What is a Worker Cooperative?

A Worker Cooperative (also called a worker-owned or employee-owned cooperative (or coop) is a business that operates pursuant to a cooperative business model which prioritizes its employees and the communities it serves. Some characteristics of a worker cooperative include employees being owners (called “Members”) –that is they receive profits (or loses) from the business as well as contribute labor and are involved in democratic decision making. Members also participate in the business’ governance which includes each member having one vote for the board of directors.    A cooperative model can be utilized in most any type of industry and with various types of legal entities (i.e., corporations, partnerships, LLC, etc. **). When a cooperative business model is appropriate and best practices are utilized, it has the potential to bring to enterprises increased profits, sustainable and empowered workers, and greater economic resiliency than typical top-down corporate models.  

For our purposes, we will use a restaurant as an example.  In a worker cooperative restaurant, employees have the opportunity to become owners (or members) in the restaurant.  This means employees get an ownership interest in the restaurant if certain criteria are met (which are set forth in the business’ organizing legal documents).  There may be a waiting process after which the employee is offered a member-ownership interest which means the worker-owner can get a share of the profits in the restaurant.  

Becoming an employee-member (owner) of the restaurant typically requires some sort of buy-in (economic participation) by the new member.  The buy-in is typically reasonable and will be stated in the restaurant’s legal operating agreement.  For example, let’s say the new member must pays $500.  This amount is that member’s initial “capital” contribution.  Additions to the workers capital or profit distribution to the employee-owner are usually based on a combination of job position, seniority, hours worked, and salary.

Another important aspect of a worker cooperative is that the worker-member participates in decision making within the restaurant.  The details as to how the democratic decision making work within the restaurant will be set forth in the legal operating agreement and related documents.  This does not necessarily mean that every employee-member has a say on every decision, although it could.  Thanks to cooperative enterprises being around for over 100 years, there are all sorts of decision-making models that worker-owned businesses use depending on the size and needs of a particular business. 

Startup enterprises or existing companies in Ohio interested in learning more about forming or converting to a worker-owned cooperative should consult with professionals (i.e., lawyers and accountants) who specialize in cooperatives to better understand the pros and cons of a cooperative model as well as to learn of cooperative resources within the community. The challenge is often finding legal and tax professionals in your area who can offer this expertise.  However, thanks to virtual meetings becoming the norm, it is possible to obtain guidance from professionals knowledgeable about coops wherever you are located in Ohio and beyond. 

** Deciding the best choice of legal entity appropriate for your cooperative should be upon consultation with legal and accounting professional.