A team of worker cooperative members, stewarded by the Sustainable Economies Law Center, successfully amended California State's worker's compensation law in favor of worker cooperatives. The law, SB 189, includes a provision that allows cooperatives to claim exemption from workers' compensation requirements under certain conditions. SB 189 was signed by Governor Jerry Brown last month and will go into effect July 1, 2018. 

Everyday workers as policymakers

The cooperative exemption in SB 189 was crafted with significant input from a group of worker cooperative members who responded to a workers’ compensation campaign call put out by the Sustainable Economies Law Center. Participants of the policy working group came from seven different worker cooperatives, including The Cheese Board, Drought Smart Cooperative, Niles Pie Company, Three Stone Hearth, Arizmendi Bakery, Home Green Home, and Echo Adventure Team.  

Even though none of the policy working group participants had prior policy experience, each member was still able to contribute to the campaign. Some working group members did cold calls to other work cooperatives, while others conducted legislative research and created fact sheets summarizing campaign points. A number of the working group members also made trips to Sacramento to meet with legislators’ offices and other lobbyists to discuss the bill and lobby for an exemption for worker cooperatives.

Members of the policy working group found the campaign to be a tremendous learning experience. As one of the working group members put it: “Even though I didn’t have past policymaking experience, the Law Center stewarded us through this campaign process and I really appreciated it. This experience allowed me to speak up, have a voice, and make some changes.”

Background and summary of SB 189

When the policy group first convened earlier this year, California had just started enforcing a problematic workers compensation law, AB 2883, that failed to take into account Cooperative Corporations. Parts of AB 2883 were crafted with stock corporations in mind and neglected to take into account its impact on Cooperatives Corporations. Prior to AB 2883, managing owners of businesses were not required to obtain workers compensation coverage for themselves. That allowed many worker cooperatives to save tens or hundreds of thousands of dollars, which the cooperatives usually put toward higher wages and better insurance coverage (such as health insurance and long-term disability insurance). While this remains true for LLCs and Partnerships, AB 2883 did not preserve this rule for Cooperative Corporations.

SB 189 was passed to clean up the problems created by AB 2883. SB 189's cooperative exemption in particular now allows cooperative corporations to opt out of providing workers compensation for its members. The spirit of the cooperative exemption is to give worker-owners a choice in how to invest their earnings, the same choice that is already afforded to owners of LLCs and domestic stock corporations.

The cooperative exemption in SB 189 is not automatic, however. To qualify for the exemption, worker cooperatives must meet the following requirements: 

1. The cooperative must be incorporated as a Cooperative Corporation.

2. The officer and/or member must own some kind of health care service or health insurance plan.

3. The officer and/or member must have a disability insurance policy, and –

4. The disability insurance policy must be approved by the Insurance Commissioner of California as being comparable to workers comp.

5. The officer and/or member must execute a waiver and file that waiver with the insurance carrier. The insurance carrier does not have to verify or investigate the accuracy of the waiver.

The full text of the cooperative exemption is below: 

[For purposes of the workers’ compensation law, “employee” excludes…] an officer or member of the board of directors of a cooperative corporation organized pursuant to the Cooperative Corporation Law, as set forth in Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code, who executes a document, in writing and under penalty of perjury, both waiving his or her rights under this chapter and stating that he or she is covered by both a health care service plan or health insurance policy, and a disability insurance policy that is comparable in scope and coverage, as determined by the Insurance Commissioner, to a workers’ compensation policy. The officer or member of the board of directors shall provide a copy of the waiver to all other officers and members of the board of directors of the cooperative corporation, and the cooperative corporation shall keep a copy of the waiver on file. The waiver is effective upon the date of receipt and acceptance by the cooperative corporation’s insurance carrier. The insurance carrier, with the consent of the individual executing the waiver, may elect to backdate the acceptance of the waiver up to 15 days prior to the date of receipt of the waiver. The insurance carrier, insurance agent, or insurance broker is not required to investigate, verify, or confirm the accuracy of the facts contained in the waiver. There is a conclusive presumption that a person who executes a waiver pursuant to this subdivision is not covered by workers’ compensation benefits.

The successful passage of the cooperative exemption in SB 189 demonstrates that the cooperative community has the ability to influence state policy. Though SB 189 is now law, the work of the policy working group does not end here. Individuals interested in working with Sustainable Economies Law Center to be part of the next iteration of a policy group that will work on policy initiatives specific to cooperatives should contact Yassi Eskandari at [email protected].