Adds employee-owned enterprises and worker cooperatives to the list of preferred contractors for public contracts in the state; authorizes such enterprises and cooperatives to make certain purchases from centralized contracts for commodities, subject to conditions of the office of general services; authorizes the comptroller to conduct certain audits of employee-owned enterprises and worker cooperatives.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9081
SPONSOR: Mamdani TITLE OF BILL:
An act to amend the state finance law, in relation to adding employee-
owned enterprises to the list of preferred contractors for public
contracts in the state
PURPOSE:
To strengthen the viability and economic opportunity of employee-owned
enterprises.
SUMMARY OF PROVISIONS:
Section 1 defines an employee-owned enterprise.
Section 2 amends subdivision 2 of section 162 of the state finance law
by adding employee-owned enterprises to the list of preferred sources
for state purchasing.
Section 3 amends subdivision 4 of section 162 of the state finance law
by including employee-owned enterprises in the priority list of
preferred sources for state purchasing.
Section 4 amends section 162 of the public service law by adding a new
subdivision 6-a to establish the rules regarding prices charged by
employee-owned enterprises in public contracting.
Section 5 sets forth the effective date.
JUSTIFICATION:
New York State law defines an employee-owned enterprise, or more specif-
ically a worker cooperative, as a business that is democratically
controlled and owned by its employees. Employees not only own the busi-
ness but also allocate decision-making power on the basis of "one
member, one vote," in contrast with the shareholder model of corporate
governance.
The vast majority of worker cooperatives are small businesses with under
25 employees, according to the most recent report by the Democracy at
Work Institute (DAWI) and the U.S. Federation of Worker Cooperatives
(USWFC). A wealth of studies have illustrated that worker cooperatives
are more resilient to economic shocks, experience lower turnover, and
have higher productivity levels than conventional U.S. firms. Unlike
conventional firms, where CEOs earn on average 350 times more than the
typical worker, the pay ratio at a worker cooperative is typically no
more than 2:1 from the highest to lowest earner. During the COVID-19
pandemic, 80 percent of worker cooperatives remained open, while just
one in five worker cooperatives lost more than 50 percent of their
revenue-compared to nearly one in three traditional U.S. firms.
New York State is home to more than 110 worker cooperatives-the highest
total in the country, according to the joint DAWI/USFWC report. But 91
of these businesses are located in New York City, which saw a dramatic
rise in worker co-ops after establishing the $1.2 million Worker Cooper-
ative Business Development Initiative in 2014. The remaining employee-
owned businesses are scattered across Upstate New York, lacking both a
consistent funding mechanism and an organized trade association such as
the New York City Network of Worker Cooperatives.
This legislation seeks to amend the state finance law by adding employ-
ee-owned enterprises to the list of preferred sources for State
contracts. This list is currently composed of commodities produced by
correctional industries programs, as well as commodities and services
produced by nonprofit agencies or employment programs for blind persons,
persons with mental or physical disabilities, or veterans. Designating
employee-owned businesses as preferred public contractors would provide
a critical new revenue stream for these entities across the State,
particularly those outside of New York City.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
N/A.
EFFECTIVE DATE:
The act shall take effect ninety days after it becomes a law.
STATE OF NEW YORK
________________________________________________________________________
9081
IN ASSEMBLY
February 6, 2024
___________
Introduced by M. of A. MAMDANI -- read once and referred to the Commit-
tee on Governmental Operations
AN ACT to amend the state finance law, in relation to adding employee-
owned enterprises to the list of preferred contractors for public
contracts in the state
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivisions 6, 7, 8, 9 and 10 of section 160 of the state
2 finance law are renumbered subdivisions 7, 8, 9, 10 and 11, and a new
3 subdivision 6 is added to read as follows:
4 6. "Employee-owned enterprise" shall have the same meaning as defined
5 by section eighteen hundred thirty-six-b of the public authorities law.
6 § 2. Subdivision 2 of section 162 of the state finance law is amended
7 by adding a new paragraph g to read as follows:
8 g. Commodities and services produced by an employee-owned enterprise
9 or a worker cooperative incorporated under the laws of this state and
10 governed by article five-A of the cooperative corporations law.
11 § 3. Subparagraph (iii) of paragraph a and the opening paragraph of
12 paragraph b of subdivision 4 of section 162 of the state finance law, as
13 amended by chapter 565 of the laws of 2022, are amended to read as
14 follows:
15 (iii) When commodities are available, in the form, function and utili-
16 ty required by, a state agency or political subdivision or public bene-
17 fit corporation having their own purchasing agency, and such commodities
18 are not available pursuant to subparagraphs (i) and (ii) of this para-
19 graph, said commodities shall then be purchased from a qualified non-
20 profit-making agency for other disabled persons, a qualified special
21 employment program for mentally ill persons, [or] a qualified veterans'
22 entity, or a qualified employee-owned enterprise or worker cooperative;
23 provided, however, the preferred source shall perform fifty percent or
24 more of the work;
25 When services are available, in the form, function and utility
26 required by, a state agency or political subdivision or public benefit
27 corporation having their own purchasing agency, equal priority shall be
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD14256-01-4
A. 9081 2
1 accorded the services rendered and offered for sale by qualified non-
2 profit-making agencies for the blind and those for the other disabled,
3 by qualified special employment programs for mentally ill persons [and],
4 by qualified veterans' entities, and by qualified employee-owned enter-
5 prises or worker cooperatives; provided, however, the preferred source
6 shall perform fifty percent or more of the work. In the case of
7 services:
8 § 4. Subparagraph (iii) of paragraph a and the opening paragraph of
9 paragraph b of subdivision 4 of section 162 of the state finance law, as
10 added by chapter 83 of the laws of 1995, are amended to read as follows:
11 (iii) When commodities are available, in the form, function and utili-
12 ty required by, a state agency or political subdivision or public bene-
13 fit corporation having their own purchasing agency, and such commodities
14 are not available pursuant to subparagraphs (i) and (ii) of this para-
15 graph, said commodities shall then be purchased from a qualified non-
16 profit-making agency for other [severely] disabled persons, a qualified
17 special employment program for mentally ill persons, [or] a qualified
18 veterans' [workshop] entity, or a qualified employee-owned enterprise or
19 worker cooperative;
20 When services are available, in the form, function and utility
21 required by, a state agency or political subdivision or public benefit
22 corporation having their own purchasing agency, equal priority shall be
23 accorded the services rendered and offered for sale by qualified non-
24 profit-making agencies for the blind and those for the other [severely]
25 disabled, by qualified special employment programs for mentally ill
26 persons [and], by qualified veterans' [workshops] entities, and by qual-
27 ified employee-owned enterprises or worker cooperatives. In the case of
28 services:
29 § 5. Section 162 of the state finance law is amended by adding a new
30 subdivision 6-a to read as follows:
31 6-a. Prices charged by employee-owned enterprises or worker cooper-
32 atives.
33 a. Qualified employee-owned enterprises or worker cooperatives may
34 make purchases of materials, equipment or supplies, except printed mate-
35 rial, from centralized contracts for commodities in accordance with the
36 conditions set by the office of general services; provided that such
37 qualified employee-owned enterprise or worker cooperative shall accept
38 sole responsibility for any payment due to the vendor.
39 b. The state comptroller may conduct audits and examinations of all
40 records, books and data of any employee-owned enterprise or worker coop-
41 erative qualified under this section to determine the costs of manufac-
42 turing or the rendering of services and the manner and efficiency of
43 production and administration of such employee-owned enterprise or work-
44 er cooperative with relation to any product or services purchased by a
45 state agency or political subdivision or public benefit corporation and
46 to furnish the results of such audit and examination to the commissioner
47 for such action as he or she may deem appropriate under this section.
48 § 6. This act shall take effect on the ninetieth day after it shall
49 have become a law; provided, however, that the amendments to subpara-
50 graph (iii) of paragraph a and the opening paragraph of paragraph b of
51 subdivision 4 of section 162 of the state finance law made by section
52 three of this act shall be subject to the expiration and reversion of
53 such subparagraph and opening paragraph pursuant to section four of
54 chapter 565 of the laws of 2022, as amended, when upon such date the
55 provisions of section four of this act shall take effect. Effective
56 immediately, the addition, amendment and/or repeal of any rule or regu-
A. 9081 3
1 lation necessary for the implementation of this act on its effective
2 date are authorized to be made and completed on or before such effective
3 date.
