A study of the statutory background for worker cooperatives in the US: a proposal for a regulatory framework

Abstract

The lack of a clear and comprehensive regulatory framework for worker cooperatives is one of the main causes for their scarcity in the USA, as it causes ignorance and uncertainty even though cooperatives are one of several forms of doing business recognized by the Internal Revenue Code (like sole proprietorships, partnerships, limited liability companies, LLC’s, and Subchapter S corporations). Tax laws divide businesses into those categories, each with its own special tax provisions and worker cooperatives try to fit into any of those forms of business while “acting on a cooperative basis”, thus, having their own specificities. Even though at a State level there are regulations for agricultural cooperatives in all States, there are only less than 30 States that have either worker cooperative regulations, general cooperative regulations or consumer regulations which worker cooperatives can use. However, the situation in the USA now demands for these entities. The fact that a particular attention is being given to worker cooperatives as an aftermath of the recent crisis is not news, as we have seen, historically2, cooperatives have traditionally emerged in situations where the public sector was unable to provide the response required by the people, for instance in support for financial access, housing, or decent livelihoods. As ZEULI and CROPP state it: “The historical development of cooperative businesses cannot be disconnected from the social and economic forces that shaped them. Co-ops then, as now, were created in times and places of economic stress and social upheaval”. Different studies during the previous recession show how worker cooperatives increase their turnover and number of jobs, while other enterprises shrink, being this the reason why their study at this moment becomes a must. Thus, there should be a minimum understanding and control of what a worker cooperative is in order to be able to register and act like a real worker cooperative. Quoting GUTNECHT “allowing something that is not a cooperative to call itself a cooperative squanders a precious asset – the goodwill and public trust that reposes in the word ‘cooperative’”. Thus, the USA is missing a very important instrument in order to fight against unemployment, inequality, income maldistribution and unsustainable development at a time when there is a conscience by a majority of the population in different movements that demand a change. This change is possible if educational, cultural and legal issues are properly addressed, as it has been done in other countries and higher instances, creating a fairer, equitable and more cohesive and sustainable society, thus a better world to live in. This paper aims to conduct a comparative statutory research on cooperative law for worker cooperatives in the USA, with a view of promoting an increased understanding within the academic and governmental communities, at a national and international level in order to promote worker cooperatives. In the case of New York public policies tacking this issue are already being devised. If this goal is achieved we will all benefit from them.

Received: 26 April 2018
Accepted: 08 April2019
Published online: 22 July 2019