AN ACT Relating to employee-ownership assistance programs; and adding new sections to chapter 43.31 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions in this section apply throughout sections 1 through 3 of this act.

(1) "Department" means the department of commerce and economic development.

(2) "Employee-owned enterprise" means a business which either:

(a) Meets all of the following conditions:

(i) Is organized as:

(A) A worker cooperative, within the meaning of Subchapter T of the Internal Revenue Code of 1954, (26 U.S.C.A. § 1381 et seq. as amended); or

(B) A corporation in which the employees own the stock of the corporation through an employee stock ownership plan, within the meaning of section 4975(e)(7) of the Internal Revenue Code of 1954, (26 U.S.C.A. § 4975(e)(7) as amended);

(ii) A majority of the voting rights are held by employees and all employees who have stock allocated to them are entitled to vote; shares are voted in such a manner that the vote of the majority of the employees controls the vote of the majority of shares; voting rights on corporate matters for shares held in a trust for the employees shall pass through to those employees, at least to the extent required by the pass through voting requirements of section 409A(e) of the Internal Revenue Code of 1954, (26 U.S.C.A. § 409A(e) as amended);

(iii) The majority of the members of the board of directors are elected by the employees; or

(b) Is organized in a manner determined by the secretary to involve substantial employees' participation.

(3) "Employee-ownership group" means a corporation or other entity, including labor unions, formed by or on behalf of the current or former employees of an industrial or commercial firm or facility located in this state for the purpose of assuming ownership or control of the firm or facility and operating it as an employee-owned enterprise.

(4) "Local administrative agency" means an organization which enters into a written agreement with the department to administer technical and financial assistance pursuant to this act, including a municipality, county, or any other nonprofit economic development organization designated by the director.

(5) "Director" means the director of commerce and economic development.

NEW SECTION. Sec. 2. The department shall establish a technical and financial assistance program to promote the development of employee-owned enterprises.

NEW SECTION. Sec. 3. (1) The department is authorized to provide technical assistance to employee-ownership groups to develop or improve an employee-owned enterprise.

(2) Employee-ownership groups shall be eligible for assistance if the employees in the employee-ownership group are employed by, formerly employed by, or affiliated with one of the following:

(a) Existing firms facing a threat of substantial layoffs or a plant closing and investigating a reorganization of all or some portion of the firm's business activity, at sites located within this state as an employee-owned enterprise. For purposes of this section "existing firm" shall include an ongoing concern, the assets of an existing company, or the assets of a company which has been closed for no more than one year as of the date of application for the feasibility study loan.

(b) Existing firms, not necessarily facing a threat of substantial layoffs or a plant closing, but considering a conversion to an employee-owned enterprise and seeking professional services to accomplish this, if conversion to employee ownership will create net new jobs or retain existing jobs at sites within this state.

(c) Existing firms which currently have some form of employee ownership and require professional services to insure success of the employee-owned enterprise in its effort to create net new jobs or retain existing jobs at sites within this state.

(3) Technical assistance made to employee-ownership groups shall include but not be limited to:

(a) Feasibility studies to investigate a reorganization or new incorporation as an employee-owned enterprise. At a minimum, the feasibility study shall:

(i) Assess the market value and demand for the product produced by the plant affected by the closing or layoff;

(ii) Assess the market value and demand for other products which could be manufactured or assembled at the plant affected by the closing or layoff;

(iii) Evaluate the production costs incurred if the plant were to be operated by the employee-ownership group; and

(iv) Determine whether there exists in the affected area and in the employee-ownership group, the desire and capacity to create a new production entity and to become competitive.

(b) Professional services to implement a feasibility study and other professional services to develop or insure the success of an employee-owned enterprise.

(4) Funds expended for feasibility studies and other professional services to employee-ownership groups to investigate a conversion to an employee-owned enterprise are subject to the following repayment conditions:

(a) If the enterprise studied is purchased or improved by the employee group, the employee group shall repay the entire amount of funds expended, with interest, in a lump sum at the closing of the purchase of the company or within one year after the date of the release of the funds by the department, whichever occurs later.

(b) If the enterprise studied is not purchased by the employee group within one year after the completion of the feasibility study, the applicant shall submit a final report concerning the feasibility of repaying the funds.

(5) (a) The applicant shall provide evidence that there is a prospect for recovery and future job growth or job retention in applications under subsection (2)(a) of this section or a substantial prospect of job growth or job retention in applications for technical assistance under subsection (2) (b) and (c) of this section.

(b) Maximum state participation is fifty percent of the total cost of the technical assistance.

NEW SECTION. Sec. 4. Sections 1 through 3 of this act are each added to chapter 43.31 RCW.