employee owned america blog

New Bipartisan Employee Ownership Legislation in Washington State

After a 2022 that saw two state legislative successes for the employee ownership field in California and Massachusetts, new bipartisan legislation has been introduced in Washington State by State Senator Mike Padden (R-Spokane) and Senate Majority Leader Jamie Pedersen (D-Seattle).

Senate Bill 5096, “An Act Relating to Expanding Employee Ownership” is a culmination of lessons learned from states that have already taken steps to advance employee ownership. The bill would create the Washington Employee Ownership Program within the Washington State Department of Commerce with a Director charged with:

  • (i) Convening a network of technical support and service providers for businesses considering all forms of broad-based employee ownership;
  • (ii) Working with state agencies whose regulations and programs affect employee-owned businesses;
  • (iii) Partnering with external service providers and organizations to make Washington State maximally conducive to the growth of employee ownership;
  • (iv) Curate a referral service with service providers to assist in feasibility studies and transitions to employee ownership

The bill replicates the approach of the State of Colorado by authorizing an Employee Ownership Commission with members appointed by the Governor, the legislature, and external stakeholders. The bill also replicates the State of Colorado in introducing a tax credit to offset the costs of feasibility studies and get business owners started on the path of considering employee ownership as a succession option. The tax credit is scoped at $2 million annually and provides up to 50% of conversion costs for an ESOP (up to $100,ooo) as well as worker cooperatives and employee ownership trusts ($25,000).

The legislation extends beyond the examples set by other states in creating a state revolving loan fund (RLF) to support the financing of conversions for the smallest of businesses that may struggle to attract conventional financing. Based on lessons learned at the federal level, the statute explicitly precludes the use of personal guarantees in the underwriting criteria for worker cooperative conversions. Finally, the bill adds statutory clarification that State Small Business Credit Initiative (SSBCI) funding for the State of Washington may be used according to the employee ownership use cases offered by the Treasury Department.

If enacted, SB 5096 would be the most significant employee ownership legislation passed at the state level. Ownership America was proud to advise on this legislation and we look forward to success in Washington State and across the country in 2023.

More information can be found on the bill here

Special thanks to Gellert Dornay for initiating this exciting legislative development.