The Assistant Secretary of Labor in Conversation with the NCEO
On September 19, 2024, the Assistant Secretary of Labor, Lisa M. Gomez, attended the NCEO’s Fall Forum to address attendees. In her role as the head of the Employee Benefits Security Administration (EBSA), Assistant Secretary Gomez is involved in key issues that affect the employee ownership community, including both regulation and promotion.
The transcription below is lightly edited from our conversation at the Forum, which you can view in full:
Loren Rodgers
Good morning, everybody. One thing that we spoke about yesterday was about this being a community. One thing about our employee ownership community that may differ from other communities you're part of is that we need regulation. Any business enterprise needs a good relationship with its regulator. It's my pleasure to sit here with Assistant Secretary Lisa Gomez today. I just want to mention how hard she worked to be here. I think the best example of that was actually the last time she was with us, which was at our annual conference in April. That involved a canceled flight and a last-minute trip by car to a different airport so she could still get to the annual conference on time. We are thrilled she is joining us and is willing to invest the time into learning about employee ownership. I won't talk much at all because we want to talk to Assistant Secretary Gomez. So let me start there. Could you tell us a little bit about your journey, from whatever you were doing before to being assistant secretary of labor?
AS Lisa Gomez
Sure. And, yes, it was a much easier trip this time. But poor Loren has PTSD from the last time. You know, nothing stopped me from getting here last time, but it was much easier today. I'm so happy to be here today. And thank you, Loren and the NCEO, for inviting me. Let's see, where do we begin? I started in this position as the assistant secretary of EBSA in October 2022. I was nominated by President Biden in July 2021. And then it took a little while for everything to get finalized and for me to get confirmed, but I started in this position in the middle of October 2022. Before being in this position (forgive me if some of you have heard this before), I was totally new to government. I had never worked in government before, whether it be state, federal, county, or local. I was not a DC person. I grew up in New York and then moved to New Jersey and practiced in private practice as an employee benefit lawyer for about 30 years before coming to this position. And then, lo and behold, you never know what life might bring you. But I was contacted and nominated, and here I am. It sounded like an offer that I couldn't refuse and sounded really interesting. It gave me an opportunity, with no one knowing who I was and where I’d come from. So many of these jobs are taken by DC people. It was fun for a little while to suddenly see all of these news headlines. You know, who is Lisa Gomez? Where did she come from? Who knows her? I was this woman of mystery for a little bit.
As someone who lived in the New Jersey suburbs, it was fun to have that for a little bit. Before coming into this, I was a partner at a law firm in New York. We were a small firm representing mostly labor and employment clients as well as employee benefit plans. Most clients were unions or plans affiliated with unions. I knew nothing about employee ownership before coming into this job, other than when I first started as an associate at the firm, I had a research assignment with some limited issue about an ESOP that someone was contemplating going into. I can't remember what it was about, but I knew that there was a thing called an ESOP; that was basically what I knew about employee ownership at the time. I didn't know anything about worker co-ops, employee ownership trusts, nothing. I had never heard of any of these things. My knowledge of worker voice and employee involvement in a business was with unions and how, through that vehicle, employees could be involved in a business. So coming into this job, I learned many, many things, including how to try to survive on a daily basis in Washington, DC. I spent almost three decades of my life in New York City, walking down 42nd Street before it got cleaned up, but I was never so worried about my safety as when I came to Washington, DC, and was looking behind my back for, you know what? For who might be coming for me, like a lobbyist or a congressperson or reporter. And watch what you say, etc. And so it's been a really interesting experience.
So that's what led me to this position. What led me to working with employee ownership is something called the WORK Act. When the SECURE 2.0 Act was passed, I learned from folks I was working with that a provision of SECURE 2.0 called the WORK Act had to do with employee ownership and had been subject to a lot of negotiation. Dealing with the WORK Act was going to be the responsibility of the Department of Labor and specifically the Employee Benefits Security Administration. And so that started me down this journey. It has been wonderful to learn so much about the different groups and different models, and it's been really interesting and fun.
Loren Rodgers
Great. Thank you. I know you've been on what you've called a learning journey. And I know it took you to a worker co-op conference last week and to our annual conference in Tampa (your talk is available for viewing on our YouTube channel). One of my favorite ways you phrased that is, “It feels a little bit like the ESOP world and the DOL need a little bit of marriage counseling.” So I wonder if you could say a little bit about what have you learned about employee ownership. What surprised you about what you've learned?
AS Lisa Gomez
Sure. I'm always looking to try to raise money for the agency, so I wasn't able to get my act together to get the tour shirts printed in time for this meeting – imagine “Lisa Gomez on tour” shirts that list on the back every place I'm going to meet employee-owned companies (just kidding). Yeah, it's been a journey. I really thought it was critical for the department, EBSA, and me in particular to first recognize the elephant in the room, i.e., the tension between the Department of Labor and EBSA on the one hand and so much of the employee ownership community on the other. Until this point, until SECURE 2.0, the Department's only (and EBSA’s only) interaction with employee ownership was with ESOPs and was in an enforcement capacity. Hence, we were only getting involved where there were problems or it looked like there were problems. That creates a very specific perspective and view. As I've told people, I'm sure you're surprised about this, but people do not call the Department of Labor and do not call ESBA to say, “Hey, I have this great ESOP, and you should really go check it out.” Well, now they do, actually, but they didn't before the WORK Act and before we started with this. We only found out about things where there were problems, and often (or sometimes), it might turn out that everything was actually fine. But mostly it was where there either was a problem or it looked like there could be a problem. So the relationship was pretty broken.
I wanted to be sure that I was getting myself out there and genuinely getting to know the community, learning about it, and understanding it from community members. And I'm really thankful to Loren and the folks here at NCEO because – as I told Loren after coming to the NCEO annual conference – I met with so many employee-owners and employee-owned companies at that meeting and heard so many wonderful stories about why people got into employee ownership and how it had worked for them that I left a complete believer. I felt as if I had watched 20 Hallmark movies. There were all of these stories about, “...and then the business was going to be sold and then everyone was going to lose their jobs and the town would no longer have…. And then in came the ESOP and everything was saved.” And so I was thinking this is the solution for everyone and that we need to tell everybody about this. I mean, anybody who was in the airport when I finally (was) on the way home, was probably looking at me saying, “She must have just been converted at some kind of….” But that is how I felt. So it just made me feel even more strongly that we needed to build this relationship and that I needed to work with the folks at EBSA to let them see what I was seeing.
And so in the course of these visits, I – and others from EBSA as well – have been visiting both ESOPs and worker co-ops. I don't know that we've gotten to an employee ownership trust (EOT) yet, but at the recommendation of the NCEO, ESCA, and the ESOP Association – and talking with members of Congress who are really interested in this and have ESOPs and employee-owned companies that they work with – we found a number of ESOPs to visit. And I know I got many invitations when I was here in April as well. So we have gone coast to coast to visit a number of different ESOPs, sitting down with them to learn what their perspective is, what they want me to know about why they did this, how it's working for them, and what struggles they might have had along the way. What has been most interesting to me is the diversity of the types of businesses and industries I have met with. I have been to everything from really large companies to small companies, in locations from New York to California, Kansas City, Atlanta, Texas, and other places. I have met different people and heard different stories about how they came to employee ownership, and I have heard different stories from employees about what they think. It's just been a great learning experience for me. I've tried to bring along people from our regional offices, and it's been quite funny to experience that. I'll be honest, their first reaction is to be like, “Oh, we're going to go to an ESOP? They're going to let us in willingly?” And I’m like, “No, they have a red carpet. They want us in.” And within minutes, everybody's talking and the folks on my end are very interested. So, it's been a great experience, and I've learned a lot. And thank you to all of you for that. It has really framed what we're doing at the department and how we can best serve this community and work together to make this employee ownership initiative that we're working on really work.
Loren Rodgers
Great. Thank you, and thank you to so many of you who have hosted people from the Department of Labor. May that be part of a culture shift and the beginning of a more productive relationship. I know you're limited in what you can say about the coming regulations about valuation and adequate consideration, but what can you tell us about the timing or process, or the period for comment? Is there anything you can say about how the substance of that is shaping up? Maybe it's more focused on the valuation process?
AS Lisa Gomez
Sure. I'm really constrained in what I can say substantively, but I can tell you about process, where we are, and how we got here. One of the WORK Act requirements is that we issue formal guidance on adequate consideration with respect to valuing employer stock. We heard a lot from community members when that first came through about what form the guidance would take. We decided we would issue formal guidance – a proposed regulation, I should say. Rather than issuing some FAQs or some other less formal guidance, we would issue proposed regulations. And that takes more time. But it leads to a more fulsome discussion among both the regulators and the public. We started with meeting with a number of stakeholders informally to talk with us about what they are interested in, what they think should be in the regulation, and what their perspectives are. So we conducted a number of those meetings. Then we started working on the proposed regulation itself. So we are coming along. I think that it will be released for public viewing soon. I can't tell you when, but it is coming soon. And when it does come out, it will be issued for notice and comment. So there will be a comment period of a specific amount of time, where people will have the opportunity to, after having read what we've put out there, give us their thoughts and reflections. And I really do strongly recommend that folks read it and comment, either individually or with groups that you're affiliated with, to make sure that your thoughts are heard on what the regulation looks like at that point. Because we do the best that we can to put together a regulation, and we get lots and lots of comments on anything that we put out. And the comments that we receive really do influence what the final product looks like. So, I can tell you that I've been there only almost two years now, but in the many regulations that we've put out, there's not been a single one that has looked the same from the proposal to the final version. The comments that we receive really do make a difference. And so I hope to hear from all of you about how wonderful it is, that you've never read as great a regulation in your life, and that it's because of Lisa that it happened. But seriously, I don't want to say that in exchange for buying my T-shirt or giving me a compliment, you're going to get anything! But, yeah, we are really working hard on that. And I think if you look back at where we've come and some of the settlement agreements and what has happened there, there will be a large focus, especially because of the directive and SECURE 2.0 Act, on what the process is for doing valuations.
Loren Rodgers
So you don't know at this point how long that comment period will be. Is that right?
AS Lisa Gomez
Yes. [nods]
Loren Rodgers
I'm sure it goes without saying that the NCEO, ESCA, and the ESOP Association will all organize some feedback on the proposal.
AS Lisa Gomez
I can assure you it won't be “you have 24 hours.” It's usually like around 45 to 60 days, something like that.
Loren Rodgers
Great. So we have a lot of people in this room who have the authority and responsibility to make their companies and their ESOPs work in ways that will make a visit from the Department of Labor a joyful experience instead of an unpleasant one. What would you say is the location within a business – i.e., the easiest leverage point inside a company – that would make for a good DOL experience? Is it more likely to be the board, the trustee, the executive team?
AS Lisa Gomez
So I think, just to take one step back, one thing to make sure that everyone always remembers is that an ESOP is an ERISA retirement plan, and it needs to function as that. And it is not something that is just born one day and then you don't have to worry about it anymore – like you've created the ESOP and now are done with that. It's a retirement plan. It's an ERISA plan, just like other ERISA plans that you may have had experience with either as an owner or as a participant in a plan. And that brings with it various obligations. Not only fiduciary obligations but also an obligation to make sure everything is done in the interest of participants, that they're protected, and that money spent from the ESOP is used appropriately. Also, ERISA has a long list of reporting and disclosure requirements, so make sure you are keeping up with all of that. So who within the company is the easiest leverage point can depend on whether there are issues, and, if so, where they lie. But the bottom line is that if there are problems, we can work together to resolve them.
There are things like reporting and disclosure problems, for example, which don't seem to get as much publicity when we're talking about ESOPs, But again, ESOPs are retirement plans. So there are lots of issues that can pop up. If you see that there is some kind of issue, such as a filing issue or a fiduciary issue, we have correction programs at the Department of Labor. We have great people who if you contact us (you can even call anonymously) and say, “I have a problem,” you can talk through a problem and see whether there is a way to resolve it. We also have programs where you can try to correct things, and it’s always better to try to get ahead of things. Also think about maybe even just talking with colleagues because I do think every business and every ESOP is different. Someone told me, “If you've seen one ESOP, you've seen one ESOP.” So talk with colleagues who have maybe been through it and ask them how did it work best for them, who they had there, and how they presented things.
Loren Rodgers
Great. Thank you. So with our last few minutes, given that the EBSA now has a division of employee ownership, I wonder if you could tell us a little bit about that. And what's your aspiration for what that might look like, for what it's doing in 10 years?
AS Lisa Gomez
Sure. So this is something really exciting because I think that when I was at the NCEO annual conference in April, I was then saying, “Soon, soon we will have a chief of the division of employee ownership.” So we actually do have a division chief within EBSA, and pursuant to the WORK Act, we were to set up an employee ownership initiative. We decided to accomplish that by establishing a division of employee ownership that sits within our Office of Outreach, Education, and Assistance. And that was deliberate on our part to make sure that internally and externally, everyone knew that this was about outreach and assistance and education. Because the charge to us, under the WORK Act, is to promote employee ownership, educate about employee ownership, and be a conduit between the states and the employee-owners to try to make all of this happen. So we established that and did a lot of research, and we're learning and making connections on our own. And then we went out to the public to look for a chief. We were very fortunate to get Hilary Abell, who was with Project Equity and worked a lot with businesses that had converted to employee ownership, both ESOPs and worker co-ops. And she is, from what we could see and what I've heard afterward, a trusted person. We got a lot of good feedback along the lines of, “Okay, that was good, Department of Labor, because you showed us that you got someone from our world to come in and lead this, rather than having someone who didn't really know anything about employee ownership.” So Hilary is there. She's been great. We were together at a worker co-op conference just last Friday, and that was a whole other world and a different experience.
And so we're trying to just learn where we can be helpful, to put together information that can be helpful to employee-owners and business owners learning about different options. We also are a separate resource for the employee ownership community, both employers and employees whose employers may have just gone into employee ownership and who are now learning the business is ESOP-owned or otherwise employee-owned. And if they want to come to a government agency to get an unbiased opinion, we can provide that. We are going to be launching (this is where I get back to my “soon”) a web page on our website for the division of employee ownership – hopefully within the coming weeks. And we'll put out a press release when that happens. We're really excited about that. And that page will list events and provide contact information. Also, as part of the WORK Act, there is a provision that we, the Department of Labor, can provide grants. Unfortunately, if you have a provision that provides for grants, but nobody then negotiates the appropriations part of it that actually gives money for those grants, then there's no money to give. So I have lots of people coming saying, “We need money. That's the most important thing you could do for us.” So I don't have that yet. But I hope we will get that. If and when that does happen, we will work closely with our Employment and Training Administration (ETA), because they are the grantmakers within the department. We have also worked very closely with our sister agencies, whether it be the SBA, Treasury, or the USDA, as well as people at the White House, who have all been very interested and excited in collaborating. Just a month or so ago, we had the first-ever White House convening on employee ownership, which was exciting and was a real showing that this administration, in particular, is very interested in learning more. And I've just seen, in the relatively short time that we've been involved in this piece of it, how much room there is for collaboration and how much things have been working in silos in the federal government when it comes to employee ownership. I’ve also seen how this is an opportunity to try to have better communications with not only the community but also with each other, so we can highlight what the needs are and how to promote this and educate in the right way. Hopefully, in 10 years we will have expanded. Poor Hilary, she's a team of one. We're a small agency, but we are looking to expand that and to be able to give money, provide lots of resources, and be out there so we can connect people, both within the government and within the community, and really make this model work better than it does presently.
Loren Rodgers
Wonderful. Good. Well, thank you so much. Assistant Secretary Gomez. Please join me in thanking the assistant secretary.