The bill would create a major federal program to provide funding and support for state-level outreach and technical assistance for employee ownership
Senators Patty Murray (D-WA) and Richard Burr (R-NC) have issued a discussion draft of the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE and SHINE Act; Congress loves acronyms), the Senate’s version of the House-passed SECURE 2.0 Act, a bipartisan bill aimed at improving retirement security. The bill makes a number of generally noncontroversial changes to retirement law and has a very good chance of becoming law. The proposal also contains the Worker Ownership, Readiness, and Knowledge (WORK) Act, which would be the most important pro-employee ownership legislation since the passage of legislation allowing S corporations to have ESOPs. The WORK Act provisions would create an office in the Department of Labor to coordinate and fund state employee ownership outreach programs and would require the DOL to set new standards for ESOP appraisals.
The language in the Senate bill follows similar language in a bill passed by the House Education and Labor Committee but not acted on by the full House, the Protecting America’s Retirement Security Act. That bill, however, did not have the directive to the DOL on appraisals. If passed, the Senate bill would go to conference with the House.
Under the law, the Department of Labor would establish an Employee Ownership and Participation Initiative to promote employee ownership and employee participation in business decision-making. The program would be funded at $4 million in fiscal year 2024, gradually increasing to $16 million by fiscal year 2028.
The funds can go to existing state programs or to create new ones. States can contract out the work to qualified organizations or create the program in-house. If a state does not apply, nonprofits can apply in the following year.
Program funds would be used for:
“(A) providing education and outreach to inform employees and employers about the possibilities and benefits of employee ownership, business ownership succession planning, and employee participation in business decision making, including providing information about financial education, employee teams, open-book management, and other tools that enable employees to share ideas and information about how their businesses can succeed;
"(B) providing technical assistance to assist employee efforts to become business owners, to enable employers and employees to explore and assess the feasibility of transferring full or partial ownership to employees, and to encourage employees and employers to start new employee-owned businesses; and
"(C) training employees and employers with respect to methods of employee participation in open-book management, work teams, committees, and other approaches for seeking greater employee input.”
The bill directs the program to “act as a clearinghouse on techniques employed by new programs and existing programs within the States, and disseminating information relating to those techniques to the programs; and …facilitate the formation of new programs, in ways that include holding or funding an annual conference of representatives from States with existing programs, representatives from States developing new programs, and representatives from States without existing programs.”
Funds can be used for educating business owners about using employee ownership for business transition, providing information on starting employee-owned companies, training employees and employers on workplace participation programs, and providing technical assistance to assess the feasibility of transactions. Funds also can be used to help pay for feasibility studies; provide materials for outreach and training; create a data bank on where to find legal, financial, and technical advice in connection with business ownership; and create networks of employee-owned companies.
States can “sponsor and submit an application . . . on behalf of any local entity consisting of a unit of State or local government, State-supported institution of higher education, or nonprofit organization,” as well as submit an application on their own behalf. If a state fails to support or establish such a program in a given fiscal year, then in subsequent fiscal years, such local governmental, educational, or nonprofit entities can apply for grants on their own initiative.
The bill would also require that the DOL develop “acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan.” ESOP advocates have long sought this clearer guidance on ESOP valuations.
The language of the WORK Act draws substantially on language the NCEO developed in 1987 for legislation introduced by Senator James Sasser. The idea was revived in a 2015 Center for American Progress report (which the NCEO was also very involved in developing) on how employee-owners could be encouraged; was included in the WORK Act, sponsored by Senator Sanders in the Senate and Representative Courtney in the House; and now is incorporated (through the Work Act) in the draft of the RISE and SHINE Act.