BILL NUMBER: S648
SPONSOR: RYAN S
 
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, and 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 employee
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 employ-
ee-owned businesses as preferred public contractors would provide a
critical new revenue stream for these entities across the State, partic-
ularly those outside of New York City.
 
LEGISLATIVE HISTORY:
2024: S.8844 Referred to Procurement and Contracts, A.9081 Referred to
Governmental Operations
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law; provided, however, that the amendments to subparagraph
(iii) of paragraph a and the opening paragraph of paragraph b of subdi-
vision 4 of section 162 of the state finance law made by section three
of this act shall be subject to the expiration and reversion of such
subparagraph and opening paragraph pursuant to section four of chapter
565 of the laws of 2022, as amended, when upon such date the provisions
of section four of this act shall take effect. Effective immediately,
the addition, amendment and/or repeal of any rule or regulation neces-
sary for the implementation of this act on its effective date are
authorized to be made and completed on or before such effective date.

Statutes affected:
S648: 162 state finance law, 162(2) state finance law