New Federal Loans and Job-Saving Buyouts: Bill Pushes Companies to Become 51% Employee-Owned

The Employee Ownership Financing Act is a big move to shift how businesses are owned in the US. It tackles two major problems at once: how to finance employee ownership transitions and how to save jobs when a company decides to shut down. The core of the bill is the creation of a new Office of Employee Ownership within the Department of Labor (DOL) and a $500 million revolving loan fund to help companies become at least 51% employee-owned.

The New DOL Office: Your Loan Officer

Within 90 days of this bill becoming law, the Secretary of Labor must establish the new Office of Employee Ownership. This office isn't just a paper pusher; it's the engine for the entire employee ownership movement, taking over the existing Employee Ownership Initiative and running the brand-new Employee Ownership Loan Program. Think of it as a specialized federal lender dedicated solely to funding buyouts and transitions into Employee Stock Ownership Plans (ESOPs) or worker-owned cooperatives. The goal is clear: use federal money to make sure workers own a majority of the company.

Financing the 51% Employee Buyout

The loan program is where the rubber meets the road. It offers loans or loan guarantees to eligible entities—like ESOPs or co-ops—specifically to buy enough company equity to hit or exceed 51% employee ownership. The interest rates are designed to be competitive, either covering the government's costs or matching the current market rate, and the repayment window is up to 15 years. Crucially, the bill explicitly excludes companies primarily owned by private equity firms from accessing this federal money. This is a deliberate move to ensure these funds go toward genuine employee-led transitions, not financial engineering.

To get this money, companies can’t just promise ownership; they have to commit to specific governance rules. For ESOPs, this means the plan must own at least 51% of the equity, the employee trustee gets full voting rights, and the board must include at least two independent members. Even more interesting for the average worker: the company must set up an employee committee within a year to develop a plan for increasing workplace democracy, potentially through open-book management. This means the loan isn't just about ownership on paper; it's about changing how decisions are actually made on the factory floor or in the office.

The Job-Saving Safety Net: Right of First Refusal

This bill inserts a powerful new tool into the Worker Adjustment and Retraining Notification Act (WARN Act), which requires companies to give notice before mass layoffs or plant closures. If an employer issues a WARN notice for a permanent plant closing, they must now include a formal offer for the affected employees to purchase the facility or company. This is a right of first refusal that must be structured either as a majority ESOP or a worker-owned cooperative.

This is a massive change for workers facing job loss. If the employees start negotiating in good faith within 60 days, the employer must keep the facility open during negotiations and for at least 30 days after the scheduled closing date. To ensure a fair deal, the employer has to pay for an independent appraisal to determine the fair market value. They also have to open the books, providing detailed financial statements, debt information, and lawsuit details—everything needed for the employees to assess whether the purchase is viable. The bill even adjusts existing retirement rules (ERISA) to make sure these specific, job-saving buyouts don't accidentally violate rules designed to prevent retirement plan abuse.

The Fine Print: Who Pays the Cost?

While the bill is largely beneficial for workers, there are a few provisions that might raise eyebrows for the financial sector. First, the Director of the new Office has the power to define what constitutes a “private equity firm” for exclusion purposes, which is a lot of regulatory discretion. Second, and more importantly for lenders, the bill allows the Director to prioritize the repayment of the government loan over other creditors in the event the company goes bankrupt. This means if you are a bank or bondholder lending money to an employee-owned company, the federal government's loan might get paid back before you do. For the average person, this is a technical detail, but it could make it slightly harder for these employee-owned firms to get traditional financing outside of this new program.