California Bill Would Create Contracting Set-Aside for ESOP Companies

California Republican Senator Suzette Valladares has introduced SB-713, a bill that would:

• Require the Director of General Services to issue an ESOP contractor certificate to qualified contractors.
• Authorize the California Employee Ownership Hub manager (a position authorized by the California Employee Ownership Act, which took effect in 2023) to maintain a comprehensive bidders list of qualified contractors that have received the ESOP certificate.
• Require, beginning on January 1, 2027, the California Department of Transportation to ensure that an unspecified percentage of state-funded construction contracts and construction-related procurements involve contractors who have received that certificate.

The bill does not currently specify what qualifications would be required to receive the ESOP contractor certificate, leaving blanks in the language that presumably would be developed if the bill is considered in committee.  One approach being considered is to use standards similar to those developed by Certified EO, a private organization that certifies ESOP and other companies as employee-owned if at least 30% of the stock is broadly owned. The approach would give additional credit for companies that are more than 30% employee-owned.