S. 2458: Employee Ownership Financing Act

This bill, known as the Employee Ownership Financing Act, aims to promote and facilitate employee ownership of businesses in the United States through various initiatives. Below is a summary of the key components:

Establishment of the Office of Employee Ownership

The bill mandates the creation of the Office of Employee Ownership within the Department of Labor. This office will be responsible for implementing the Employee Ownership Initiative and managing the Employee Ownership Loan Program. The office will have a director appointed by the Secretary of Labor and will employ staff as needed to accomplish its functions.

Employee Ownership Loan Program

The bill establishes an Employee Ownership Loan Program aimed at providing loans and loan guarantees to eligible entities, such as:

• Employee stock ownership plans (ESOPs)
• Worker-owned cooperatives
• Qualified trusts on behalf of ESOPs or eligible cooperatives

The program's primary goal is to enhance employee ownership of companies and increase employee participation in decision-making processes.

Loan Terms and Conditions

Loans provided under this program will be designed to enable the following:

• Purchase equity in companies that are at least 51% employee-owned or will become so with the loan support.
• Allow companies under 51% employee ownership to transition to at least 51% employee ownership.
• Support companies in increasing overall employee ownership and potentially expanding their operations.

Loan terms will be structured to bear interest at a rate covering borrowing costs and losses, capped at current market rates, with repayment over a maximum of 15 years.

Employee Right of First Refusal

The bill stipulates that if an employer announces a plant closing, employees must be given the opportunity to purchase the facility through an ESOP or a worker-owned cooperative. The employer must provide an appraisal of the facility's value, conducted by an independent third party, to assist employees in the purchase decision.

Advisory Council on Employee Ownership

The legislation calls for the formation of an Advisory Council on Employee Ownership consisting of seven members appointed by the Secretary of Labor. The council will advise on employee ownership issues and recommend actions to further the goals of the Act.

Authorization of Appropriations

The bill allows for the appropriation of up to $500 million for the Employee Ownership Loan Program for the fiscal year 2026, intended to remain available until fully expended, along with additional funds for administrative costs associated with managing this program.

Implementation and Regulations

The Secretary of Labor is tasked with implementing this Act, including issuing necessary regulations and guidance within one year of the Act's enactment.

Exemption from Prohibited Transactions

The bill also provides exceptions from certain prohibited transaction rules under the Employee Retirement Income Security Act, specifically for purchases made through employee stock ownership plans in connection with plant closures.

Relevant Companies

None found