeting with lots of different stakeholders in the area, hearing from all different types of stories and perspectives and concerns and ideas. We've kind of just acted as a sponge over the past year to take in information and think about next steps.

In the time we were first setting up the agency, we had some people in a more temp position setting up the office. We have been interviewing candidates for a permanent position as chief of that division, and we’re looking forward to being able to more fully staff that office.

Valuation Regulations

Lisa Gomez: The other piece of the WORK Act within our purview is to offer formal guidance regarding valuation of employer stock with respect to ESOPs. We have committed that we’ll be doing notice-and-comment rule-making with respect to that issue. We’re working on a draft rule. We’ve met with different stakeholders, received input from different folks within the ESOP community on their thoughts with respect to such a rule. We’ll (obviously) issue that for proposal and for folks to comment on, and then move forward with a final rule. This is a high priority, not only for us at EBSA but for the administration as a whole. There are several folks on the hill who are very interested in it, so we’re working hard towards that.

There have been a bunch of things on the plate, for better or for worse, SECURE 2.0 had about 20 different assignments just for the DOL and the EBSA. Many of them had specific deadlines to them, so we’ve been deadline-driven with few people to work on this. I had hoped we’d get it out sooner, but I promise that it’s in the works and should be out pretty soon.

Interagency Coordination

Lisa Gomez: Right now, we are talking with each other. We’ve been talking both under the direction of the White House, talking with folks at commerce, folks at treasury, at the SBA, people within the USDA – And just learning from each other and trying to make connections, so that we’re not operating in these silos and we can be discussing on a greater platform how to make employee ownership really work and how to make it a successful option.

Organized Labor

Lisa Gomez: I’ll say one other thing that came as a surprise to me, having come from a career where I did a lot of work with labor organizations, was trying to understand: can labor organizations and employee ownership co-exist? (I began) Hearing about how they do – and hearing different ways that union and employee ownership work together. I see new opportunities for the labor movement to be considering it.

Building a New Relationship

Lisa Gomez: I have definitely drunk the kool-aid over the last 19 months. I was told I’m going to love these people as these are the true believers of employee ownership. I have definitely sensed that and appreciate all the information that I’ve been able to get while here.

Steve Storkan: That info doesn’t arrive without you taking the initiative and we greatly appreciate that. I saw you speaking a couple weeks ago at the Aspen Institute and we had a chance to talk briefly afterward. One of the things that really struck me was that you talked about all of this new knowledge that you’re getting about the positive sides of ESOPs. And I think, when thinking about the dept, it does sound like it’s in a separate division. Can you talk about your idea that you’re bringing in all of the great info, the “good” side of ESOPs, and that will naturally flow to the entire department. Those offices don’t work directly together, but I think the general feeling about employee ownership will hopefully change. Is that correct?

Lisa Gomez: There's always going to be issues. Outliers, where there are plans that are not doing it right. The calls that we usually get that relate to ESOPs are more people contacting us and saying “There’s a problem.” So there’s been a very limited experience so far. Just in the time we’ve been working on this project since the beginning of last year, the folks within the agency, (people working enforcement, regulation, outreach, education, and assistance), are learning more about employee ownership and the good stories, which far outweigh the troublesome stories that are out there. I think there is somewhat of a time of fixing, I don’t want to call it a broken relationship, but a relationship that hasn’t allowed either side to really understand the other in a complete way – I feel like I’m a marriage counselor or something here.

I was telling some folks an example, when I was traveling in KC, and we were going to visit some employee ownership companies. I brought with me some employees from the regional office in KC. These employees – their only experience with ESOP where there were problems –. came with me to do these visits and I could just see a change in them just over the course of an afternoon. Where they walked in and they were kinda looking around “hmmm” and by the end were taking pictures and everyone is in a great mood and saying, “This is wonderful what's happening here.” They are usually coming into a situation where they’re meeting people at the company… well, they’re NOT meeting people at the company,  because they walk in the door and the employees have been told, “Well, DOL is here, no one talk with them, everyone stay in your offices, don’t share any information.” And then this was, well, they might as well have laid out a red carpet for us because they wanted to show us everything. The break room, the kitchen, look at the plaques on the wall. It’s a good moment for people who are working on this at the department to learn about how ESOPs and employee ownership work and just a whole new perspective on things.

New Role for EBSA

Steve Storkan: When you think about the department – and (hopefully) the dollars to support the department and state – how do you see the interplay between the DOL, the states, the non-profits (or other organizations)? But mainly, what do you see as the role of the DOL in expanding employee ownership (including ESOPs, but other employee ownership as well)?

Lisa Gomez: The role of the DOL is looking at this in the context of what is the future of the workplace. The role of the DOL general is to protect workers and I think we can protect workers and workers’ retirement benefits, which is one of the main missions of EBSA, by looking at what is out there that is not being explored fully that can be protecting workers, expanding worker voices, increasing opportunities for workers, helping employers and workers to be working together for successful outcomes. Building a better workforce. This is part of all of that. One of the main roles we have is not only to educate and promote but to try to help make connections with respect to state agencies that are out there. To make sure we’re connecting with them and providing information to the community – to the workers and employers that we deal with – to let them know that there are these state agencies and how they can be helpful. We are a relatively small agency, and so we’re putting together information and materials.

But it’s not as if employee ownership – whether coop, trust, or ESOP – just appeared yesterday. There are lots of orgs out there that have put together materials, have made connections, and have great stories. So the more that we can draw upon – not trying to reinvent the wheel – who’s out there and who we can make connections between, so that we can increase awareness of this being a potential opportunity for businesses. And particularly as we’re facing this “silver tsunami” as they call it. People are trying to make important decisions about what to do with their businesses as they approach retirement, and just thinking about the next chapter. For them to understand their options. We (would) have professionals who understand the options, regulators who understand and can connect them to this option, and just have people make decisions that they feel comfortable with as they go into the next chapter.

Steve Storkan: I know you’re the director of this office; do you see the DOL’s website and that office as being a hub for resources and connections? Or is that a little bit of an “overstep” for the DOL? How detailed would you like to see it?

Lisa Gomez: I definitely want this to be much more than just you can click on this site and read a bunch of materials about options. Those materials exist. If people know about employee ownership, they could just google and find info. So for us to pile on to that and simply become another website with info, I don’t think that’s worth much and I don’t think that will further the message. I think that we, as a gov agency, need to take seriously that we are a gov agency and that people – either EEs or ERs – may turn to us if they are looking for information. When we do outreach events or are doing media, podcasts, those will come with a different level of credibility and assurance to folks – that you may not have heard about (employee ownership), but the federal government believes in it. And there are several gov agencies who are out there supporting it and are trying to provide information on a state and federal level. So [we’d like] to give that kind of support and connection and not just info. We’re working on it – and, of course, there are constraints.

One of the constraints is that there’s a part of the WORK Act that we haven’t really talked about that discusses grants being given with respect to promoting employee ownership. There are no appropriations behind those grants. If that money is appropriated, we’d most likely work with employment and training administration at the DOL, whose job it is to administer grants. We have to get money behind those things. I’m really excited to see where this is going to go and think there’s a lot of momentum now.

Steve Storkan: I love that answer – that it’s not just going to be a page on the DOL website, this is a movement, and that you said that the federal government is behind this would be a major accomplishment in what we’re doing. I really appreciate that. We’re running against time, but I want to give you the last word with the audience before I do an exercise with them. Is there anything we didn’t touch on today and/or that you’d like to leave the crowd with – or did we cover it all?

Lisa Gomez: Hopefully we covered a lot. One thing I’d like to leave you all with is that: We at the DOL – and me myself – continue to be in information-gathering mode, sponge mode. It's not about my ideas. I want good ideas. You are the people who have lived in this community and worked  with people in this community. I’m sure you have great ideas about how we can reach out to people in these communities and what can be effective – whether they’re webinars or personal meetings or reaching out to different groups. We were talking about HBCUs – give me your ideas. DOL.gov/ebsa subscribe to us; subscribe, and we’ll keep you posted when we launch and what’s going on. Find me on the org chart and email me directly. I’d like to get ideas from everyone