Session Laws

Whereas, The deferred operation of this act would tend to defeat its purpose, which is to immediately provide for employee involvement and ownership projects, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. Section 17 of chapter 6 of the General Laws, as appearing in the 1988 Official Edition, is hereby amended by striking out, in line 24, the words "and the nutrition board" and inserting in place thereof the words:- the nutrition board and the commission on employee involvement and ownership.

SECTION 2. Said chapter 6, as so appearing, is hereby further amended by adding the following section:-

Section 204. There shall be a commission on employee involvement and ownership, hereinafter called the commission, to consist of thirteen members including the secretary of economic affairs or his designee, the secretary of labor or his designee, and eleven persons to be appointed by the governor, four of whom shall be representatives from employers, of which one shall represent the Associated Industries of Massachusetts; four of whom shall be representatives from employee organizations, of which one shall represent the AFL-CIO; and three of whom shall be representatives from the employee involvement and ownership technical assistance community, of which one shall have expertise in private sector employee involvement, one shall have expertise in public sector employee involvement, and one shall have expertise in employee ownership.

Each appointed member shall serve for a term of four years, except that in making the initial appointments the governor shall appoint two members representing employers and two members representing employee organizations to serve for two years; two members representing employers and two members representing employee organizations to serve for four years; one member representing the technical assistance community to serve for two years; and two members representing said technical assistance community to serve for four years. Upon expiration of the term of a member, a successor shall be appointed, in the same manner for a like term. Any member shall be eligible for reappointment. Vacancies shall be filled in a like manner for the remainder of the unexpired term. Any member may be removed from his appointment by the governor for cause. The members shall be compensated for necessary and reasonable expenses only.

Five members of the commission, two from employee organizations, two from employers, and one technical assistance member shall constitute a quorum and the affirmative vote of such five members shall be necessary and sufficient for any action to be taken by the commission. No vacancy in the membership of the commission shall impair the right of a quorum to exercise all the rights and perform all the duties of the commission. Any action taken by the commission may be authorized by resolution at any regular or special meeting and shall take effect immediately unless otherwise provided in the resolution.

The commission shall advise the governor and the executive director of the industrial services program established by section two of chapter twenty-three D from time to time on issues and policy matters pertaining to employee involvement and ownership in the commonwealth including, but not limited to, overseeing the development of the employee involvement and ownership program, making recommendations to develop and improve the performance of said program, making recommendations to develop legislation to promote employee involvement and employee ownership, monitoring the development and implementation of the memoranda of understanding developed pursuant to section nineteen of said chapter twenty-three D, facilitating the cooperation of representatives from employee organizations, government and business, and providing advice on state-wide private employee involvement and ownership programs.

There shall be a chairperson and a vice chairperson of the commission elected annually as follows: in even numbered years, the chairperson shall be elected from the representatives from employers and the vice chairperson shall be elected from the representatives from employee organizations and in the odd numbered years the chairperson shall be elected from the representatives from employee organizations and the vice chairperson shall be elected from the representatives from employers. The members shall also annually elect one of their number as secretary. The commission may elect such other officers as it deems necessary. The commission shall meet from time to time as it deems necessary, but not less than four times per year.

The commission shall adopt operating rules and procedures; provided, however, that such rules and procedures are consistent with the provisions of said chapter twenty-three D.

SECTION 3. Chapter 23D of the General Laws is hereby amended by striking out section 1, as appearing in the 1988 Official Edition, and inserting in place thereof the following section:-

Section 1. As used in this chapter the following words shall, unless the context requires otherwise, have the following meanings:

"Applicant", any legal entity, or person seeking assistance pursuant to this chapter for an employee involvement or employee ownership project.

"Area labor-management committee", a committee composed of representatives from management, labor and private concerned citizens from a particular geographic area or industry; provided, however, that management representatives shall be selected by management and labor representatives shall be selected by labor.

"Board", board of trustees of the economic stabilization trust.

"Business", any individual, firm, corporation, partnership, trust or other legal entity with its principal office, plant, or facility in the commonwealth and engaged in manufacturing, research and development, or the provision of goods and services.

"Commission", the commission on employee involvement and ownership established in section two hundred and four of chapter six.

"Director", or "Executive Director", the executive director of the industrial service program.

"Employee", any person employed for hire by an employer in any lawful employment; provided, however, that employees shall be designated as managerial employees if they participate to a substantial degree in formulating or determining policy.

"Employee involvement", the involvement of both employees and managers in decisions affecting their work; provided, however, that where a certified collective bargaining agent represents said employees such involvement of said employees shall be with the agreement of said agent.

"Employee organization", any lawful association, organization, federation, council, or labor union, the membership of which includes public or private employees, and assists its members to improve their wages, hours, and conditions of employment.

"Employee-owned business", a corporation organized and operated pursuant to chapter one hundred and fifty-seven A, or by a partnership consisting of at least three persons which is owned and controlled by the partners on a cooperative basis whereby the partners vote on partnership matters on a one-person, one-vote basis and the ratio of partners to nonpartner employees is no less than one to one, or a business, the ownership of which is represented by shares and the governing body of which is elected by holders of shares in which more than fifty percent of the class of voting shares having the greatest combination voting power and dividend rights and more than fifty percent of all other classes of shares are owned by (1) not less than seventy percent of the employees of such business, (2) an employee-stock ownership plan maintained by such business, or (3) a combination of the foregoing, subject to the following:

(i) shares of any class owned by an employee who owns more than fifteen percent of such class shall be treated as owned by someone other than said employee. For purposes of determining whether a person owns more than fifteen percent of a class, shares owned by the person's spouse, children or parents shall be treated as owned by said person.

(ii) voting shares owned by an employee stock ownership plan shall be taken into account only to the extent that the employee stock ownership plan passes the vote with respect to all shares held in trust through to employees.

"Employee ownership", employees having an ownership interest in the business where they work.

"Employee-ownership project", a plan, arrangement or transaction under which (a) a business would become an employee-owned business within a period of not more than five years, or (b) an employee-owned business would be established.

"Employee stock ownership plan", an employee stock ownership plan within the meaning of 26 USC section 4975(e)(7), including, where the context so indicates, the trust maintained under such a plan.

"Employer", includes any person acting in the interest of an employer directly or indirectly.

"Financing agreement", a legal agreement between the economic stabilization trust and a business or person which details the terms and conditions upon which the trust has loaned to, invested in, or otherwise financed said business or person.

"Person", any individual or individuals, firm, corporation, partnership, trust or other legal entity which seeks to purchase a business or the plant, facilities or assets of a business in the commonwealth or to institute or implement an employee-ownership project.

"Program", the industrial service program.

"Trustees", the trustees of the economic stabilization trust.

"Trust", the economic stabilization trust.

"Voting power", the power of shares, relative to other shares in the business, to elect at least a majority of the members of the governing body of a business.

SECTION 4. Section 4 of said chapter 23D, as so appearing, is hereby amended by inserting after clause (g) the following clause:-

(h) promoting employee involvement and ownership projects as described in sections seventeen to twenty-four, inclusive.

SECTION 5. Section 5 of said chapter 23D, as so appearing, is hereby amended by adding the following paragraph:-

To perform the duties pursuant to clause (h) of section four, a technical assistance fund is hereby established to be used by the director to contract with private consultants solely for the purposes of assessing the feasibility of converting an existing business to an employee-owned business or for assessing the feasibility of establishing a start-up employee-owned business, and for providing other technical assistance to employee-owned businesses and employee-ownership projects including, but not limited to, legal assistance, marketing assistance and educational services; provided, however, that before contracting for such services, the director shall determine that:

(a) the employee-owned business or employee-ownership project is unable to pay for such services;

(b) such services cannot be obtained of sufficient quality and with sufficient speed from an existing state agency, department, office or quasi-public corporation to properly perform said duties; and

(c) the employee-owned business or employee-ownership project agrees to repay the program for the cost of the technical assistance provided the feasibility assessment is positive, based on terms and conditions established by the director.

SECTION 6. Section 8 of said chapter 23D, as so appearing, is hereby amended by striking out, in line 5, the word "fifteen" and inserting in place thereof the word:- sixteen.

SECTION 7. Paragraph (a) of section 9 of said chapter 23D, as so appearing, is hereby amended by striking out the first sentence and inserting in place thereof the following sentence:- The trust shall be governed by and its powers exercised by a board of trustees which shall consist of five members: the secretary of the executive office of economic affairs, the secretary of the executive office of labor, and three persons to be appointed by the governor, who shall together be experienced in the financial analysis of businesses, turnarounds of troubled businesses, the management of businesses, and the organization and operation of employee-owned businesses; provided, however, that each such trustee shall be experienced and knowledgeable in at least one such area.

SECTION 8. Said chapter 23D is hereby further amended by striking out section 11, as so appearing, and inserting in place thereof the following section:-

Section 11. The purposes of the economic stabilization trust shall be as follows:

(a) To provide flexible high risk financing necessary to implement a change of ownership, a corporate restructuring, or a turnaround plan for an economically viable, but troubled business which faces the likelihood of a large employment loss, plant closure, or failure without such a change of ownership, corporate restructuring, or turnaround plan. The financial participation of the trust is aimed at supplementing private financial institutions and public economic development agencies when such institutions are not able to provide all the financing or bear all of the risk necessary to transfer ownership, restructure or turnaround a business in a situation where the business might otherwise fail or greatly reduce its employment.

(b) To provide flexible high risk financing in connection with the start-up of employee-owned businesses or the implementation of employee-ownership projects. The financial participation of the trust is aimed at supplementing private financial institutions and public economic development agencies when such institutions are not able to provide all the financing or bear all of the risk necessary to start-up an employee-owned business or implement an employee-ownership project.

Not less than ten percent of the financing provided pursuant to this section shall be targeted to businesses that are employee-owned businesses in order to fulfill the purposes of paragraphs (a) and (b); provided, however, that any portion of said ten percent which is not expended for the purposes of employee-owned business may be expended for other purposes authorized in this section, subject to annual approval by the commission.

In the performance of its purposes, the trust shall be deemed to be investing, not on the basis of a direct financial return on its investment but in order to reduce the social costs of a large employment loss, plant closure or business failure and to obtain the financial benefits the commonwealth receives from maintaining the operations and employment of viable businesses, and shall not be held to the loan loss standards of private commercial lenders.

SECTION 9. Said chapter 23D is hereby further amended by striking out section 13, as so appearing, and inserting in place thereof the following section:-

Section 13. Any business or person seeking financing from the trust shall submit to the executive director a complete application for financing and any other information as the board shall request.

The board shall review the application for financing, and based upon the information submitted and such additional investigation as the trustees may deem necessary, approve or deny said application subject to the following requirements:

(a) Before approving an application for assistance in connection with the purchase of a troubled business, the board shall determine and incorporate in its minutes that:

(1) the business is likely to experience a large loss of employment, plant closure, or failure without the loan financing or investment by the trust;

(2) the business or person seeking to purchase the business has taken or will take such actions as the board deems necessary to insure the business has a reasonable chance to continue as a successful business, including, but not limited to, changes in its operations, financing, or management and that said actions are included as a condition for financing by the trust in the financing agreement; and

(3) the business or person seeking to purchase the business has made diligent efforts to obtain the financing necessary to continue its operations or transfer ownership of the business from private financial institutions and public economic development agencies, and such financing is unavailable or has been offered on terms that would prevent the successful continuation or change in ownership of the business.

(b) Before approving an application for assistance in connection with an employee-owned business or an employee-ownership project, the board shall consult with the director and after receiving the recommendation of the director, shall determine and incorporate in its minutes that:

(1) the business or person seeking assistance has taken or will take such actions as the board and the director deem necessary to insure that the employee-ownership project has a reasonable chance to succeed; and

(2) except with respect to assistance for pre-feasibility and feasibility studies, that such business or person has made diligent efforts to obtain the financing necessary to institute or implement the employee-ownership project from private financial institutions and public economic development agencies, and such financing is unavailable or has been offered on terms that would prevent the successful institution or implementation of the project.

SECTION 10. Said chapter 23D is hereby further amended by striking out section 14, as so appearing, and inserting in place thereof the following section:-

Section 14. The trust shall annually submit a complete and detailed report of the trust's activities, within ninety days after the end of each fiscal year to the governor, to the clerk of the house of representatives and to the clerk of the senate. The report shall include all the businesses or persons that received financing from the trust, the number of direct jobs created, saved or maintained, the indirect employment created, saved or maintained, the location and wage level of direct jobs created, saved or maintained, the fiscal benefits to the commonwealth in the form of tax revenues generated and social welfare expenditure avoided as a result of the business and employment maintained by the trust.

SECTION 11. Said chapter 23D is hereby further amended by adding the following nine sections:-

Section 16. There shall be established within the economic stabilization trust a separate fund to be known as the Employee-Ownership Revolving Loan Fund, the proceeds of which shall be used to provide low interest long term loans to individuals for the purchase of such individual's ownership interest in an employee-owned business. Said fund shall consist of all monies designated therefor by the board of trustees of the Economic Stabilization Trust Fund in consultation with the director.

Said board shall administer the employee-ownership revolving loan fund program. The application process, and the terms and conditions of approving such loans shall be determined by the board in consultation with the director. Said Employee-Ownership Revolving Loan Fund shall be subject to the same reporting and auditing requirements as the economic stabilization trust, as provided in sections fourteen and fifteen.

Section 17. There is hereby established in the executive branch, under the supervision of the executive director of the industrial services program, a program of employee involvement and ownership. Said program shall provide education, outreach and promotion efforts to create an overall environment in the commonwealth which will expand and enhance employee involvement and ownership, to publicize and promote the benefits of employee involvement and ownership to policy makers and the general public, to encourage joint collaborative outreach efforts regarding involvement and ownership in the workplace, to research and evaluate employee involvement and employee ownership in the commonwealth, to showcase employee involvement and ownership initiatives in the commonwealth, to facilitate and coordinate the sharing of existing information and resources, and to provide grants pursuant to the provisions of this chapter.

The director shall have the powers to appoint any specific committee or task force and to contract with consultants, agents or advisors deemed necessary to further the purposes of the program of employee involvement and ownership; provided, however, that said director shall seek the advice of the commission prior to such appointment or such hiring.

Said director may accept gifts or grants of money or property from any source; provided, however, that any money received shall be deposited with the state treasurer to be kept in a separate fund in the treasury for expenditure without appropriation by the director in accordance with the conditions of such gift or grant.

The director shall, after consultation with the commission, issue such rules, regulations and procedures governing the application for and delivery of services provided for by sections seventeen to twenty-four, inclusive, which are deemed necessary for the proper performance of the duties of the program of employee involvement and ownership.

Section 18. (a) The duties of the program of employee involvement and ownership shall be consistent with the provisions of section eighteen and shall include, but not be limited to:

(1) promotion of employee involvement and employee ownership;

(2) coordination with other available state programs, including the executive offices of manpower affairs and labor;

(3) education of state agency personnel who advise or provide assistance to businesses, individuals, public sector entities, and employee organizations about the implications of employee involvement and employee ownership for their agency's programs or services, including but not limited to training, assisting with staff development seminars, and facilitating the coordination of state agency resources;

(4) development of education programs, including, but not limited to, convening an annual conference with industry, government and labor participation to promote and discuss employee involvement and ownership in the commonwealth and elsewhere;

(5) provision of research and evaluation of public and private employee involvement as well as employee ownership including but not limited to conducting a survey of employee participation and management practices in the public and private sector;

(6) cooperation with all other state, federal and local agencies, departments and commissions, as is necessary, to carry out its duties and purposes;

(7) implementation of the advice and recommendation of the commission relative to improving the performance of its duties and purposes;

(8) creation of referral services including, but not limited to, a "loaned" executive and union leader program;

(9) assistance to private business through the provision of diagnostic resource and referral services in exploring the feasibility of establishing employee involvement programs;

(10) provision of grants to state agencies, the majority of whose employees are not subject to the provisions of chapter one hundred and fifty E, authorities of the commonwealth and the board of regents of higher education for employee involvement start-up efforts;

(11) provision of grants to regional and municipal authorities, cities and towns including the public school systems, regional school districts and independent vocational schools for employee involvement start-up efforts;

(12) review of private enterprises and businesses doing business with the commonwealth which have more than one hundred employees to assess their employee involvement efforts and compilation of a list of employee-owned firms which might provide products and services to the commonwealth;

(13) promotion of the creation, training and funding of area labor-management committees, including the provision of grants to said area labor-management committees;

(14) development and issuance of procedures concerning the administration of the duties of the program of employee involvement and ownership consistent with the purposes of this chapter.

(b) The program of employee involvement and ownership shall perform research and evaluation concerning employee involvement and employee ownership efforts. The purpose of said research and evaluation shall be to:

(1) aid the employee involvement and ownership programs in the commonwealth in becoming more effective by learning through research and feedback of the information to the participants of such programs. Said research and evaluation shall involve program participants in the design survey instruments and feedback methods of such evaluation;

(2) assess and evaluate each project funded by said program to determine whether or not such project is meeting its own goals and the goals of this chapter; and

(3) provide information to the commission, the governor and the public so that informed decisions may be made about employee involvement and employee ownership in meeting the needs of the commonwealth.

A summary of such research and evaluation concerning employee involvement and ownership efforts shall be regularly published.

Section 19. The director may promote and accept requests for grants for start-up employee involvement programs in state agencies, the majority of whose employees are not subject to the provisions of chapter one hundred and fifty E, authorities of the commonwealth, the Massachusetts board of regents of higher education or any institution under its authority, regional and municipal authorities, cities, towns, regional school districts and independent vocational schools. The school committee of a city or town may request such grants for the public school system under its control. Any such grant to cities and towns for such public school systems shall be deposited with the treasurer of such city or town to be expended by the school committee without further appropriation. Such grant requests shall include, but not be limited to, an approved statement of purpose and an implementation plan to which participating labor and employer representatives have committed themselves in writing. Said grants shall be on a matching basis with said participating state agency, the majority of whose employees are not subject to the provisions of chapter one hundred and fifty E, authority of the commonwealth, Massachusetts board of regents of higher education, city, town, regional school district or independent vocational school funding. Said grants shall be used for, but not be limited to, training managers, union leadership and employees in employee involvement strategies and methods.

Said director is authorized to enter into memoranda of understanding with the state agencies including, but not limited to, the office of employee relations, the department of personnel administration and the board of conciliation and arbitration, which are already actively involved in coordinating the commonwealth's employee involvement program. Such memoranda of understanding shall include, but not be limited to, joint sponsorship of conferences, workshops, and education and outreach materials.

Said director shall develop memoranda of understanding with state agencies which are or might be involved with employee ownership, including agencies of the commonwealth which are involved with providing capital sources.

Section 20. (a) The program of employee involvement and ownership shall assist applicants seeking to institute or implement employee-ownership projects by serving as an advocate for such applicants in obtaining financial and other assistance from private sources and from other governmental agencies. Said program shall make such applicants aware of the financial assistance available for qualified employee-ownership projects pursuant to this chapter and may, upon request, assist applicants in the preparation of applications for such financial assistance.

(b) Said program shall coordinate with and assist the board of trustees of the economic stabilization trust in the approval process for persons and businesses seeking financial assistance pursuant to this chapter for employee-ownership projects.

(c) Said program shall compile and make available to applicants a directory of qualified vendors of professional services essential to employee-ownership projects.

(d) Said program may assist applicants seeking to institute or implement employee-ownership projects by making the staff of said program available for aid in the preparation of legal and other necessary documentation.

(e) Said program may design and implement a special outreach program to inform and educate potential retiring owners of small businesses about the benefits of employee-ownership. Said program shall include, but not be limited to, generating a list of closely held businesses domiciled in the commonwealth, developing information materials, explaining the benefits and assistance available to retiring owners interested in selling their businesses to the employees of the business, and targeting said informational materials to the identified small business owners.

Section 21. No applicant shall receive assistance or funding from the program of employee involvement and ownership without the written consent and participation of any collective bargaining agent for the employees of the applicant's employer and, where said employees are not represented by any collective bargaining agent, without the written consent and agreement of the employer as determined by said program.

The new owners of an employee-owned business that receive funds through the program of employee involvement and ownership or the economic stabilization trust, pursuant to this chapter, shall recognize that a condition of the receipt of any assistance including, but not limited to, a feasibility study, loan, financing or investment from said economic stabilization trust or program is the requirement that the new owners of said business shall retain and continue to recognize any duly certified collective bargaining agent and shall assume any existing contracts or other current agreement with employees, related to terms and conditions of work until the date of expiration of such contract or agreement.

Section 22. The program of employee involvement and ownership shall promote the creation of area labor-management committees and assist said committees in promoting employee involvement and ownership activities in manufacturing, service, and technical industries as well as in the public sector.

Said program may award grants to area labor-management committees on a competitive basis, promote the interaction of business and labor leaders in initiating employee involvement efforts, and perform other related matters.

Any area labor-management committees receiving such grants shall provide educational programs and outreach relating to employment involvement activities.

Said program shall provide technical support to said area labor-management committees, including staff training, public relations, developing educational materials and coordinating joint area labor-management committees' activities.

Section 23. No employee shall be disciplined, suspended, terminated, retaliated against or otherwise affected because of the employee's participation or nonparticipation in any employee involvement or employee ownership project or program or activity related to such project or program.

Section 24. The director shall annually submit a report to the governor, clerk of the house of representatives, clerk of the senate, and the commission within ninety days of the end of each fiscal year.

The report shall include: (a) a description of the activities of the program of employee involvement and ownership; (b) any recommendations to improve the performance of said program; and (c) a description and evaluation of state-wide employee involvement and employee ownership programs undertaken by and in the commonwealth.

SECTION 12. Section 1 of chapter 40K of the General Laws, as appearing in the 1988 Official Edition, is hereby amended by inserting after the definition of "Corporation" the following definition:-

"Employee-owned business", a corporation organized and operated pursuant to chapter one hundred and fifty-seven A or by a partnership consisting of at least three persons which is owned and controlled by the partners on a cooperative basis whereby the partners vote on partnership matters on one person, one vote basis and the ratio of partners to nonpartner employees is no less than one to one, or a business, the ownership of which is represented by shares and the governing body of which is elected by holders of shares in which more than fifty percent of the class of voting shares having the greatest combination voting power and dividend rights and more than fifty percent of all other classes of shares are owned by (1) not less than seventy percent of the employees of such business, (2) an employee-stock ownership plan maintained by such business, or (3) a combination of the foregoing, subject to the following:

(i) shares of any class owned by an employee who owns more than fifteen percent of such class shall be treated as owned by someone other than said employee. For purposes of determining whether a person owns more than fifteen percent of a class, shares owned by the person's spouse, children or parents shall be treated as owned by said person.

(ii) voting shares owned by an employee stock ownership plan shall be taken into account only to the extent that the employee stock ownership plan passes the vote with respect to all shares held in trust through to employees.

SECTION 13. The last paragraph of section 6 of said chapter 40K, as appearing in the 1988 Official Edition, is hereby amended by striking out, in line 41, the word "and (b)" and inserting in place thereof the following:- , (b),- and inserting after the word "dislocation", in line 44, the following clause:-

and, (c) whose business is organized and operated as an employee-owned business.