California Code, Government Code - GOV § 12100.31

(a) California's small businesses continue to contend with the pressures of the aging baby boomer business owners who are at or near retirement and desperately looking for an exit. According to national surveys, 79 percent of business owners want to retire within 10 years, 60 percent in less than 5 years, and 33 percent in less than 3 years. However, only 15 percent of businesses successfully transition to the next generation in the family, and only 20 percent of commercial listings actually sell. Nearly 360,000 California businesses, employing 3.9 million workers, are at risk because their owners are nearing retirement.

(b) Rather than closing for good or selling to large, out-of-state buyers, small business owners can find willing buyers in the people who work alongside them every day: their employees. Doing so would anchor essential production and services in communities, protect livelihoods, avert layoffs, and save the state money.

(c) Employees becoming owners would create opportunities for wealth-building and community stability. It would also help California create a more inclusive, equitable, and stable economy, supported by the studies of employee-owned businesses and their success and resiliency during the Great Recession and the COVID-19 pandemic.

(d) Fairness to employees is critical for the success of employee ownership transactions. Employee ownership should supplement, not supplant, fair wages, health insurance, retirement benefits, and the freedom to join a union. Employee ownership transactions through an Employee Stock Ownership Plan (ESOP) should be structured to provide employees with a fair valuation of their ownership stake with an independent trustee as a best practice for the transaction. Professional feasibility assessments are a best practice for transitions to all broad-based employee ownership forms.

(e) While the benefits of employee ownership are well documented, many stakeholders in the business and workforce ecosystems are unaware of broad-based employee ownership forms and their benefits, best practices for their implementation, or opportunities for their widespread expansion. In partnership with leaders in the field of employee ownership, the State of California can play a catalytic role in raising awareness of all forms of broad-based employee ownership, increasing access to capital for employee-owned enterprises, encouraging best practices, and ensuring that workers who are most burdened by income and wealth inequality and the racial wealth gap gain access to wealth, quality jobs, and workplace voice through employee ownership.

(f) It is the intent of the Legislature to establish a dedicated hub within the Office of Small Business Advocate that will increase awareness and understanding of employee ownership among stakeholders, assist business owners and employees in navigating available resources, and streamline and reduce barriers to employee ownership.