Susta|nab|e Iobs, Susta|nab|e Commun|t|es:

1he Un|on Co-op Mode|

March 26, 2012


8ob WlLherell, unlLed SLeelworkers (uSW)
Chrls Cooper, Chlo Lmployee Cwnershlp CenLer (CLCC)
Mlchael eck, Mondragon lnLernaLlonal uSA











*lleose oote tbot tbls ooloo co-op templote ls loteoJeJ to be o llvloq Jocomeot sobject to cootloooos
tevlsloo ooJ lmptovemeot boseJ oo oset feeJbock ooJ opplleJ expetleoces. 1bls templote ls oot
loteoJeJ to be o ooe-slze-flts-oll moJel, bot totbet offets o set of lJeos ooJ qolJelloes to oJopt lo
fotmloq oew ooloo co-ops oo o cose by cose bosls.
2

Introduct|on

1hose who opL Lo make hlsLory and change Lhe course of evenLs Lhemselves have an
advanLage over Lhose who declde Lo walL passlvely for Lhe resulLs of Lhe change."
- laLher !ose Marla ArlzmendlarrleLa

An economlsL wlll Lell you LhaL Lhe CreaL 8ecesslon" ln Lhe unlLed SLaLes began ln uecember 2007 and
was offlclally over ln !uly 2009 when Lhe economy began Lo grow agaln. Looklng aL employmenL daLa, as
well as Lrends ln wages and compensaLlon, however, we see LhaL Lhls economlc growLh has mlssed Lhe
vasL ma[orlLy of Lhe populaLlon Lo daLe.

ln uecember 2007, aL Lhe beglnnlng of Lhe CreaL 8ecesslon", Lhe effecLlve unemploymenL raLe (more
speclflcally, u6" as calculaLed by Lhe 8ureau of Labor SLaLlsLlcs) was 8.8. AL Lhe end" of Lhe
recesslon, ln !uly 2009, Lhls unemploymenL raLe sLood aL 16.3. 1wo years laLer, Lhe effecLlve
unemploymenL raLe remalned close Lo 16 LhroughouL 2011, leavlng abouL 23 mllllon people ln Lhe u.S.
elLher unemployed or underemployed.

ln addlLlon, wages have sLagnaLed over Lhe pasL 30 Lo 40 years, wlLh llLLle Lo no growLh afLer accounLlng
for lnflaLlon. As Lhe rapldly lncreaslng cosLs of healLh care conLlnue Lo be passed Lo employees from
Lhelr employers, neL wages have acLually gone down. 1hose of us LhaL can flnd [obs are worklng longer
hours for less pay, a conLlnulng Lrend LhaL we have llved wlLh for decades now.

lf we were Lo creaLe an economy LhaL worked for everyone, an economy LhaL creaLes good, susLalnable
[obs and ls accounLable Lo Lhe communlLles LhaL drlve lL, whaL would LhaL look llke?

Cne powerful example Lo conslder ls Lhe developmenL of Lhe Mondragon co-operaLlves ln Spaln.

SLlll devasLaLed from Lhe Spanlsh Clvll War, mosL noLorlously Lhe bomblng of Cuernlca ln 1937, Lhe
8asque reglon ln 1943 suffered pollLlcal represslon and hlgh unemploymenL. 1he reglon had llLLle access
Lo caplLal or lnvesLmenLs and lacked any Lype of soclal safeLy neL.

lL ls ln Lhls conLexL LhaL laLher !ose Marla ArlzmendlarrleLa sLarLed up a small polyLechnlc school LhaL
was Lhe seed for Lhe phenomenon we know Loday as Lhe Mondragon co-operaLlves. 1hlrLeen years
laLer, wlLh Lhe asslsLance of laLher Arlzmendl, flve graduaLes of Lhe school sLarLed Lhe flrsL Mondragon
co-operaLlve, ulgor, a small manufacLurlng faclllLy produclng kerosene sLoves. ln a llLLle over 30 years,
LhaL llLLle worker-owned co-operaLlve grew Lo become Lhe Mondragon CooperaLlve CorporaLlon, whlch
Loday employs over 83,000 people, nearly all of Lhem worker owners, wlLh 2011 annual revenues over
$24 bllllon dollars.

1he goal of Lhe Mondragon co-operaLlves ls Lo creaLe compeLlLlve [obs and enLerprlses LhaL can supporL
Lhelr famllles and Lhelr communlLles, wlLh values rooLed ln Lhe ldeals of soclal [usLlce and worker dlgnlLy.
Sharlng LhaL goal, Lhe Mondragon example ls Lhe foundaLlon on whlch we lnLend Lo bulld.

M|ss|on & Va|ues

1he mlsslon of Lhe unlon co-op model ls Lo creaLe soclal and economlc [usLlce and worker dlgnlLy
Lhrough Lhe creaLlon of good, susLalnable [obs ln vlable, susLalnable buslnesses LhaL are accounLable Lo
3

boLh lLs workers and Lhe communlLles ln whlch Lhey operaLe, as well as Lo supporL and susLaln Lhose
communlLles.

ln conLrasL Lo a Machlavelllan economlc sysLem ln whlch Lhe ends [usLlfy any means, Lhe unlon co-op
model embraces Lhe ldea LhaL boLh Lhe ends and means are equally lmporLanL, meanlng LhaL LreaLlng
workers well and wlLh dlgnlLy and susLalnlng communlLles are [usL as lmporLanL as buslness growLh and
proflLablllLy.

!usL as our unlon co-op model seeks Lo bulld on Lhe foundaLlon seL by Lhe Mondragon co-operaLlves,
Lhe prlnclples and values of Lhe unlon co-op model bulld upon Lhe Len 8aslc rlnclples of Lhe Mondragon
co-operaLlves as well:

Cpen Adm|ss|on
1he co-op wlll noL dlscrlmlnaLe ln Lhe admlsslon of new worker-owners, excepL LhaL each person
musL accepL Lhe 8aslc rlnclples and be capable of performlng Lhe work requlred.

Democrat|c Crgan|zat|on
1he prlnclple of one worker, one voLe" shall prevall LhroughouL Lhe co-op, lncludlng Lhe annual
Ceneral Assembly and Lhe elecLlon of Lhe 8oard of ulrecLors. Lvery worker-owner owns an
equal share and has an equal voLe Lhrough one class" ownershlp.

Sovere|gnty of Labor
As Lhe Mondragon co-operaLlves deflne lL: Labor ls Lhe maln facLor for Lransformlng naLure,
socleLy and human belngs Lhemselves. As a resulL, Labor ls granLed full soverelgnLy ln Lhe
organlzaLlon of Lhe co-operaLlve enLerprlse, Lhe wealLh creaLed ls dlsLrlbuLed ln Lerms of Lhe
labor provlded and Lhere ls a flrm commlLmenL Lo Lhe creaLlon of new [obs."

Instrumenta| and Subord|nate Nature of Cap|ta|
eople are prlorlLlzed over proflLs. rovldlng and creaLlng [obs are prlorlLlzed over lncreaslng
Lhe marglnal reLurn on lnvesLmenLs. As resldenL Abraham Llncoln wroLe ln hls flrsL SLaLe of Lhe
unlon address ln 1861: Labor ls prlor Lo and lndependenL of caplLal. CaplLal ls only Lhe frulL of
labor, and could never have exlsLed lf labor had noL flrsL exlsLed. Labor ls Lhe superlor of caplLal,
and deserves much Lhe hlgher conslderaLlon."

art|c|pat|on |n Management
Cwnershlp" musL become more Lhan [usL Lhe value of a share. Workers musL also Lake
ownershlp ln Lhe co-op by Lhelr parLlclpaLlon ln Lhe managemenL of Lhe co-op, ensurlng LhaL Lhe
co-op remalns accounLable Lo lLs worker-owners.

Wage So||dar|ty
Wage solldarlLy means Lhere ls less dlsparlLy among workers and Lhe communlLles ln whlch Lhey
llve, relnforclng Lhe equallLy, and quallLy, of ownershlp. ln mosL cases, Lhe hlghesL pald worker
ln Lhe Mondragon co-operaLlves makes no more Lhan 3 Lo 7 Llmes Lhe lowesL pald worker.

Inter-Cooperat|on
!usL as workers beneflL from worklng cooperaLlvely ln a buslness, so Loo can co-ops beneflL from
worklng cooperaLlvely wlLh oLher co-ops. Such an lnLerdependenL sysLem of co-ops allows each
4

co-op Lo creaLe and share common resources such as flnanclng, research and developmenL, and
Lralnlng, as well as Lo supporL each oLher Lhrough down Lurns ln Lhe markeLs or Lhe economy.

Soc|a| 1ransformat|on
A key parL of Lhe co-op's mlsslon ls Lo supporL and lnvesL ln Lhelr communlLles by creaLlng [obs,
fundlng developmenL pro[ecLs, supporLlng educaLlon, and provldlng opporLunlLy.

Un|versa||ty
1he co-op supporLs all efforLs Lo promoLe workplace democracy and promoLes Lhe co-operaLlve
model and culLure as a means Lo achleve soclal and economlc [usLlce.

Lducat|on
LducaLlon ls valued as Lhe key Lo Lhe developmenL and progress of a people" and ls crlLlcal Lo
democraLlze power", as quoLed from !ose Marla ArlzmendlarrleLa. LducaLlon and llfelong
learnlng provlde Lhe Lools for worker-owners Lo adapL and susLaln Lhe co-op.

CreaLlng susLalnable [obs and susLalnable communlLles requlres broadenlng Lhe deflnlLlon of value
beyond Lhe boLLom llne". 1he moral values of Lhe enLerprlse musL maLLer as much, lf noL more so, Lhan
flnanclal values. 1hese values of democraLlc worker ownershlp and soclal and economlc [usLlce are whaL
dlfferenLlaLe Lhe unlon co-op model from LradlLlonal buslness models, maklng Lhe unlon co-op more
susLalnable and glvlng lL a compeLlLlve edge over Lhe long Lerm.

1he unlon co-op model wlll seek Lo closely lmplemenL Lhe prlnclples and values of Lhe Mondragon
model ln comblnaLlon wlLh collecLlve bargalnlng ln a way LhaL noL only makes Lhe workplace more
parLlclpaLory and more accounLable Lo Lhe workers, buL also furLher proLecLs Lhe lnLeresLs of Lhe
workers and esLabllshes guldellnes Lo ensure LhaL all workers are LreaLed falrly.

1o susLaln Lhls model, we musL also ensure a dynamlc labor-managemenL relaLlonshlp rooLed ln
parLnershlp, undersLandlng Lhe needs of boLh Lhe worker-owners as owners and of Lhe worker-owners
as workers, and respecL for Lhe dlfferenL advocacy roles each has.

Can such an ldea really Lake rooL ln an Amerlcan culLure sLeeped ln lndlvlduallsm? Conslder LhaL Lhe
people who orlglnally formed and supporLed Lhe Mondragon co-operaLlves dld so ouL of necesslLy Lo
feed and provlde for Lhelr famllles. 1hey sLarLed Lhelr own schools, creaLed Lhelr own [obs, provlded
Lhelr own healLh care and meL Lhelr own banklng and flnanclng needs. 1helrs ls a sLory abouL self-
rellance and pragmaLlsm, noL [usL ldeallsm. values such as self-rellance, ownershlp, and democracy
obvlously have deep rooLs ln our culLure and hlsLory as well.

Worker-Cwned Co-operat|ves and Labor Un|ons

1here are naLural and hlsLorlcal alllances beLween Lhe co-operaLlve and labor unlon movemenLs. Where
Lhose have dlverged, we belleve Loday's challenges offer a hlsLorlc momenL and opporLunlLy Lo brlng
Lhem back LogeLher.

Worker-owned co-operaLlves have a long hlsLory daLlng back Lo Lhe 8ochdale loneers ln norLhern
Lngland ln 1844 and Lhe works and wrlLlngs of 8oberL Cwens ln Lhe 1820s and 1830s. Larly worker-
owned co-operaLlves may have been organlzed among a parLlcular Lrade or communlLy, buL Lhe
3

advanLages of earller worker-owned co-operaLlves remaln much Lhe same as Lhey do Loday: economles
of scale, muLual ald and supporL, full dlsLrlbuLlon of proflLs, full ownershlp and worker accounLablllLy.
unforLunaLely, Lhe growLh of worker-owned co-operaLlves has been llmlLed by a number of facLors over
Lhe years, prlmarlly access Lo low cosL caplLal, lack of lnvesLmenL, mlspercepLlons, and lsolaLlon. Whlle
Lhe lnLeresL ln, and adopLlon of, worker co-operaLlves has been growlng, slgnlflcanL obsLacles remaln Lo
acceleraLed adopLlon.

Slmllarly, labor unlons were lnlLlally formed ln Lhe unlLed SLaLes ln Lhe mld-1800s among a parLlcular
Lrade as a means of muLual ald and supporL, a cerLlflcaLlon of Lralnlng and skllls ln LhaL Lrade, and as a
means Lo proLecL from Lhe deskllllng and devaluaLlon of LhaL Lrade. ln Lhe 1880s, however, 1erence
owderly led Lhe knlghLs of Labor ln organlzlng hundreds of Lhousands of unskllled workers, lncludlng
women and Afrlcan Amerlcans, Lo lmprove Lhelr worklng condlLlons. 1he knlghLs of Labor were also one
of Lhe flrsL labor unlons Lo promoLe Lhe developmenL of worker-owned co-operaLlves. Slnce Lhe
naLlonal Labor 8elaLlons AcL was passed ln 1933, spurrlng a rapld growLh ln unlon membershlp, Lhe
rlghLs and ablllLy of workers Lo organlze and Lo bargaln have been consLanLly eroded and under aLLack.
ln recenL decades, u.S. labor unlons have been prlmarlly focused on bargalnlng and admlnlsLerlng
conLracLs and only ln recenL years become more wllllng Lo allocaLe slgnlflcanL resources Lo organlzlng, Lo
pollLlcs and leglslaLlve lssues, and Lo Lrade lssues. As unlon denslLy has decllned, however, so has Lhe
power of Lhe unlon. Layoffs, planL closlngs, and Lhe demand for conLracL concesslons have become
commonplace as we waLch mulLlnaLlonal corporaLlons run away from Lhe communlLles LhaL supporLed
Lhem.

1he modern experlence of organlzed labor and employee ownershlp has been mlxed and somewhaL
uneasy. ln Lhe laLe 1980s and early 1990s, Lhere was a movemenL by some unlons, such as Lhe unlLed
SLeelworkers (uSW), Lowards employee ownershlp, exchanglng conLracL concesslons for ownershlp
sLakes ln order Lo keep Lhe buslness afloaL. Powever, Lhe creaLlon of such Lmployee SLock Cwnershlp
lans (LSCs) frequenLly dld noL resulL ln much change Lo Lhe labor-managemenL dynamlc or Lo Lhe
naLure of Lhe operaLlonal sLrucLure, and as a resulL, ownershlp" meanL llLLle Lo noLhlng Lo Lhe
workforce. As a resulL, many of Lhose lnvolved came Lo vlew employee ownershlp negaLlvely, as [usL
anoLher way Lo wrlng concesslons ouL of workers, or worse, Lo undercuL Lhe wages and beneflLs aL Lhelr
compeLlLors. Conversely, llke much of Lhe general publlc, many of Lhe people lnvolved ln employee
ownershlp have been susplclous LhaL unlons could only brlng lnLernal confllcL, an us vs. Lhem"
menLallLy, and unlon demands LhaL would puL Lhelr company ouL of buslness.

1hls hlsLory ls ln many ways unforLunaLe, as generally labor unlon prlnclples share many slmllarlLles wlLh
accepLed co-operaLlve prlnclples, lncludlng:
uemocraLlc elecLlon of leadershlp based on one member, one voLe.
1he propenslLy Lo promoLe, selecL (and elecL) leadershlp from Lhe rank-and-flle.
An emphasls on educaLlon, Lralnlng, and collecLlve aLLalnmenL.
Concern for Lhe communlLy.
Co-operaLlon wlLh slmllar and/or afflllaLed enLlLles.

1he few LSC converslons from Lhe early 1990s LhaL have en[oyed relaLlve success ln Lhe years slnce,
have Lwo prlnclple aspecLs ln common: (1) a ma[orlLy ownershlp sLake, and (2) a real change ln Lhe
sLrucLure and culLure ln Lhe organlzaLlon LhaL made ownershlp" feel llke more Lhan [usL Lhe value of a
share.

6

lL ls ln Lhls conLexL LhaL we seek Lo parLner labor unlons and co-operaLlves as a poLenLlal paLh Lowards
creaLlng good, susLalnable [obs LhaL supporL and susLaln Lhe communlLles ln whlch Lhey operaLe.

1he Un|on Co-op Mode|

A unlon co-op ls a unlonlzed worker-owned co-operaLlve ln whlch worker-owners all own an equal share
of Lhe buslness and have an equal voLe ln overseelng Lhe buslness.

1radlLlonally ln larger scale worker-owned co-operaLlves, worker-owners elecL a 8oard of ulrecLors from
among Lhemselves and Lhe 8oard appolnLs people Lo manage Lhe day-Lo-day operaLlons of Lhe co-
operaLlve.

AlLhough lL may be common wlLhln larger co-ops Lo elecL people Lo look ouL for Lhe day-Lo-day lnLeresLs
of Lhe worker-owners as owners, lL's decldedly less common wlLhln co-ops Lo elecL people Lo look ouL
for Lhe day-Lo-day lnLeresLs of worker-owners as workers. 1owards Lhls end, Lhe Mondragon co-
operaLlves have creaLed Soclal Counclls whlch offer a formal sLrucLure LhaL allows shop floor worker-
owners more lnpuL and dlalogue on a day-Lo-day basls on lssues lncludlng wages, beneflLs, and worklng
condlLlons, buL are generally llmlLed Lo an advlsory role.

1he unlon co-op model replaces Lhe Soclal Councll wlLh a unlon CommlLLee. As wlLh oLher buslnesses,
ln a unlon co-op Lhe appolnLed ManagemenL would have an obllgaLlon Lo engage ln collecLlve bargalnlng
wlLh Lhe unlon CommlLLee over lssues such as wages, beneflLs, and worklng condlLlons.

1he bargalnlng unlL" represenLed by Lhe unlon CommlLLee would ldeally encompass all non-supervlsory
worker-owners ln Lhe co-op, alLhough smaller bargalnlng unlLs could be carved ouL, uslng naLlonal Labor
8elaLlons 8oard (nL88) crlLerla as a general guldellne.

As hlsLorlcally proven, worker-owned co-operaLlve buslnesses can be hlghly compeLlLlve wlLh buslnesses
LhaL have a convenLlonal corporaLe sLrucLure. Where ownershlp means more Lhan [usL a value of a
share, worker-owners Lend Lo be more self-moLlvaLed, more producLlve, and more creaLlve, helplng
Lhelr buslness Lhrlve, grow, and remaln proflLable.

A unlonlzed worker-owned co-operaLlve LhaL has a collecLlve bargalnlng agreemenL whlch provldes
guldellnes over wages, beneflLs and worklng condlLlons, bullds upon Lhe hlsLorlcal sLrengLhs of worker-
owned co-operaLlves buL also helps Lo ensure LhaL all worker-owners are LreaLed falrly, have access Lo
due process, and LhaL worker-owners as workers are more engaged ln Lhe buslness on an ongolng basls.

WlLh Lhree separaLe buL equal groups elecLed or selecLed from wlLhln Lhe co-operaLlve (elecLed 8oard of
ulrecLors, selecLed ManagemenL, and elecLed unlon CommlLLee members), no worker-owner would be
allowed Lo serve ln more Lhan one of Lhose capaclLles aL any one Llme. Powever, noLhlng should
prevenL a worker-owner from servlng ln mulLlple roles on a consecuLlve basls, for example, someone
elecLed Lo Lhe unlon CommlLLee could laLer be elecLed Lo Lhe 8oard of ulrecLors lf Lhey are no longer
servlng on Lhe unlon CommlLLee.

1he experlence of Lhe Mondragon co-operaLlves has also shown LhaL a broader supporL sysLem ls key Lo
susLalnablllLy and growLh. Whlle we can'L expecL Lo lmmedlaLely repllcaLe a Mondragon sysLem LhaL has
developed over many decades, a unlon co-operaLlve has Lhe advanLage of belng parL of Lhe broader
7

unlon and cooperaLlve supporL sysLems, noL only drawlng on shared experlence and knowledge, buL also
wlLh Lhe ablllLy Lo Lap lnLo unlon beneflL plans, such as healLh lnsurance plans LhaL may provlde lower
cosL opLlons due Lo Lhe unlon's collecLlve buylng power and deflned beneflL reLlremenL plans LhaL share
rlsk and maxlmlze reLurns.

Structura| Components

1he core organlzaLlonal prlnclple of Lhe unlon co-op model ls one worker, one voLe". rlmarlly, Lhe
sLrucLural foundaLlon of Lhe unlon co-op model ls based on Lhe Mondragon model, wlLh Lhe Soclal
Councll replaced wlLh a unlon CommlLLee.

Llke Lhe Mondragon model, Lhe prlmary overslghL body ln Lhe unlon co-op model wlll be Lhe Ceneral
Assembly, whlch shall meeL annually and ln whlch each worker-owner of Lhe co-op shall have an equal
voLe.

Worker-owners wlll also elecL a 8oard of ulrecLors from wlLhln Lhe co-op, slmllar Lo Mondragon's
Covernlng Councll, whlch shall have broad overslghL responslblllLy, governed by and sub[ecL Lo Lhe
Ceneral Assembly. Members of Lhe 8oard of ulrecLors would be elecLed Lo four year Lerms wlLh a
proporLlonal number of seaLs up for elecLlon every year or every oLher year, dependlng on Lhe by-laws
of Lhe speclflc co-op. 1o be ellglble Lo run for a 8oard seaL, Lhe person musL be a worker-owner wlLhln
Lhe co-op and may noL serve on Lhe ManagemenL Leam or Lhe unlon CommlLLee whlle servlng on Lhe
8oard of ulrecLors. 1he number of seaLs on Lhe 8oard shall be deLermlned by Lhe co-op's bylaws and
shall be proporLlonal Lo Lhe number of worker-owners wlLhln Lhe co-op. A co-op may also flnd lL useful
Lo provlde aL leasL Lwo seaLs on Lhe 8oard for people ouLslde" Lhe co-op as a way of galnlng addlLlonal
perspecLlve and advlce. unless oLherwlse requlred, such as a hybrld model wlLh ouLslde lnvesLors, Lhe
lnLernal" 8oard members could selecL Lhe ouLslde" members. AnoLher meLhod of lncorporaLlng
people ouLslde of Lhe co-op would be Lhe creaLlon of an Advlsory 8oard LhaL ls separaLe from Lhe 8oard
of ulrecLors.

1he ManagemenL Leam shall be appolnLed by Lhe 8oard of ulrecLors for a Lerm of four years and shall be
sub[ecL Lo removal by Lhe 8oard or Lhe Ceneral Assembly. A member of Lhe ManagemenL Leam shall
also be a worker-owner wlLhln Lhe co-op and may noL serve on Lhe 8oard of ulrecLors or Lhe unlon
CommlLLee. As wlLh Lhe Mondragon model, a ManagemenL Leam member may serve no more Lhan Lwo
consecuLlve Lerms ln any one poslLlon. ln order Lo be removed from a ManagemenL Leam poslLlon
durlng Lhelr four year Lerm by Lhe Ceneral Assembly, aL leasL Lwo-Lhlrds of Lhe worker-owners musL
peLlLlon for a speclal Ceneral Assembly, Lo be held wlLhln 30 days of Lhe peLlLlon, and for Lhe removal Lo
be supporLed by aL leasL Lwo-Lhlrds of Lhose worker-owners aL Lhe Ceneral Assembly.

Llke Lhe Soclal Councll ln Lhe Mondragon model, a unlon CommlLLee wlll be elecLed on a
represenLaLlonal basls from dlfferenL areas wlLhln Lhe co-op, noL on an aL-large basls such as Lhe 8oard
of ulrecLors. Also llke Lhe Soclal Councll, Lhe unlon CommlLLee wlll have responslblllLy as Lhe
communlcaLlon lnfrasLrucLure on a day-Lo-day basls beLween Lhe lndlvldual worker-owners and Lhe
ManagemenL Leam. Powever, where Lhe Soclal Councll ln Mondragon only has Lhe ablllLy Lo advlse
ManagemenL on workplace maLLers such as compensaLlon and worklng condlLlons, Lhe unlon
CommlLLee shall have Lhe auLhorlLy Lo collecLlvely bargaln. A member of Lhe unlon CommlLLee musL be
a worker-owner of Lhe co-op and may noL serve on Lhe ManagemenL Leam or Lhe 8oard aL Lhe same
Llme.
8


1he unlon CommlLLee shall represenL all worker-owners, wlLh Lhe excepLlon of managemenL, ln Lhelr
roles as workers for Lhe purpose of collecLlve bargalnlng. ln Lhe evenL a ma[orlLy of ellglble worker-
owners declde Lo noL have a unlon CommlLLee represenL Lhem ln collecLlve bargalnlng, Lhe unlon
CommlLLee shall be dlsbanded.

1he unlon CommlLLee would negoLlaLe a collecLlve bargalnlng agreemenL wlLh Lhe ManagemenL Leam of
Lhe co-op whlch lays ouL lmporLanL pollcles and procedures for Lhe co-op, such as due process for
dlsclpllne lssues, dlspuLe resoluLlon, how compensaLlon ls sLrucLured, whaL beneflLs are provlded, and
how senlorlLy ls applled. 1he unlon CommlLLee would also work closely wlLh Lhe ManagemenL Leam and
Lhe 8oard Lo adapL Lo changes ln Lhe buslness and/or Lhe operaLlon, as well as Lo creaLe an ongolng
communlcaLlon and collaboraLlon process wlLh ManagemenL.

As a means Lo lmprove communlcaLlons, a unlon co-op may also wanL Lo esLabllsh ex-offlclo" seaLs on
Lhe 8oard for a member of ManagemenL (such as a CLC or CM) and for a member of Lhe unlon
CommlLLee.

Pow Lhe unlon co-op model ls lmplemenLed ls parLlally deLermlned by Lhe slze of Lhe co-op. ln a small
group of 10 people or less, Lhere ls llkely Lo be ample opporLunlLy for each worker-owner Lo lnLeracL
wlLh each oLher and co-operaLe ln Lhe managemenL of Lhe buslness. 1he larger Lhe group, however, Lhe
less Lhose dlrecL relaLlonshlps are llkely Lo happen and Lhe greaLer Lhe need for day-Lo-day managemenL
speclallzaLlon. Whlle lL has been long accepLed pracLlce ln larger worker-owned co-ops Lo elecL a 8oard
and appolnL ManagemenL, Lhe need for advocacy for worker-owners as workers ls normally
unaddressed. AlLhough Mondragon does noL requlre a Soclal Councll, lL ls sLrongly suggesLed ln a
worker-owned co-op of 30 or more people. Llkewlse, Lhe beneflLs of lncreased accounLablllLy and
communlcaLlon lnherenL ln havlng a unlon CommlLLee wlll be more fully reallzed Lhe larger Lhe group.
















Board of
Directors
Union
Committee
Management
Worker
Owners
9

Cwnersh|p and I|nanc|ng

When creaLlng Lhe legal enLlLy for Lhe unlon co-op, Lhere are several forms Lo choose from, alLhough Lhe
laws Lo do so are seL aL Lhe sLaLe level and vary wldely from sLaLe Lo sLaLe. AlLhough MassachuseLLs and
MlnnesoLa have laws speclflc for worker-owned cooperaLlves, mosL sLaLes do noL. Lven lf your sLaLe
does noL have co-op speclflc sLaLuLes, you can sLlll creaLe a unlon co-op sLrucLure wlLhln Lhe more
LradlLlonal forms of lncorporaLlon, such as C Corps, S Corps, and LLCs. lor S Corps, alLhough lL has Lax
advanLages because earnlngs are passed Lhrough Lo Lhe shareholders, Lhere are slgnlflcanL llmlLaLlons Lo
ownershlp Lo conslder, such as Lhe llmlL of no more Lhan 100 shareholders.

1he ldeal ownershlp sLrucLure would be for worker-owners Lo have 100 ownershlp of Lhe buslness,
equally dlsLrlbuLed among Lhe worker-owners, and Lo be sLrucLured as a co-operaLlve. Powever, Lhe
level of caplLal lnvesLmenL requlred for some co-ops, such as ln Lhe manufacLurlng secLor, may be
lnlLlally unaLLalnable for [usL Lhe worker-owners Lhemselves. ln Lhose cases, we need Lo conslder hybrld
ownershlp and lnvesLmenL models LhaL are conslsLenL wlLh our unlon co-op prlnclples, buL also allow for
addlLlonal co-op opporLunlLles Lo be creaLed and for worker-owners Lo move Lowards 100 ownershlp
over Llme.

Cne posslble hybrld ownershlp opLlon would be Lo malnLaln Lhe baslc co-op sLrucLure, buL also Lo allow
ouLslde lnvesLors Lo own shares and conLrol a number of seaLs on Lhe 8oard of ulrecLors. 1he prlmary
advanLage of Lhls scenarlo ls LhaL only one enLerprlse needs Lo be creaLed and malnLalned. WlLh Lhe
scarclLy of any subsLanLlve legal guldellnes for co-operaLlve enLerprlses, many exlsLlng worker-owned
co-operaLlves ln Lhe u.S. have been seL up as sLandard C CorporaLlons wlLh by-laws, pollcles and
procedures based on Lhe co-operaLlve model. As a C CorporaLlon, a unlon co-op needlng Lo adopL a
hybrld ownershlp and lnvesLmenL model would have plenLy of flexlblllLy wlLhln LhaL sLrucLure Lo allow
for ouLslde lnvesLors and 8oard members. Such a hybrld, however, lmbeds Lhe ouLslde lnvesLor lnLo Lhe
co-op and could poLenLlally undermlne Lhe mlsslon of bulldlng worker ownershlp and/or undermlne Lhe
co-operaLlve sLrucLure lLself by selllng lLs shares Lo oLher lnvesLors, refuslng Lo sell back shares Lo
worker-owners, or posslbly even changlng or ellmlnaLlng Lhe co-operaLlve sLrucLure lLself ln an aLLempL
Lo maxlmlze resale value.

AnoLher posslble hybrld opLlon would be Lo malnLaln Lhe 100 worker-owned co-operaLlve as a
separaLe enLlLy and creaLe a separaLe [olnL-venLure company, such as an LLC, wlLh ouLslde lnvesLors.
1he prlmary advanLage of Lhls model would be LhaL Lhe co-operaLlve would always remaln compleLely ln
Lhe hands of Lhe worker-owners and accounLable Lo Lhem only. 1he co-op could have llLLle
caplLallzaLlon requlremenLs lnlLlally, formed Lo be able Lo parLner (as one coheslve group) wlLh ouLslde
lnvesLors ln a [olnL-venLure sLrucLure. 1he co-op may Lhen be able Lo negoLlaLe Lhelr ownershlp sLake ln
Lhe LLC based on Lhe labor provlded, and poLenLlally lncreaslng LhaL ownershlp sLake as cerLaln
benchmarks are seL or buylng addlLlonal shares uslng a predeLermlned formula. A clear paLh Lo
lncreaslng ownershlp would need Lo be carefully lald ouL, so LhaL workers are noL Laklng on rlsk wlLhouL
a correlaLlng poLenLlal for rewards. 1he co-op could poLenLlally enLer lnLo a number of dlfferenL LLCs
wlLh varlous lnvesLors. An LLC operaLlng agreemenL could also seL guldellnes on how lnvesLors sell Lhelr
shares. oLenLlal downsldes of such a hybrld mlghL lnclude compllcaLlons arlslng from a second layer of
organlzaLlonal bureaucracy or lf Lhe co-op Lakes on more rlsk ln an LLC Lhan lL oLherwlse should, as parL
of a larger enLlLy.

10

1heoreLlcally, ln elLher of Lhe above scenarlos, workers could own a mlnorlLy of shares lnlLlally and buy
ouL or earn enough addlLlonal shares Lo evenLually Lake 100 ownershlp. 8aLher Lhan one ouLslde
lnvesLor holdlng a ma[orlLy sLake, lL could be more reallsLlc for Lhe co-op Lo assemble a group of smaller
lnvesLors wlLh ownershlp sLakes of 10 Lo 20 each. uependlng on Lhe slLuaLlons, such lnvesLmenL
could come from oLher co-ops, suppllers, cusLomers, lmpacL lnvesLors, credlL unlons, non-proflLs, anchor
lnsLlLuLlons, even communlLy groups.

lf a hybrld ownershlp sLrucLure ls lnlLlally needed, an lnvesLor or benefacLor mlghL requesL some Lype of
golden share" as a condlLlon of Lhelr lnvesLmenL and/or lnvolvemenL. A golden share" could provlde
veLo power over cerLaln declslons of Lhe co-op, such as wheLher or noL Lo sell Lhe buslness. Cne
purpose of a golden share" mlghL be Lo keep worker-owners from selllng Lhe buslness ln order Lo reap
a shorL Lerm galn from Lhe long Lerm lnvesLmenLs of oLhers. AlLhough ownershlp, almosL by deflnlLlon,
would seem Lo requlre Lhe ablllLy Lo sell, for our purposes, Lhe rlghLs of ownershlp do noL necessarlly
conLradlcL Lhe use of a golden share" ln Lhe shorL and medlum Lerms where Lhe rlsks of a sLarL-up are
llkely dlsproporLlonaLely borne by oLhers. Any golden share" oughL Lo have speclflc llmlLaLlons wlLh a
deflned sunseL perlod and mosL llkely wlll need Lo be negoLlaLed wlLh each lnvesLor as parL of Lhe
lnvesLmenL agreemenL.

1he goal of Lhe unlon co-op, even when uLlllzlng a hybrld ownershlp model, should be for worker-
owners Lo evenLually galn 100 ownershlp and for Lhese buslnesses Lo remaln place-based and
communlLy-anchored for Lhe long Lerm. Mechanlsms for volunLarlly resLrlcLlng Lhe dlssoluLlon/sale of
Lhe co-op oughL Lo be lncluded ln Lhe by-laws, such as unanlmous approval or a sLrong super-ma[orlLy
approval requlred from all shareholders.

Cu|ture

A key componenL Lo Lhe long Lerm vlablllLy of Lhls model, as emphaslzed by numerous pracLlLloners and
experLs and based on a wlde varleLy of experlences, ls developlng a workplace culLure LhaL ls conslsLenL
wlLh Lhe mlsslon and values of Lhe model. Pow Lo develop LhaL culLure wlll remaln an open-ended
quesLlon Lo be resolved on a case-by-case basls, buL a few polnLs are worLh conslderlng:

llndlng a balance beLween confllcL and co-opLaLlon. A concern ralsed abouL Lhls unlon co-op
model ls Lhe percepLlon of labor-managemenL confllcL ln unlonlzed buslnesses. AlLhough Lhe
labor-managemenL relaLlonshlp Lrends more Lowards worklng LogeLher ln Lhe vasL ma[orlLy of
cases, we oughL Lo recognlze LhaL labor-managemenL confllcL can and does occur (wheLher Lhe
workforce ls unlonlzed or noL), and conslder how LhaL confllcL can be mosL effecLlvely managed.
A good labor-managemenL relaLlonshlp ls abouL resolvlng confllcL, noL creaLlng lL. Among Lhe
many lessons Lo be learned from Lhe CM-uAW parLnershlp aL SaLurn, a model whlch could
almosL be descrlbed as co-managemenL", ls LhaL afLer Lhe flrsL few years of operaLlon, a
ma[orlLy of Lhe workers voLed ouL Lhe lnlLlal group of local unlon offlcers because Lhey were
percelved Lo be Loo close Lo managemenL. As a resulL, Lhe company and Lhe unlon moved
Lowards a more LradlLlonal model. We belleve cooperaLlon and confllcL are noL muLually
excluslve, buL raLher are Lhe foundaLlon for a healLhy relaLlonshlp based on muLual respecL,
when properly managed.

1ralnlng on worklng ln and managlng ln a cooperaLlve has always been essenLlal for success.
key Loplcs would lnclude communlcaLlons, Leam bulldlng, problem solvlng, declslon maklng, and
11

leadershlp. As Lhe Mondragon pracLlce demonsLraLes, Lhls Lype of organlzaLlonal Lralnlng
cannoL and musL noL be a one-Llme evenL, buL raLher an ongolng learnlng and relnforcemenL
process.

AccounLablllLy ls anoLher lynchpln of success. 1hls model uLlllzes a unlon CommlLLee and
collecLlve bargalnlng as a means of lmprovlng Lhe accounLablllLy of managemenL Lo Lhe workers,
buL lL also lnLends Lo lmprove Lhe accounLablllLy of lndlvldual workers Lo each oLher and Lo Lhe
buslness by communlcaLlng clear guldellnes and pollcles for everyone Lo follow. A common
mlspercepLlon ls LhaL unlons proLecL bad" workers, however, Lhe lnLenL of a negoLlaLed
grlevance procedure ls only Lo provlde due process. Cood managemenL pracLlces are needed Lo
malnLaln accounLablllLy and we belleve Lhls model provldes useful Lools Lo achleve LhaL goal.

Worker-owned companles LhaL adopL an ownershlp culLure have more producLlve employees because
Lhey are glven auLonomy and Lake ownershlp of Lhelr [obs and have more effecLlve managers who are
freed up from Lhe lnefflclencles of closely supervlslng subordlnaLes, unlLed ln dolng Lhe besL [ob Lhey can
Lo saLlsfy Lhelr cusLomers and susLaln a proflLable buslness.

Negot|at|ng the Co||ect|ve 8arga|n|ng Agreement

ln a convenLlonal workplace wlLh a unlon, a collecLlve bargalnlng agreemenL (C8A) ls negoLlaLed
beLween Lhe workers ln Lhe unlon and Lhe managemenL of Lhe company LhaL seLs ouL Lhe wages, hours,
and worklng condlLlons for Lhose workers. 1he C8A ls a legally blndlng conLracL and usually applles for a
flxed perlod of Llme before Lhe Lerms of Lhe agreemenL are renegoLlaLed.

ln a unlon co-op, slnce workers and owners are no longer necessarlly dlsLlncL groups, a C8A would be
negoLlaLed ln much Lhe same way for Lhe beneflL of worker-owners as workers, yeL would also requlre
some addlLlonal flexlblllLy Lo adapL Lo buslness and markeL changes LhaL would concern worker-owners
as owners.

Slnce workers ln a worker-owned co-operaLlve have Lhe ablllLy Lo change Lhe co-op's bylaws aL Lhe
annual meeLlng, voLe on Lhe 8oard of ulrecLors, and LheoreLlcally run Lhe enLerprlse, some may wonder
whaL Lhe purpose of negoLlaLlng a collecLlve bargalnlng agreemenL would have. 1wo prlnclple reasons
are: (1) wlLhouL a C8A, Lhe ablllLy of workers Lo hold managemenL accounLable on a day-Lo-day basls ls
llmlLed and lndlrecL, and (2) Lo ensure falr LreaLmenL and provlde due process. As conLemplaLed by
!ames Madlson ln Lhe lederallsL apers and laLer colned by Alexls de 1ocquevllle ln uemocracy ln
Amerlca, Lhe Lyranny of Lhe ma[orlLy" ln a democracy could Lrample Lhe rlghLs of Lhe mlnorlLy,
prompLlng Lhe need for a sysLem of checks and balances.

A collecLlve bargalnlng agreemenL helps Lo assure Lhe day-Lo-day accounLablllLy of managemenL by
esLabllshlng guldellnes and pollcles LhaL can no longer be unllaLerally changed by managemenL. lnsLead,
such changes would be negoLlaLed wlLh oLher workers (Lhe unlon CommlLLee), dlrecLly elecLed by Lhelr
peers, whose role ls Lo be advocaLes for Lhe worker-owners as workers.

A collecLlve bargalnlng agreemenL would also provlde for due process ln Lhe evenL of a dlspuLe. lor
example, ln Lhe evenL a worker-owner feels he or she has been dlscrlmlnaLed agalnsL, unfalrly passed
over for a promoLlon, or un[usLly dlsclpllned, he or she could allege a grlevance and aLLempL Lo resolve lL
aL mulLlple levels, lncludlng uLlllzlng an lmparLlal arblLraLor as a lasL resorL lf Lhe lssue remalns
12

unresolved. A collecLlve bargalnlng agreemenL can provlde Lhe workplace equlvalenL of checks and
balances and a worker-owner blll of rlghLs. 1hls formallzed process, whlle normally assoclaLed wlLh
unlons, ls ln compleLe harmony wlLh accepLed co-operaLlve prlnclples, and ls ln many cases ls even used
as a model ln worker co-operaLlves wlLhouL unlon-represenLed employees.

Pavlng a clear seL of pollcles and guldellnes ouLllned ln Lhe C8A LhaL are well esLabllshed and well-
communlcaLed can creaLe a more sLable and more efflclenL workplace. A C8A also provldes more
sLablllLy and more clarlLy Lo Lhe wages and beneflLs earned by Lhe workers, reduclng favorlLlsm and
relnforclng falrness and solldarlLy.

ln a unlon co-op, Lhe C8A ls llkely Lo be more of a llvlng documenL Lhan may be Lhe case ln a more
LradlLlonal buslness sLrucLure. AlLhough a LradlLlonal C8A provldes sLablllLy and ls blndlng for a flxed
perlod of Llme, LhaL sLablllLy can be balanced wlLh Lhe need for flexlblllLy and adapLaLlon Lhrough
processes and procedures muLually agreed Lo by labor and managemenL.

lor co-ops wlLh mulLlple bargalnlng unlLs, a [olnL unlon CommlLLee LhaL represenLs Lhe comblned group
as a whole could be formed, whlle sLlll provldlng lndlvldual unlon membershlp based on Lhe [ob
classlflcaLlon or dues pald Lo each unlon as a proraLed share of Lhe comblned membershlp. ln oLher
words, lf unlon A represenLs 90 of a comblned group and unlon 8 represenLs 10, Lhe worker-owners
ln unlon A [ob classlflcaLlons would elLher be dlrecL members of unlon A or a [olnL unlon CommlLLee
could forward 90 of dues Lo unlon A. AnoLher opLlon would be Lo negoLlaLe one masLer" conLracL
LhaL deLermlnes wage scales and beneflLs for everyone, and Lhen negoLlaLe separaLe local" agreemenLs
LhaL are speclflc Lo each bargalnlng unlL. WlLh mulLlple bargalnlng unlLs, havlng enLlrely separaLe
conLracLs could be problemaLlc Lo admlnlsLer for a small unlon co-op.

Cenerally, Lhe bylaws of a co-op and a collecLlve bargalnlng agreemenL serve Lwo dlsLlncL roles. Where
Lhe co-op's bylaws apply Lo everyone ln Lhe co-op and can be amended annually aL Lhe Ceneral
Assembly, Lhe C8A applles only Lo Lhose ln Lhe bargalnlng unlL and ls normally seL ln place for an
exLended perlod of Llme, such as 3 years. Powever, slnce Lhe C8A can be amended by muLual
agreemenL beLween ManagemenL and Lhe unlon CommlLLee aL any Llme, Lhe C8A would poLenLlally be
Lhe more flexlble documenL.

ln addlLlon Lo Lhe Mondragon prlnclples above, some key elemenLs of Lhe bylaws would lnclude:
An operaLlng agreemenL LhaL deflnes how shares are dlsLrlbuLed, voLed, and Lransferred. ln a
hybrld lnvesLor model, Lhls would lnclude how many shares Lhe worker-owners are collecLlvely
enLlLled Lo, how many shares Lhe ouLslde lnvesLors (lf any) recelve, Lhe process for worker-
owners Lo lncrease Lhelr collecLlve ownershlp sLake, whaL resLrlcLlons would be placed on Lhe
poLenLlal sale or Lransfer of such shares, and whaL voLlng rlghLs are provlded by such shares.
1he mlsslon and values LhaL Lhe unlon co-op shall llve by.
1he sLrucLure of Lhe unlon co-op, Lhe roles and responslblllLles of each body wlLhln LhaL
sLrucLure, and Lhe process for lmplemenLlng and changlng LhaL sLrucLure, such as how and when
elecLlons are held and how bylaws can be amended.
1he pollcles and beneflLs LhaL shall apply Lo all worker-owners ln Lhe co-op. Where Lhe unlon
co-op model employs Lhe collecLlve bargalnlng process Lo perlodlcally modlfy such lLems, Lhe
lnLenL for Lhe bylaws ls Lo apply some of Lhe core prlnclples LhaL are unllkely Lo be changed over
Llme as a core Lo Lhe proper funcLlonlng of Lhe model, such as:
o Some Lype of due process procedure for Lhose ouLslde Lhe bargalnlng unlL(s).
13

o A requlremenL LhaL whaLever group based beneflLs negoLlaLed by Lhe unlon CommlLLee,
such as healLh lnsurance and penslons, shall apply Lo all worker-owners ln Lhe co-op,
boLh for Lhe efflclencles of provldlng Lhose beneflLs and for Lhe poLenLlal movemenL of
worker-owners ln and ouL of Lhe bargalnlng unlL.
o An endorsemenL of Lhe collecLlve bargalnlng process and Lhe unlonlzaLlon of Lhe
worker-owners, as well as an lmparLlal elecLlon process for worker-owners Lo selecL Lhe
unlon of Lhelr cholce (lncludlng havlng no unlon aL all). Whlle u.S. labor law prohlblLs
employers from favorlng a parLlcular unlon, Lhere ls no resLrlcLlon on an employer belng
pro-unlon or favorlng unlons generally.
o A sLaLemenL of solldarlLy LhaL any worker-owners ouLslde a bargalnlng unlL wlll pay an
amounL equlvalenL Lo dues pald by worker-owners lnslde a bargalnlng unlL Lo elLher Lhe
unlon or a charlLy of Lhelr chooslng.
o Pow proflLs are dlsLrlbuLed generally among all worker-owners, Lhe esLabllshmenL of
ownershlp accounLs, Lhe esLabllshmenL of a reserve pool ln case of losses, and Lhe
process of recoverlng losses from ownershlp accounLs afLer Lhe reserve pool has been
exhausLed.
o robaLlonary perlod for new workers and Lhe process for converslon of new workers
lnLo worker-owners.

Some key elemenLs of a collecLlve bargalnlng agreemenL ln a unlon co-op:
Many of Lhe LradlLlonal Loplcs of wages, beneflLs, and worklng condlLlons, whlch are also
mandaLory sub[ecLs of bargalnlng under u.S. law, would be parL of Lhe C8A for Lhe bargalnlng
unlL:
o !ob classlflcaLlons, wage" raLes for each classlflcaLlon, lncenLlves (lncludlng a more
deLalled formula for proflL sharlng).
o Croup-based beneflLs such as healLh lnsurance and penslons, whlch under Lhe bylaws
would be exLended Lo all worker-owners ln Lhe co-op. Slnce Lhe unlon CommlLLee ls seL
up Lo be more dlrecLly connecLed Lo Lhe needs and deslres of worker-owners as
workers, negoLlaLlng such beneflLs ln Lhe C8A provldes more accounLablllLy Lo Lhe group
of worker-owners as a whole Lhan lf such beneflLs were unllaLerally declded by
ManagemenL or Lhe 8oard of ulrecLors. 1he ablllLy Lo modlfy Lhe C8A on an ongolng
basls also provldes more flexlblllLy and more efflclency ln adapLlng Lo changlng
condlLlons Lhan requlrlng a Ceneral Assembly Lo sLudy, Lhoroughly dlscuss and voLe on
such changes on an annual basls.
o Accrual and use of beneflLs such as vacaLlon, slck days, and holldays.
o 1he process for [ob blddlng, schedullng, overLlme, leaves of absence, and dlsclpllne.
uue process for any dlspuLes abouL Lhe C8A ls applled, LradlLlonally known as Lhe grlevance and
arblLraLlon process.
1he process for Lhe collecLlon of unlon dues.
A commlLmenL LhaL ManagemenL and Lhe unlon CommlLLee wlll make Lhelr besL aLLempL Lo
reach muLual agreemenL ln Lhe evenL condlLlons warranL Lhe modlflcaLlon of Lhe C8A durlng Lhe
Lerm of Lhe agreemenL.

As Lhe governlng documenL for Lhe enLlre co-operaLlve, Lhe bylaws should generally serve as Lhe prlmary
seL of rules, wlLh Lhe C8A belng negoLlaLed wlLhln LhaL framework. Powever, ManagemenL wlll have a
legal obllgaLlon Lo bargaln wlLh Lhe unlon CommlLLee over mandaLory sub[ecLs such as wages, hours and
worklng condlLlons. Where a C8A confllcLs wlLh Lhe bylaws ln such an area, Lhe C8A ls Lhe legally
blndlng documenL for Lhe bargalnlng unlL and would prevall, sub[ecL Lo appllcable laws. lor example,
14

Lhe co-op's bylaws may provlde some Lype of 8oard revlew for workers ouLslde of Lhe unlon
(managemenL) for Lhe purposes of deLermlnlng compensaLlon, buL Lhe compensaLlon sysLem for Lhose
wlLhln Lhe unlon wlll be seL by Lhe C8A.

Compensat|on

As a worker-owned co-operaLlve, Lhe ulLlmaLe lnLenL ls LhaL all of Lhe proflLs wlll be dlsLrlbuLed equlLably
Lo Lhe worker-owners. 8eallsLlcally, however, proflLs wlll always be varlable and never guaranLeed, so
we musL also anLlclpaLe losses and how Lhe varlablllLy ln proflLs and losses mlghL affecL Lhe worker-
owners.

ln order Lo provlde a more conslsLenL lncome for lLs worker-owners, Mondragon co-operaLlves have
adopLed a pracLlce of advanclng anLlclpaLed proflLs durlng Lhe year (almosL equlvalenL Lo paylng wages),
Lhen maklng Lhe flnal dlsLrlbuLlon based on year-end flnanclal resulLs. ln adapLlng Lhe Mondragon
model Lo a u.S. model, paylng wages lnsLead of anLlclpaLed proflLs" does noL necessarlly dlsadvanLage
Lhe co-op or lLs worker-owners, so Lhe focus of Lhe u.S. unlon co-op model wlll be Lo pay wages as Lhe
base unlL of compensaLlon.

ln a co-op where Lhe workers are also owners, uLlllzlng some level of varlable pay meLhods, such as
proflL sharlng, lncenLlves, and bonuses, oughL Lo be conslsLenL wlLh core prlnclples, such as wage
solldarlLy, and compeLlLlve buslness pracLlces so LhaL Lhe unlon co-op ls proflLable. Cenerally wlLhln
Mondragon co-operaLlves, compensaLlon could be descrlbed as roughly averaglng 83 base pay and
13 varlable pay based on proflL and performance. 8ecognlzlng Lhe confllcLlng lnLeresLs beLween
worker-owners as workers deslrlng Lhe hlghesL posslble base pay and Lhe worker-owners as owners
deslrlng Lhe hlghesL posslble varlable pay, applylng Lhe generallzed raLlos from Lhe Mondragon model
would appear Lo be a good place Lo sLarL.

undersLandlng Lhe unlque naLure of Lhe worker-owned co-operaLlve sLrucLure, lL ls lmporLanL Lo
emphaslze LhaL earnlng shared rewards (proflLs) also means sharlng rlsks (losses) as well. 1he advanLage
of creaLlng Lhe co-op as a C CorporaLlon or as an LLC means Lhere are llmlLs Lo Lhe llablllLles of
ownershlp, buL pracLlcal conLlngencles need Lo be ln place Lo absorb losses wlLh Lhe expecLaLlon of a
Lurn-around, prlor Lo declarlng bankrupLcy. Where proflLs would be dlsLrlbuLed Lo lndlvldual ownershlp
accounLs of Lhe workers (wheLher held lnLernally wlLhln Lhe co-op or pald ouL Lo exLernal accounLs), a
reserve fund could be bullL up prlor Lo dlsLrlbuLlon Lo lndlvldual accounLs, so LhaL when losses do occur,
Lhe reserve fund can be uLlllzed prlor Lo Lhe co-op wlLhdrawlng money from Lhose lndlvldual accounLs.

Pow proflLs are allocaLed Lo lndlvldual worker-owners (LradlLlonally known as paLronage dlvldends),
would ulLlmaLely be up Lo Lhe co-op, alLhough ownershlp dlvldends could be pald as equal amounLs (one
worker, one share) or based on Lhe lnvesLmenL of Lhelr labor lnLo Lhe co-op, such as a calculaLlon
modeled on pay raLe, Llme worked, and years of servlce. Where Lhe lndlvldual accounLs are held
lnLernally wlLhln Lhe co-op, Lhe annual allocaLlon of proflLs ls essenLlally a paper" allocaLlon, noL
necessarlly cash. ?eL worker-owners are responslble for paylng Laxes on Lhe allocaLlon of proflLs lnLo
Lhelr lndlvldual member accounL, so Lhe co-op would be requlred by l8S regulaLlons Lo Lurn aL leasL 20
of LhaL dlsLrlbuLlon lnLo a cash payouL, large enough Lo cover any lncremenLal lndlvldual Lax llablllLy.

ln Lerms of wage solldarlLy, we noLe LhaL mosL Mondragon cooperaLlves have been able Lo susLaln a
raLlo of Lhe hlghesL pald worker recelvlng no more Lhan 3 Lo 7 Llmes whaL Lhe lowesL pald worker earns.
13

Powever, dependlng on facLors such as Lhe Lype of buslness and Lhe slze of Lhe buslness, Lhe unlon co-
op may need Lo adapL lLs compensaLlon model Lo recrulL and reLaln hlghly skllled and hlghly experlenced
workers and managers, conslsLenL wlLh Lhe prlnclple of wage solldarlLy as much as posslble.

Lducat|on and 1ra|n|ng

AnoLher key shared value of boLh unlons and co-operaLlves ls Lhe emphasls on educaLlon, whlch ls a
furLher lllusLraLlon of Lhe power of Lhe unlon co-op model. 1he emphasls on educaLlon ls formulaLed
around dlsLlncL, yeL relaLed concepLs: equlpplng lndlvldual worker owners wlLh Lhe sklll seLs noL only Lo
do Lhelr [obs, buL also Lo perform as owners and managers of Lhe enLerprlse, as well as provldlng
opporLunlLles for personal enrlchmenL and advancemenL. Speclflc LargeLed areas for educaLlon could
lnclude operaLlons and safeLy Lralnlng, flnanclal llLeracy, Leam declslon-maklng skllls, and more. As parL
of Lhe larger unlon and co-operaLlve supporL sysLems, experLlse and Lralnlng programs are avallable Lo
unlon co-ops Lo draw from. ln addlLlon, conLlnulng educaLlon classes could be offered dlrecLly for co-op
members, as well as a LulLlon asslsLance beneflL.

A plvoLal componenL of ensurlng Lhe success of Lhls model, especlally ln Lhe case of a converslon of an
exlsLlng buslness lnLo a co-op, ls Lralnlng on worklng ln and managlng ln a cooperaLlve workplace.
AlLhough many unlons may already have poslLlve and healLhy relaLlonshlps wlLh mosL of Lhelr
employers, Lhe culLure of Lhe worker-owned cooperaLlve (and by exLenslon Lhe unlon co-op) ls
slgnlflcanLly dlfferenL from a LradlLlonal buslness, requlrlng a focus on Lralnlng for all employees on how
Lo work cooperaLlvely and manage cooperaLlvely. As noLed above, Lhls Lype of organlzaLlonal Lralnlng
cannoL and musL noL be a one-Llme evenL, buL raLher an ongolng learnlng and relnforcemenL process.
WlLhouL Lhe rlghL culLure, boLh Lhe premlse and Lhe promlse of worker ownershlp are aL rlsk.
Cwnershlp musL mean more Lhan Lhe value of a share.

utt|ng the r|nc|p|es of Soc|a| 1ransformat|on & Inter-Cooperat|on |nto ract|ce

AlLhough Lhls unlon co-op model ls slgnlflcanLly focused on bulldlng worker ownershlp and
accounLablllLy wlLhln a parLlcular workplace, our prlnclples of Soclal 1ransformaLlon and lnLer-
CooperaLlon are almed aL ensurlng LhaL workplace can supporL and susLaln Lhe communlLles ln whlch lL
operaLes.

Soclal 1ransformaLlon ls abouL how we use Lhese susLalnable [obs Lo supporL and develop susLalnable
communlLles, speclflcally Lhrough provldlng good local [obs, supporLlng oLher local buslnesses, and
lnvesLlng ln Lhe local communlLy. An example of supporLlng oLher local buslnesses would be Lo uLlllze a
8uy Local" preference LhaL noL only keeps money and [obs wlLhln Lhe local communlLy, buL also furLher
develops Lhe dynamlcs of Lhe local economy and poLenLlally mlnlmlzes Lhe envlronmenLal lmpacL of Lhe
supply chaln. lnvesLlng ln Lhe local communlLy noL only has quallLy of llfe lmpacLs, such as recreaLlonal
and culLural acLlvlLles, buL also supporLs and grows Lhe local economy, Lhrough lnvesLmenLs such as
educaLlon and lnfrasLrucLure. ln Lhe shlfL Lo a more global economy, lL ls Lhls supporL and lnvesLmenL ln
Lhe local communlLy LhaL ls fadlng away, creaLlng more and more globallzed buslnesses wlLh no loyalLy
Lo any parLlcular communlLy, sLaLe, or naLlon. Looklng Lo Lhe Mondragon cooperaLlves, lL's worLh noLlng
LhaL Lhelr approach Lo growlng Lhelr buslnesses around Lhe world ls slgnlflcanLly unllke Lhe Lop-down
globallzaLlon approach of Loday's mulLl-naLlonal corporaLlons, raLher, Lhelr approach ls one of mulLl-
locallzaLlon", developlng boLLom-up buslnesses rooLed ln Lhelr local communlLles and broughL LogeLher
16

under an umbrella of oLher neLworked cooperaLlves whlch serve Lo lncrease boLh local employmenL and
Lhe value of LhaL employmenL.

1he muLual beneflL Lhose neLworked cooperaLlves provlde each oLher goes Lo Lhe hearL of Lhe prlnclple
of lnLer-CooperaLlon. As noLed prevlously, lnLer-CooperaLlon wlLhln Lhe labor unlon conLexL means
beLLer access Lo speclallzed servlces and Lralnlng, as well as leveraglng group buylng power for beLLer
healLh lnsurance beneflLs and reLlremenL beneflLs. lnLer-CooperaLlon wlLh oLher buslnesses, such as
oLher unlon buslnesses, oLher co-ops, and especlally oLher unlon co-ops, provldes Lhe solldarlLy and
muLual supporL wlLhln a vlrLual communlLy of buslnesses LhaL share slmllar values. lnLer-CooperaLlon ln
Lhls conLexL keeps money flowlng wlLhln Lhese buslnesses, susLalns [obs wlLhln Lhese buslnesses, and
creaLes Lhe opporLunlLy Lo share speclallzed servlces and/or Lralnlng.

Lvo|ut|on

Where Lhe concepLs of boLh labor unlons and co-operaLlve buslnesses have been around for aL leasL 130
years, Lhe lnLenL of Lhe unlon co-op model ls Lo adapL and lnLegraLe Lhose prlnclples and core concepLs
Lo Lhe challenges and opporLunlLles we face Loday. lf successful, adapLaLlon becomes evoluLlon. Cur
ulLlmaLe goal, Lherefore, mlghL be descrlbed as Lhe evoluLlon of Lhe workplace.

1he followlng examples offer lessons learned from pasL experlences and offer lnslghL lnLo how Lhe unlon
co-op model could adapL and evolve exlsLlng models:

CollecLlve bargalnlng compllmenLs co-operaLlon and workplace democracy.
Where people unfamlllar wlLh labor unlons have ralsed concerns abouL creaLlng an unnecessary
adversarlal slLuaLlon, we need Lo conslder Lhe rooL and cause of such concern: LhaL labor unlons are
generally only ln Lhe news when a confllcL erupLs, such as a sLrlke or lockouL. ln facL, sLrlkes and
lockouLs are excepLlonally rare, occurrlng durlng maybe 1 of conLracL negoLlaLlons. More ofLen Lhan
noL, negoLlaLlons are abouL flndlng Lhe balanclng polnL beLween helplng Lhe employer succeed and
ensurlng LhaL Lhe employees share ln LhaL success. Where Lhere ls muLual respecL of each oLher's roles,
a reasonable agreemenL can be reached. Lven Lhough we call lL a co-operaLlve, we musL also recognlze
LhaL by lLs very naLure, worker-owners have confllcLlng lnLeresLs as workers and as owners and how LhaL
lnherenL confllcL ls managed can have a slgnlflcanL lmpacL on Lhe success or fallure of Lhe enLerprlse.
lnLegraLlng Lhe collecLlve bargalnlng process lnLo Lhe co-op creaLes a forum for LhaL lnherenL confllcL Lo
be resolved falrly and smooLhly where Lhe ManagemenL and unlon CommlLLee respecL each oLher's
advocacy roles. CollecLlve bargalnlng ln Lhls conLexL provldes a forum for confllcL resoluLlon.

CollecLlve bargalnlng lncreases accounLablllLy and proLecLs workers' rlghLs.
1he mere facL LhaL Lhere are laws governlng employmenL, safeLy, and dlscrlmlnaLlon, does noL mean
LhaL Lhose laws aren'L frequenLly broken. AlLhough a co-op's prlnclples and bylaws are esLabllshed Lo
gulde and govern Lhe operaLlon of Lhe co-operaLlve, enforclng such rules ln a falr and equlLable manner
can be a challenge. As menLloned above, ln a democraLlc workplace Lhose rules are also sub[ecL Lo Lhe
same Lyranny of Lhe ma[orlLy" lssues LhaL LhreaLen Lhe rlghLs of Lhe mlnorlLy. A collecLlve bargalnlng
agreemenL provldes due process and a legal, enforceable framework under whlch rules can be enforced
falrly, where managemenL can hold workers accounLable Lo Lhose rules and where workers can hold
managemenL accounLable Lo Lhose rules as well. 1he mosL lmporL aspecL of Lhe grlevance procedure ls
LhaL lf Lhe lssue cannoL be resolved lnLernally, Lhe maLLer can be referred Lo an lmparLlal arblLraLor Lo
make Lhe declslon.
17


!olnlng a unlon larger Lhan Lhe co-operaLlve opens up slgnlflcanL opporLunlLles, lncludlng shared
resources, for worker-owners.
Cne of Lhe key prlnclples we seek Lo adapL from Mondragon ls LhaL of lnLer-cooperaLlon: LhaL co-ops
should supporL and work LogeLher wlLh oLher co-ops Lo make each oLher sLronger, [usL as smaller local
unlons [oln LogeLher wlLh oLher local unlons as parL of a blgger unlon. lnLer-cooperaLlon beLween a
unlon co-op and oLher local unlons (albelL wlLhln LradlLlonal employers), sLrengLhens boLh. As parL of a
larger group/unlon, members of Lhe unlon co-op have access Lo shared resources and collecLlve power
LhaL Lhey would noL oLherwlse have, lncludlng Lhe ablllLy Lo galn access Lo lower cosL, hlgher quallLy
healLh lnsurance, reLlremenL plans, lndusLry and markeL research, educaLlon and Lralnlng, flnance and
publlc pollcy lnlLlaLlves.

Worker-owned co-operaLlves could provlde unlon members Lhe opporLunlLy Lo have more fulfllllng and
more saLlsfylng [obs and careers, as well as more fully recelvlng Lhe proflLs creaLed by Lhelr work.
lf Lhere ls an us vs. Lhem" culLure ln some workplaces, lL ls probably a Lwo way sLreeL. Any opporLunlLy
Lo work ln an envlronmenL LhaL promoLes worker dlgnlLy, muLual respecL and real ownershlp LhaL means
more Lhan [usL Lhe value of a share ls golng Lo be a poslLlve for workers. 1he unlon co-op model alms Lo
lmprove Lhe accounLablllLy of managers Lo Lhe worker-owners, and Lo provlde opporLunlLles for Lralnlng
and advancemenL. As owners, workers can also feel assured LhaL Lhelr lngenulLy and hard work wlll be
rewarded equlLably raLher Lhan explolLed.

Worker-ownershlp could provlde some rellef Lo Lhe consLanL LhreaL of layoffs and planL closlngs.
ln a worker-owned co-op where Lhe prlorlLy ls [obs over proflLs, workers have a beLLer opporLunlLy Lo
flgure ouL alLernaLlves Lo layoffs, bankrupLcles, and closlngs ln hard Llmes, raLher Lhan have Lhe rug
pulled rlghL ouL from under Lhem and lefL wlLh no alLernaLlves.

Case Stud|es

CooperaLlve Pome Care AssoclaLes - new ?ork ClLy, new ?ork
CooperaLlve Pome Care AssoclaLes (CPCA) ls a provlder of home healLh care servlces based ln Lhe SouLh
8ronx area of new ?ork ClLy, whose 1,700 employee owners are represenLed by 1199SLlu and ls
currenLly Lhe largesL worker cooperaLlve ln Lhe unlLed SLaLes. CPCA sLarLed buslness as a worker co-
operaLlve ln 1986 wlLh Lhe prlmary goal of lmprovlng Lhe condlLlons for workers ln an lndusLry LhaL has
LradlLlonally offered workers low wages (ofLen seL by governmenL and prlvaLe lndusLry healLh plans) and
sub-sLandard beneflLs.

ln 2003, CPCA supporLed Lhe efforLs of lLs workers and worker-owners Lo [oln 1199SLlu and form a
collecLlve bargalnlng unlL. 1he reasons expressed by labor and managemenL for dolng so were: 1) Lo
conLlnue CPCA's mlsslon ln ralslng Lhe floor" for lndusLry workers and lmprovlng condlLlons ln Lhe
lndusLry ln general, 2) Lo Lake advanLage of SLlu's pollLlcal clouL ln Lhe sLaLe of new ?ork's
apporLlonmenL of healLh care conLracLs, and 3) Lo Lake advanLage of SLlu's beneflL and educaLlon
programs for Lhe workers. 8epresenLaLlves from boLh labor and managemenL expressed Lhe ldea LhaL
unlonlzlng Lhe cooperaLlve's worker-owners was a loglcal sLep ln Lhe developmenL of a poslLlve
workplace.

CPCA workers are offered Lhe opLlon Lo volunLarlly purchase a share and become an owner of Lhe
buslness. Workers who declde Lo become owners purchase a share of Lhe cooperaLlve for $1,000, wlLh
18

a small amounL deducLed from Lhelr paychecks unLll Lhe full amounL ls pald over Llme. As owners,
workers geL voLlng rlghLs wlLhln Lhe cooperaLlve and recelve dlvldends as shareholders.

ln addlLlon Lo Lhe LradlLlonal elemenLs of a collecLlve bargalnlng agreemenL (C8A), such as Lhe grlevance
procedure, medlaLlon and arblLraLlon processes, CPCA managemenL and 1199SLlu offlclals felL LhaL an
addlLlonal avenue for labor-managemenL relaLlons was needed. ln 2007, an agreemenL was reached Lo
form a Labor-ManagemenL CommlLLee (LMC), whlch replaced Lhe pre-unlon Worker Councll. 1he LMC's
prlmary purpose was Lo serve as formallzed sLrucLure for dlscusslng and resolvlng on-Lhe-[ob workplace
lssues, preferably prlor Lo flllng a formal grlevance or Lrlggerlng an arblLraLlon procedure. 1he LMC has
also served as a source of ln-house leadershlp developmenL and cooperaLlve culLure developmenL, as
well as a vehlcle Lo supporL and poslLlvely lmpacL Lhe buslness.

8oLh labor and managemenL represenLaLlves have expressed Lhe oplnlon LhaL all Lhe orlglnal goals of Lhe
LMC have been meL, and ln mosL cases exceeded. Speclflcally regardlng labor managemenL relaLlons,
Lhe LMC was lnsLrumenLal ln lmplemenLlng buslness-wlde culLure lnlLlaLlves LhaL succeeded ln rebulldlng
a sense of communlLy among worker-owners whlch had been sLressed due Lo buslness growLh. 1he LMC
also lmplemenLed lmproved communlcaLlon processes LhaL creaLed efflclencles ln resolvlng grlevances,
as well as educaLlon and Lralnlng programs for communlcaLlng poLenLlally unpopular lnlLlaLlves llke
efflclency lmprovemenLs. Success of Lhe LMC ls predlcaLed on hlgh levels of muLual LrusL from all parLles,
lncludlng managemenL, unlon local leadershlp, and rank and flle worker-owners. 1hls LrusL ls bullL on
shared values of worker empowermenL and conLlnual supporL for Lhe LMC process.

1hroughouL all Lhese programs, Lhe procedures and ob[ecLlves remalned conslsLenL: a commlLmenL Lo
necessary Lralnlng and educaLlon programs for LMC parLlclpanLs, open communlcaLlon from all levels,
daLa-supporLed problem analysls, and non-[udgmenLal soluLlon formaLlon. 1here was and ls a slgnlflcanL
cosL Lo Lhe buslness ln lmplemenLlng Lhe LMC sLrucLure, due prlmarlly Lo Lhe facL LhaL Llme spenL on Lhe
CommlLLee ls compensaLed aL regular wage raLes for all parLlclpanLs, buL LhaL lnvesLmenL conLlnues Lo
pay dlvldends.

1he LMC has 16 members, composed of 8 worker-owners, 6 admlnlsLraLlve sLaff members of CPCA, and
2 unlon represenLaLlves. WlLhln Lhe LMC, 3 smaller work groups have been creaLed LhaL are Lasked wlLh
solvlng speclflc, narrower lssues: servlce dellvery, communlcaLlons, and access Lo chlld care, wlLh Lhe
goal of uLlllzlng 3 addlLlonal work groups ln Lhe fuLure. 1he LMC does noL dlrecLly handle bargalnlng aL
conLracL Llme, buL wlll lnformally dlscuss all lssues, lncludlng Lhose covered by Lhe conLracL. 8oLh labor
and managemenL represenLaLlves expressed Lhe bellef LhaL Lhls separaLlon beLween Lhe LMC and Lhe
bargalnlng commlLLee has been a neL poslLlve for Lhe company. CPCA also lncludes as parL of lLs
sLrucLure a Leadershlp CommlLLee LhaL lncludes labor and managemenL represenLaLlves.

As a unlonlzed cooperaLlve, CPCA has expanded from abouL 300 people ln 2000 Lo abouL 1,700 ln 2010,
has lncreased Lhe raLlo of full Llme [obs wlLhln Lhe cooperaLlve, provldes quallLy healLhcare Lo lLs
workers, and allocaLes 80 of lLs revenue dlrecLly Lo workers' wages and beneflLs.

MarkeL lorge - LvereLL, MA
Crlglnally founded as an lron and meLal workshop ln 8osLon, MA ln 1896, MarkeL lorge produces sLeam
equlpmenL for Lhe foodservlce lndusLry aL lLs manufacLurlng planL ln LvereLL, MA. ln 1991, Lhe company
LhaL owned lL, SpeclalLy LqulpmenL, announced LhaL lL lnLended Lo close Lhe planL and move Lhe
operaLlons Lo Ceorgla. Powever, Lhe workers, members of uSW Local 2431, were able Lo convlnce
SpeclalLy LqulpmenL Lo glve Lhem Llme Lo buy lL and ln 1993, afLer Lwo and a half years of negoLlaLlons,
19

boughL 100 ownershlp of Lhe MarkeL lorge operaLlon Lhrough an Lmployee SLock Cwnershlp lan
(LSC). llnanced prlmarlly Lhrough concesslons by Lhe workers and bank loans, Lhe 130 workers aL Lhe
Llme all owned an equal share of Lhe company and resLrucLured Lhelr buslness more along Lhe llnes of a
cooperaLlve model. laced wlLh Lhe common challenges for employee buyouLs of older faclllLles, older
equlpmenL, and llmlLed access Lo caplLal and lnvesLmenL, MarkeL lorge workers have persevered for
almosL 20 years and conLlnue Lo make lnnovaLlve, hlgh quallLy producLs.