The Sustainable Economies Law Center created the Empowering Livelihoods Campaign to educate about and advocate for employment law reforms necessary to the creation of cooperative and equitable economies.
At SELC, we look forward to an economy based on equity, sustainability, and justice for all. In order to develop vibrant local and regional economies, we will need many people to open up all kinds of new businesses, from small-scale farms to food cooperatives to textile and fabric businesses to local manufacturing businesses. Many of these people will rely on their friends, family, and communities to help them get started, and we need to ensure that our labor and employment laws support these new businesses instead of threatening their ability to exist. For businesses that opt to govern and structure themselves as worker-owned cooperatives, our labor and employment laws need to change to accommodate the inherent features of worker-owned cooperatives that place worker well-being above profit. For small-scale farm communities whose cultural heritage is founded upon mutual aid and reciprocity, our legal definition of "employee" needs to change to accommodate the diverse manners in which farmers help each other out. Our laws ought to foster more volunteerism for nonprofits or nonprofit-owned social enterprises, without requiring that they be treated as employees.
Our vision is to create a world where all people have control over their livelihoods and are free and able to develop and participate in worker-owned cooperatives, consumer-run cooperatives, housing cooperatives, nonprofit social enterprise, and microenterprise. In alignment with international human rights standards, we believe every person has the right to work. We believe that cooperatively-owned and community-controlled enterprises create more dignified, equitable, and stable jobs than conventional investor-owned businesses. We hope to create a legal system that nurtures, rather than inhibits, cooperative enterprise.
We are guided by the following international human rights principles:
Article 23 of the U.N.’s Universal Declaration of Human Rights:
(1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
(2) Everyone, without any discrimination, has the right to equal pay for equal work.
(3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
(4) Everyone has the right to form and to join trade unions for the protection of his interests.
Article 6, Part III of the International Covenant on Economic, Social and Cultural Rights:
(1) The States Parties to the present Covenant recognize the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts, and will take appropriate steps to safeguard this right.
(2) The steps to be taken by a State Party to the present Covenant to achieve the full realization of this right shall include technical and vocational guidance and training programmes, policies and techniques to achieve steady economic, social and cultural development and full and productive employment under conditions safeguarding fundamental political and economic freedoms to the individual.
- Unemployment: Unemployment rates are as high as 25% in some parts of the country. Traditional businesses are designed to ensure that the owners have a sufficient number of workers, and not to ensure that communities have sufficient opportunities to make livelihoods.
- Wealth concentration: Employment in conventional investor-owned businesses has resulted in the continuous concentration of wealth in the hands of few.
- Worker vulnerability: Many U.S. workers are economically vulnerable and suffering under unfavorable working conditions. This is especially true for immigrant workers and low-income workers.
- Ineffective laws: Current employment laws have been ineffective in advancing the overall wellbeing of workers in U.S. society. Instead, the economic status and wellbeing of workers has declined over time. For the lowest-earning half of people living in the United States, real hourly wages have increased, at most, by only 4% in the last 40 years, while they have increased by 34% for the top 5% of income earners. (See http://www.epi.org/blog/real-hourly-wage-growth-last-generation/)
- Workers and the unemployed are trapped: The best solution to the above problems is widespread development of enterprises and jobs that the workers, themselves, control. However, complying with employment laws can be difficult and expensive, and the vast majority of people have very little access to capital necessary to finance compliance. The combination of these factors traps communities and prevents them from creating their own jobs. This leaves people only one option: Compete for and remain trapped within a scarce number of jobs, many of which are underpaid, unhealthy, and unsatisfying, and which contribute to the growing gap between the rich and poor.
Examples of Barriers:
- Worker cooperative: A group of five former farmworkers form a worker cooperative corporation in California and they begin their own farming business. California law is currently not clear about whether they must treat themselves as employees. If these cooperative members were required to purchase workers compensation insurance and pay themselves minimum wage from day one, they would be unable to start their cooperative.
- Food cooperative: A group of 100 community members in a food desert neighborhood form a cooperative to collectively purchase locally-grown and healthy food. Each member commits to volunteering three hours per month to retrieve and receive orders, manage accounting, and divvy up the food. While the cooperative has no intention to earn money, the law might require them to pay themselves minimum wage and carry workers compensation insurance, even though everyone volunteers only three hours per month. The requirement to treat members as employees would undermine the viability of the cooperative.
- Housing cooperative: Twenty people pool their money to buy a multi-unit building and create a housing cooperative. As a condition of living there, every current and future member must commit to working 8 hours per month to do chores, fix up the building, and do administrative tasks. As a result, the members might legally be considered employees of the cooperative. As with the examples above, the requirement to obtain workers compensation insurance and pay minimum wage will undermine the viability of their arrangement.
- Nonprofit-owned enterprise: A volunteer-run urban community garden grows vegetables and donates them to charity. To raise funds to buy supplies and pay rent for the parcel of land, the group sells about 20% of its produce at a weekly farm stand. A California Department of Labor Standards and Enforcement (DLSE) opinion letter currently indicates that it is not legal for nonprofit volunteers to take part in commercial activities, which could mean that volunteers are not allowed to work at the farmstand. (“[W]hen religious, charitable, or nonprofit organizations operate commercial enterprises which serve the general public, such as restaurants or thrift stores, or when they contract to provide personal services to businesses, such enterprises are subject to the Industrial Welfare Commission Orders and volunteers may not be utilized.”See California Division of Labor Standards Enforcement Opinion Letter dated October 27, 1988, available at http://www.dir.ca.gov/dlse/opinions/1988-10-27.pdf)
- Micro-enterprise: An immigrant couple runs a small farm near Fresno, earning about $20,000 per year. Periodically, they also help out on a neighboring farm, and two neighbors lend a hand to the couple in return. The couple has one employee. The couple could receive thousands of dollars in fines for failure to treat their neighbors as employees. In addition, the couple could receive thousands of dollars in fines if they make even a small mistake on required paperwork for their employee. For example, one California farmer was fined $9,000 for failure to write the last four digits of his three employees’ social security numbers on the otherwise compliant wage statement he provided them, and he failed to include it because the wage statement form he used did not provide a space for that information. Fines of this size and nature make many small farmers live in fear of excessive penalties. In addition, many non-English-speaking employers have received fines as a result of poor translation when the DLSE visits their workplace. As a result, labor enforcement practices in California threaten the viability of small farms.
A Roadmap to Change:
The recommendations here relate primarily to California, but these concepts and policies can also inform employment law and policy in other states and at the federal level.
1. Inform and Assist Californians
Laws can be very hard to understand and even diligent employers can get confused about the details and requirements. As such, we recommend that the following steps be taken to ensure that Californians are thoroughly informed about employment laws:
- Information and Resources: The Department of Industrial Relations’ (DIR) website should provide more resources to assist people in understanding the law. In particular, the DIR should offer more information to small-scale employers and to employers who speak limited English. (Examples coming soon.)
- Training: The DIR and other state agencies should provide easy-to-understand in-person and video trainings about compliance with employment laws. (Examples coming soon.)
- Provide Technical Assistance: The DIR and other state agencies should provide free or low-cost technical assistance for low-income employers seeking to comply with the law.
2. Reform Enforcement Practices
Enforcement practices have already deeply harmed many California businesses, particularly small farms. Enforcement practices that threaten the viability of a small business can hurt employees as much as employers.
- The DLSE should issue stop orders before issuing fines in some cases. It is harmful to low-income employers and their employees when the DLSE issues fines for minor and first-time violations.
- The DLSE should order more thorough audits or investigation before issuing fines. Many employers - immigrant farmers in particular - have been fined for things that turned out to not be violations. Citations are often issued in error as a result of poor communication between the DLSE and employers, or as a result of poor translation for non-English-speaking employers. The DLSE should do further audits and investigation prior to citing an employer.
- The DLSE should exercise discretion to lower fines for some employers, such as for low-income employers and vulnerable industries, and under circumstances where the violation did not actually harm an employee and/or a mistake was made in a good faith attempt to comply with the law.
3. Interpret and Clarify Existing Law
In order for worker cooperatives to grow and flourish in California, it is critical to clarify the employment status of worker-owners in collectively-governed worker cooperative corporations. Currently, it is unclear whether worker-members of a cooperative corporation must treat themselves like employees. Lawyers have argued both sides and it is important to clarify this in order to give worker cooperatives the confidence needed to start their businesses. We request that the DLSE draft an opinion letter clarifying whether entity choice makes a difference in determining whether the workers are employees or partners of the business.
4. Change the Law
The following are specific changes that should be made to the California Labor Code:
- Consumer cooperatives: The law should change to allow people to volunteer for democratically-governed consumer cooperatives, housing cooperatives, and mutual benefit organizations where all members have the same work obligations. Hawaii has passed a somewhat similar law (Haw. Rev. Stat. Ann. § 421C-33).
- Worker cooperative corporations: The law should change in order to clarify that the fact of incorporation makes no difference in determination of employment relationship in worker cooperatives, with regard to wage, hour, and workers compensation laws.
- Nonprofit enterprise: The law should change to allow people to volunteer up to a certain number of hours per month for nonprofit-owned social enterprises, so long as the participants otherwise meet the definition of “volunteer” established in Tony & Susan Alamo Foundation v. Sec’y of Labor, 471 U.S. 290 (1985).
- Change unconstitutional statutory fines: Current statutory fines under the California Labor Code have led to penalties that are unconstitutionally excessive. (More information on this coming soon.) It is important to change California Labor Code section 226.3 and other statutory fines if such statutes could result in the imposition of unconstitutionally excessive fines.
- Short-term work: In order support the viability of small farms and other businesses with fluctuating labor needs, California law should be amended to require the State Compensation Insurance Fund to carry workers compensation insurance policies that cover workers for short-periods of time, such as one week. This way, a small farm could, for example, employ a group of ten people for three days during harvest time, without having to purchase six months of coverage for each of the 10 people.