Rhode Island 2025 Regular Session

Rhode Island House Bill H5940 Compare Versions

Only one version of the bill is available at this time.

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5	5	2025 -- H 5940
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7	7	LC001857
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9	9	S T A T E O F R H O D E I S L A N D
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2025
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO LABOR AND LABOR RELATIONS -- THE RHODE ISLAND
16	16	OPPORTUNITY FOR EMPL OYEE OWNERSHIP ACT
17	17	Introduced By: Representatives Stewart, J. Lombardi, Voas, Tanzi, Morales, Cruz, Potter,
18	18	Alzate, Cotter, and Casimiro
19	19	Date Introduced: February 28, 2025
20	20	Referred To: House Labor
21	21
22	22
23	23	It is enacted by the General Assembly as follows:
24	24	SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR RELATIONS" 1
25	25	is hereby amended by adding thereto the following chapter: 2
26	26	CHAPTER 61 3
27	27	THE RHODE ISLAND OPPORTUNITY FOR EMPLOYEE OWNERSHIP ACT 4
28	28	28-61-1. Definitions. 5
29	29	As used in this chapter, the following words shall have the following meanings unless the 6
30	30	context clearly requires otherwise: 7
31	31	(1) “Employee-owned business” means: 8
32	32	(i) An employee cooperative corporation organized under title 7; or 9
33	33	(ii) A limited liability company (LLC) or limited liability partnership (LLP), in either case, 10
34	34	whose bylaws, operating agreement or partnership agreement, as applicable, meets the following 11
35	35	requirements: 12
36	36	(A) All persons who meet the definition of employee-owner (“worker-owner”) according 13
37	37	to the bylaws, operating agreement or partnership agreement of the business are voting members 14
38	38	of the company, and have equal voting rights in all decisions brought before the membership; and 15
39	39	(B) Any profits distributed to said worker-owners by the company are distributed on the 16
40	40	basis of their patronage in the company, with patronage measured based on the labor supplied to 17
41	41	the company. 18
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44	44	LC001857 - Page 2 of 5
45	45	(2) "Employee-owned business resource list" means a list of local and regional entities 1
46	46	qualified to offer guidance with starting, converting, or maintaining an employee-owned business. 2
47	47	Such an employee-owned business resource list shall be created and maintained by the secretary of 3
48	48	state's office, publicly visible and searchable on their website, available as a printable document, 4
49	49	and updated on a regular basis. 5
50	50	(3) “Owner” means the owner(s) of a qualified business prior to a qualified business sale. 6
51	51	(4) “Qualified business” means an entity that: 7
52	52	(i) Has operated a principal place of business in Rhode Island for at least one year; 8
53	53	(ii) Is a taxpayer subject to Rhode Island tax pursuant to title 44, but not limited to a C 9
54	54	corporation, S corporation, limited liability company, partnership, limited liability partnership, or 10
55	55	a sole proprietorship; 11
56	56	(iii) Is a privately held business; 12
57	57	(iv) Has at least three (3) workers not including the owner, or other similar pass-through 13
58	58	entity; 14
59	59	(v) Meets the relevant size standards for a small business by industry, as set forth by the 15
60	60	U.S. Small Business Administration in 13 CFR§ 121.201; 16
61	61	(vi) Is not a medium or large business as defined by the U.S. Small Business 17
62	62	Administration; and 18
63	63	(vii) Is not a publicly traded company. 19
64	64	(5) “Qualified business sale” means any transaction between the owner of a qualified 20
65	65	business and a QEG that concludes in the qualified business becoming an employee-owned 21
66	66	business or at least a fifty-one percent (51%) increment of total ownership of the qualified business 22
67	67	being transferred to an employee-owned business. Such transactions shall not include transfers by 23
68	68	inheritance, nor transfers or sales to immediate family, defined as siblings, spouses and/or children. 24
69	69	(6) “Qualified employee group (QEG)” means a group containing at least a simple majority 25
70	70	of full-time and/or part-time workers at the qualified business, totaling a minimum of three (3), at 26
71	71	the point of formal notice of business sale by the owner to workers. 27
72	72	28-61-2. Sale of a qualified business 28
73	73	(a) In the event the owner of a qualified business decides to sell such qualified business or 29
74	74	at least a fifty-one percent (51%) increment of total ownership of such qualified business in an 30
75	75	equity sale, they shall notify all current full-time and part-time workers at the business within seven 31
76	76	(7) days of the decision in a dated written notice. Such notice shall be posted on the date listed in 32
77	77	the notice in a prominent location to which all workers have access, or if no such place exists, via 33
78	78	an existing electronic medium used to communicate with workers. The notice shall communicate: 34
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81	81	LC001857 - Page 3 of 5
82	82	(1) Date of the notice; 1
83	83	(2) The owner’s intent to sell the business; 2
84	84	(3) Information about the existence of the opportunity to own law, specifying that 3
85	85	employees have an exclusive opportunity for thirty (30) days from the written notice to officially 4
86	86	initiate a process to potentially purchase the business as an employee group, as outlined in that law; 5
87	87	(4) Information about the secretary of state's employee-owned business resource list, 6
88	88	including the URL or website, if applicable, and specifying the employee-owned business resource 7
89	89	list as a resource to assist employees considering buying the business; and 8
90	90	(5) Any price the owner of the qualified business proposes for the business sale. 9
91	91	(b) In the event a QEG does not purchase one hundred percent (100%) of total ownership 10
92	92	of the qualified business, such as where owners or other parties retain or purchase a stake in the 11
93	93	business, the provisions of this section shall apply only if the QEG holds the sole voting rights and 12
94	94	decision-making power in the resulting business. Sales of the qualified business that include 13
95	95	agreements infringing on this requirement for democratic governance by worker-owners shall 14
96	96	nullify the benefits to the owner from this section. 15
97	97	(c) Any group of workers that is eligible to form a QEG has thirty (30) days from the date 16
98	98	the owner’s notice was posted or upon the workers’ electronic receipt thereof, to signal in writing 17
99	99	via registered mail to the owner their intent to compete to buy the qualified business, and list all 18
100	100	members of the QEG. The owner shall immediately make available any financial records necessary 19
101	101	for evaluating the health and value of the business, following the signing of a non-disclosure 20
102	102	agreement between the owner and the QEG. If, after thirty (30) days, no QEG has signaled interest 21
103	103	in a purchase, the owner shall be free to sell the business as they choose. 22
104	104	(d) From the date any QEG signals intent to buy the business, the owner and the applicable 23
105	105	QEG shall have one hundred eighty (180) days to have the value of the business assessed by a 24
106	106	qualified independent business valuation consultant agreed to by the owner and the QEG, and to 25
107	107	reach agreement on a price; or alternatively, if a competitive good-faith offer is made by a third 26
108	108	party, the QEG shall have the opportunity to match that offer. 27
109	109	(e) In the event the owner and QEG reach a price that is equivalent or superior to all other 28
110	110	good-faith offers received on the open market within the one hundred eighty (180) day period, the 29
111	111	owner shall be obligated to sell the business to the QEG; however, the highest bid need not be the 30
112	112	winning bid, and the owner may sell to a QEG for reasons other than preferring the highest bid. 31
113	113	(f) In the event of a completed qualified business sale, the owner shall be exempted from 32
114	114	obligation under § 44-30-2.7, to pay the state capital gains tax on any gains from the sale of the 33
115	115	qualified business under one million dollars ($1,000,000). Any gains from the sale of the qualified 34
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118	118	LC001857 - Page 4 of 5
119	119	business over one million dollars ($1,000,000) shall continue to be subject to the relevant capital 1
120	120	gains tax. In the event of a partial sale of the qualified business to the QEG, this exemption shall 2
121	121	apply only to the proportion of the business being sold to the QEG. 3
122	122	(g) All labor union membership or collective bargaining agreements existing prior to a 4
123	123	qualified business sale shall continue to be in effect under the new ownership structure. 5
124	124	(h) Upon the completion of a qualified business sale, the resulting business shall not be 6
125	125	subject to external governance, decision-making or management influence from non-worker or 7
126	126	non-member parties, including non-member shareholders or outside investors. Any contract 8
127	127	enabling control of the company by outside investors shall not be in compliance with this section. 9
128	128	(i) In the event that the owner of a qualified business fails to comply with the terms of this 10
129	129	section, the QEG shall have the right to request a court injunction to stop such improper sale and 11
130	130	require compliance with this section. 12
131	131	28-61-3. Communication notices. 13
132	132	On the effective date of this chapter, within sixty (60) days, the secretary of state's office 14
133	133	shall send communication notices both via paper mail and electronic mail, if possible, to any entity 15
134	134	actively doing business in the State of Rhode Island which may potentially be in the category of 16
135	135	"qualifying business" as defined in this chapter. The communication notice shall contain a summary 17
136	136	of this law, and shall include an additional notice in locally used languages stating the importance 18
137	137	of having the information translated. The communication notice shall also contain reference to the 19
138	138	employee-owned cooperative business resource list, including other information regarding where 20
139	139	it can be found on the secretary of state's website. After such initial communication notice from the 21
140	140	secretary of state's office, the same communication notice shall be sent to existing businesses each 22
141	141	year via electronic or paper mail, as well as to new businesses upon incorporation. Implementation 23
142	142	of this chapter shall be considered effective sixty (60) days after communication notices are sent to 24
143	143	Rhode Island businesses, after which time any qualifying business shall be obligated to follow the 25
144	144	provisions of this chapter. 26
145	145	SECTION 2. This act shall take effect upon passage. 27
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147	147	LC001857
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151	151	LC001857 - Page 5 of 5
152	152	EXPLANATION
153	153	BY THE LEGISLATIVE COUNCIL
154	154	OF
155	155	A N A C T
156	156	RELATING TO LABOR AND LABOR RELATIONS -- THE RHODE ISLAND
157	157	OPPORTUNITY FOR EMPL OYEE OWNERSHIP ACT
158	158	***
159	159	This act would establish an opportunity for employee ownership and the process whereby, 1
160	160	if the owner of a qualified business decides to sell said business or at least fifty-one percent (51%) 2
161	161	of said business, the owner would notify all current full-time and part-time workers within seven 3
162	162	(7) days of the date of the decision. 4
163	163	This act would take effect upon passage. 5
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165	165	LC001857
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