By Jay Cumberland , Equal Justice Works Fellow Sponsored by the eBay Foundation
Read time: 15 minutes
DISCLAIMER: This is legal information, not legal advice. Please consult with your own attorney before taking action based on this information.
Workers could take advantage of this crisis to seize ownership and control of businesses. In times like this, the rules of the game don’t match the game being played. Anything, good or bad, becomes more possible. Of course, old rules and laws continue to stack the deck against worker control. So, what strategies should workers employ to fight against the odds and seize ownership and control of businesses across the country? Where will the money come from to do this? How can this be accomplished when the law is not on the side of workers? In this article, I outline legal strategies available to workers during Covid-19 that might make it possible to change the terms of everyday life.
Want to watch a video about this instead of reading? Check out the video below. It covers almost everything in this article.
The legal strategy most relevant to you depends on your situation. Do you and your co-workers have a good working relationship with management and ownership? In that case, the strategies for quick cooperative conversion during Covid-19 outlined in this article /webinar will likely be more relevant for you. Do you work under bad management and/or have a bad relationship with ownership and management? In that case, read on!
Historical repression of worker control and self-management
In the United States, continued repression of workers advocating for worker control has splintered the cooperative movement off from the main branch of the labor movement. For over a century, the cooperative movement has existed mostly separate from the labor movement in the United States. Unions don’t know about or promote co-ops. Co-ops don’t enter into dialogue with unions. This was not always the case, however.
From the 1880s to the 1920s, unions like the Knights of Labor and the Industrial Workers of the World fought for better conditions within existing enterprises but also helped workers fight for ownership and control of those enterprises.
The Knights of Labor arose during the Industrial Revolution, a moment when the rules of the game stopped working because economic relations fundamentally changed. They wanted to exert democratic control over the entire economy and fill the United States with cooperative enterprises. Their efforts helped create more than 300 cooperatives in the 1880s alone. The U.S. population was 50 million at that time. Now it’s 300 million now, more than 6 times that in 1880s, yet there are only around 450 worker cooperatives. Population increased by a factor of 6 since 1880, but worker co-ops increased by only 1.5. What happened between 1880 and now that stunted the growth of the cooperative movement?
An old Industrial Workers of the World poster.
In the early 1900s, several states criminalized advocacy for worker control. In 1919, for example, California declared a state of emergency and passed a criminal syndicalism law. This law made it illegal to advocate for change in industrial ownership by crime, sabotage, or unlawful acts of force. Basically, it illegalized the Industrial Workers of the World. In practice, the law criminalized mere association with socialist parties, communist parties, and unions like the Industrial Workers of the World. Was it actually legal to arrest thousands for simply talking about worker control? In Whitney v. California, a court case from 1927, the United States Supreme Court said yes, since advocacy for change in industrial ownership was “an existing evil.” California’s criminal syndicalism law continued on the books until 1991, despite being declared illegal in the 1960s by the U.S. Supreme Court.
This is Whitney from Whitney v. California. Look at that hat!
Repression of worker control by labor unions like the American Federation of Labor added to this legal repression. Defectors from the Knights of Labor formed the American Federation of Labor (“AFL”). From the beginning, the AFL rejected the Knights’ focus on forming cooperatives and changing industrial ownership and control. When the Industrial Workers of the World formed to continue the legacy of the Knights of Labor, the AFL opposed it too. When the red scare raged in the 40s and 50s, the Congress of Industrial Organizations (“CIO”) expelled the eleven left-led, communist unions. To this day, AFL-CIO unions like the United Steelworkers of America don’t allow members to associate with groups advocating for communism or with the Ku Klux Klan. These are both existing evils for them.
Cover of an anti-communist, anti-labor speech by Charles E. Hoffman, Michigan Congressman
From this time forward, the cooperative movement and the labor movement parted ways. For a brief moment in the Great Depression in the 1930s, it seemed the cooperative movement might graft back onto the labor movement. Upton Sinclair ran for Governor of California on the EPIC Plan to seize ownership and control of shuttered farms and factories and give them to workers. He won 40% of the vote. His campaign was thwarted by the first real influx of private capital into an American political campaign in America. After that, in subsequent moments of upheaval like the 1960s and the Great Recession of 2008, workers formed cooperatives from the ground up rather than by taking control of existing enterprises. The law, coupled with government-sponsored propaganda campaigns during the Cold War and the force exerted by AFL-CIO unions, had shaped the way workers protested in moments of change.
Except, in 2008, the 1880s re-appeared for a brief moment in Chicago, Illinois. The government bailed out big banks. Bank of America took the money, bailed out big businesses, and left small businesses out to dry. It withdrew a line of credit from a window factory in Chicago, and the factory shuttered overnight. The workers, together with their union, occupied the factory to protest the shutdown, which violated the WARN Act. The press elevated their illegal sit-down strike. The workers won back pay, the factory re-opened under new ownership, then it went into bankruptcy. The workers, with help from their union and the Working World, bought some of the assets out of the bankruptcy and started their own factory--New Era Windows.
The workers at New Era Windows
As I understand it, New Era Windows launched the current worker co-op conversion movement in the United States, but the wave of worker co-op conversions that followed settled comfortably within the constraints of the law. Outreach was done to respectable, retiring small business owners to sell their businesses to their longtime employees. Contested businesses were not on the radar. Worker control raised its head above water for a moment, only to be forcibly submerged again by the weight of history.
Continuing repression of advocacy for worker control
The historical repression of efforts to achieve worker control continues in law and union practice.
AFL-CIO unions often give up the right to protest company shutdowns by including management prerogative clauses when negotiating collective bargaining agreements. The courts back up this refusal to protest company shutdowns. They have ruled that shutting down a business is not a mandatory subject of bargaining. This means a union can’t lawfully authorize a strike against company shutdowns.
The National Labor Relations Board does not allow labor law protections to extend to workers who aim to gain control and/or ownership of their existing workplaces. Section 7 of the National Labor Relations Act gives workers the right to engage in concerted action for mutual aid and protection. Section 7, while incredibly expansive, does not extend to attempts by workers to take ownership and/or control. Workers can be lawfully fired without legal recourse for advocating for worker control.
For context, this situation isn’t inevitable. Tenants have much more protection when advocating for control of their apartments than workers do when advocating for control of their businesses. Consider the right of first refusal policy proposed as part of Bernie Sanders corporate accountability and democracy agenda. Tenants in Washington, D.C. have benefited from such a tenant opportunity to purchase act (“TOPA”) for over 30 years. Tenants have the right to act together to buy their building at a price offered by a third party. Thousands of units have been collectively purchased. This would not be possible without eviction laws providing that tenants can only be evicted under certain circumstances. Tenants cannot be evicted merely for advocating for tenant control and ownership. Contrast Bernie Sander’s right of first refusal policy. A national right of first refusal for workers wouldn’t overrule National Labor Relations Board decisions allowing workers to be fired without recourse for advocating for worker control. Workers would still fear reprisal for taking action.
Let’s bring TOPA to the Bay Area! Visit yes2topa.org to learn about Bay Area TOPA.
To add another legal barrier, economic interference claims essentially let criminal syndicalism live on as a civil wrong instead of a criminal wrong. Economic interference involves claims like inducing breach of contract, intentional interference with economic or contractual relations, or negligent interference with economic or contractual relations. A successful economic interference charge requires “wrongful action.” Wrongful action includes action (1) for the purpose of appropriating the benefits of the harmed party’s contract, (2) that constitute an independent and intentional legal wrong, or (3) for the sole purpose of injuring a party. If there’s already a letter of intent in place for a business sale , and if the workers of a business take action to block that sale and buy the business themselves, then there may be a viable economic interference claim. This is criminal syndicalism, in other words.
Historically informed legal strategy to achieve worker control now
This historical and continuing legal repression of worker control limits but does not destroy the legal strategies available to workers when organizing within their business for worker control. It does not limit it absolutely though. I often hear people say, in effect, that it’s a waste of time to advise workers about worker control. They say the choice to sell a business to the workers is absolutely in the control of the business owner. There’s truth to this, but it’s also false. It’s false because workers do have power they can leverage to influence an owner’s choice. Even without the law on their side, strategies remain. This approach is inspired by a quote from Staughton Lynd and Daniel Gross’s Labor Law For the Rank & Filer: Building Solidarity While Staying Clear of the Law:
In other words, you can achieve victories even when the law is not completely on your side This strategy does not entirely work when it comes to worker control since there are no legal protections available specifically for worker control advocacy. Still, there are ways to steer clear of the law as much as possible when organizing collectively to buy a business.
Below I outline legal strategies for achieving worker control during Covid-19.
Legal Strategy for Workers Who Remain Employed
Strategy #1: Take open action and accept the consequences
If you’re willing to take the risk of being fired, go ahead and openly advocate for worker control. Preferably, win co-workers to your side and have them advocate with you. Existing labor law protections do not prevent workers from being fired, but do allow workers to sue employers for unlawful termination after they’ve been fired. Millions of Americans have already been fired because of Covid-19. As a result, an employer's power to fire is less powerful than usual. It certainly still has teeth, especially insofar as health insurance is tied to employment. However, if it seems likely that you’ll shortly be fired anyway, taking action with the likely consequence of being fired becomes more reasonable.
Strategy #2: Keep it secret, make it hard to sell, find out when it’s for sale, and civil disobedience
If you’re wary of being fired for advocating for worker control, then prevent that possibility for as long as possible while putting you in the best position possible to buy the business when it goes up for sale.
Keep it secret
First, start organizing with your co-workers early but don’t do it on company time, company premises, company email accounts, or company electronic devices. Keep your organizing efforts secret as long as possible. An employer can’t fire you for advocating for worker control if they don’t know you’re doing it.
Make it hard to sell
Second, make the business hard to sell by using a combination of legal methods. A business is difficult to sell when it’s saddled with debt, when there are existing lawsuits against it, and when the purchaser will have to negotiate with an organized and unruly workforce. You can file wage theft, employment discrimination, misclassification, and other lawsuits against the business. These lawsuits all help scare away prospective buyers. Successful lawsuits may also saddle a business with debt that makes the business difficult to sell. Strategically filing these lawsuits when you’ve organized with your coworkers and are ready to take action helps put you in a good position to buy the business. Finally, unionizing or taking independent labor action under Section 7 of the National Labor Relations Act makes a business harder to sell because it scares away prospective buyers.
Find out when it’s for sale
Third, make a plan to prevent the owner from selling the business out from under your feet without you knowing.
Business owners will keep the sale secret until the last minute and, potentially, until after the sale is finalized. This is because knowledge of a prospective sale can cause key employees to leave. This lowers the value of the business, which is wrapped up in the knowledge of existing employees (yes, you are the value of the business!).
To avoid this scenario, take steps to find out if the business is about to sell. You can look at online small business brokerage sites like BizBuySell.com to see if your business is anonymously listed for sale. The site likely won’t say the business’ name, but you’ll know enough about the business to know it’s your business. Also, you can make an educated guess that the business is about to sell if the owner asks for unusual financial information about the business, if you see the owner engaging with lawyers or accountants, or if you see the owner inexplicably not hiring for vacant positions.
Once you find out or believe the business is about to sell, it’s the time to make your organizing public. When the owner is about to sell, they’ll be reluctant to fire employees since this will devalue the business. You’ll have more informal protection than usual at this moment, and your public organizing for worker control might scare away prospective buyers. By withholding action until this moment, you’ll have gained maximum leverage and demonstrated that your labor is critical to the business.
Third-and-a-half, don’t give up if the business does sell. In the years immediately after a business sale, the new business owner is particularly vulnerable. Most small business sales are partially seller-financed or, at the very least, financed with hard debt from a bank. This means that if the business can’t maintain profitability after a sale, the last owner will re-gain control of the business in order to liquidate it and pay off their loan. Or, the last owner will foreclose on the new owner’s house or sell the new owner’s car to pay off their debt. Or, the bank will take control of the business to re-sell it. So, if a business sells, don’t give up. Repeat the prior steps within Strategy #2. You retain considerable leverage, perhaps even more leverage than you had prior to the sale.
Fourth, if all else fails, engage in principled civil disobedience like the workers at New Era Windows or the mothers of the recent Moms4Housing campaign in Oakland, CA. To my knowledge, the workers at New Era Windows were never prosecuted for criminal trespass and the moms of Moms4Housing were never prosecuted either. The workers of New Era Windows acted on the belief that workers should own and control their businesses. The homeless mothers who occupied a vacant home in Oakland acted on the belief that housing should be a human right. In both cases, public opinion influenced the application of the law. That will not always be the case. However, sometimes it will.
Strategy #3: Organize, form your own co-op, then lease the business space or your labor
An alternative to strategy #2 is forming a new cooperative made up of all workers in your existing business and then leasing the business premises or leasing your labor back to the existing business. At this point, many businesses have laid off some workers and retained other workers. This tactic pits worker against worker. By contrast, this strategy helps workers band together in solidarity to take control of their working conditions.
First, organize (secretly or publicly, depending on your risk analysis) with your co-workers who continue to be employed and your co-workers who have been laid off or furloughed. Convince those who continue to be employed to quit as soon as you form your new cooperative. Convince the unemployed to become members of your new cooperative.
Form Your Own Co-op
Second, form a worker cooperative and bring all workers on as members of the cooperative. At this point, the workers who remain employed will quit and join your co-op.
Lease the Business Space
Third, negotiate with the business owner to sub-lease the space occupied by the business. In essence, this is an asset lease rather than an asset purchase. This was proposed during the Great Depression as a strategy for unemployed workers. It’s a low-cost way for workers to become re-employed by starting a business on their own terms. It’s also, in effect, a strike where instead of accepting re-employment on different terms, you strive to gain the upper hand to dictate the terms of your own employment. If you utilize this strategy, you will not automatically gain access to existing contracts and customers of the prior business.
Campaign pamphlet for Upton Sinclair’s End Poverty in California (“EPIC”) Plan
Lease Your Labor
Alternatively, as a third step, negotiate with the business owner to lease your labor from your new worker co-op to their business. In essence, this is forming your own union and directing your own collective bargaining process. The legal term for what you will have created is an employee leasing company. You will be employed by your worker co-op, the employee leasing agency, but you will work for your old business. You will be able to negotiate for employment on a collective basis. Note that it remains to be seen whether this arrangement will qualify for Subchapter T taxation for worker co-ops (see Type D conversion).
Negotiate for Control
Fourth, if you wish to go further, use the bargaining power you’ve created to negotiate a purchase of the existing business. If the business owner is forced to liquidate the business through bankruptcy, you enter into negotiations to buy the assets of the business. If the business owner is not yet in a position to liquidate the business, you offer to buy the assets of the business. If the business owner re-starts the business, you refuse to be re-hired individually by their business.
Legal Strategy for Unemployed Workers
Legal Strategy #3 listed above is viable for workplaces where all workers are unemployed workers as well as for workplaces where some workers are unemployed and others are employed. Alternatively, the following strategy is available as well.
Unemployment law is structured to prevent workers from exercising bargaining power when negotiating terms of employment, and many states are aiming to take advantage of this by re-opening as quickly as possible during Covid-19. In California, unemployed workers receiving unemployment insurance benefits must apply for and accept suitable work. If they refuse to accept suitable work, their unemployment benefits will cease.
Workers who remain employed can take labor action to help the unemployed gain bargaining power when negotiating for re-employment. In California, a position is considered unsuitable if it is vacant due directly to a strike, lockout, or other labor dispute. Therefore, if workers are fired because they are taking action to protect unfair, unsafe, or inequitable working conditions during Covid-19, those workers have provided unemployed workers with bargaining power. In a way, the unemployed do not have to cross the picket line. This strategy does not lead directly to worker control, but it create more leverage for workers, which supports their drive for worker control.
“This sounded nonsense to Alice so she said nothing, but set off at once towards the Red Queen. To her surprise, she lost sight of her in a moment, and found herself walking in at the front door again.
A little provoked, she drew back and, after looking everywhere for the Queen (whom she spied out at last, a long way off), she thought she would try the plan, this time, of walking in the opposite direction.
It succeeded beautifully. She had not been walking a minute before she found herself face to face with the Red Queen, and full in sight of the hill she had been so long aiming at.
“Where do you come from?” said the Red Queen. “And where are you going? Look up, speak nicely, and don’t twiddle your fingers all the time.”
Alice attended to all these directions, and explained, as well as she could, that she had lost her way.
“I don’t know what you mean by your way,” said the Queen; “all the ways about here belong to me . . .”
Lewis Carroll, Through the Looking Glass.
Zapatista Subcomandante Insurgente Marcos writes in "Durito to Conquer Europe": “As Alice discovers, that in order to reach the Red Queen she must walk backwards, so too we must turn to the past in order to move forward and to be better. In the past we can find the paths to the future.” Looking to the ways worker control and self-management has been and continues to be shaped by history provides a viable path toward worker control and self-management in the present. This path is traversable now, more than ever, but history has shown that the window closes quickly. Walking carefully, within existing legal protections, and walking with collective purpose, with other workers and with knowledge of sound legal strategy, we can win worker control now.
About the Author
Jay Cumberland is an Equal Justice Works Fellow hosted by the Sustainable Economies Law Center. He started the project Anchoring Communities in order to help workers and tenants in the Bay Area resist displacement by taking collective control of their workplaces and buildings.
Jay believes political theory, social movement theory, and an international perspective must inform his work supporting housing cooperative conversions and worker cooperative conversions. These conversions are, after all, political exercises happening in social spaces around the globe. You can reach Jay at [email protected].