H 7964Labor Relations

Labor and Labor Relations - The Rhode Island Opportunity for Employee Ownership Act

Requires business owners to give employees a 30-day opportunity to buy the company as a cooperative before selling publicly.

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Introduced Feb 27, 2026Committee House Labor

Plain-English Summary

The "Rhode Island Opportunity for Employee Ownership Act" creates a new requirement for owners of small, privately held businesses in Rhode Island. If such an owner decides to sell their business, they must first notify their employees. The bill gives employees a 30-day exclusive window to initiate a process to purchase the business and convert it into a worker cooperative. The state must also create a resource list to assist with these conversions. The law includes exemptions for sales to family members, or sales necessitated by death, medical issues, or emergencies.

For younger readers

This new rule helps workers have a chance to own the business where they work. If the owner of a small business decides to sell it, they must tell their workers first. The workers then have 30 days to say if they want to try to buy the business together as a group. This gives the workers a special turn to try to keep their jobs and become their own bosses. This rule does not apply if the owner is selling the business to a family member or because of an emergency.

Who & Where It Applies

Impacted groups

Small business ownersPrivate sector employeesWorker cooperativesBusiness brokersRhode Island Commerce Corporation

Impacted communities

All

Constitutional & Fiscal Check

This legislation restricts the alienation of private property by imposing a mandatory waiting period and notification requirement before a sale can proceed to the public. While courts generally uphold "rights of first refusal" if reasonable, a challenge could be raised under the Takings Clause or Due Process Clause regarding the interference with the freedom of contract and the right to dispose of one's property without encumbrance.

Estimated cost

Amount unknown

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Promotes economic democracy by giving workers the first right of refusal to own the means of production, ensuring that the wealth generated by the business remains with those who create it.
Helps prevent community destabilization caused by corporate buyouts or private equity takeovers, keeping capital and business decision-making power within the local community.
Increases job security for employees who might otherwise face layoffs, wage cuts, or loss of benefits during a traditional sale to an outside entity.
The thirty-day window provided for employees to organize is likely too short for workers to secure the necessary capital and legal support to make a viable offer.
Lacks provisions for state-backed financial assistance or loan guarantees, meaning low-income workers may technically have the right to buy but lack the financial means to do so.
Contains broad exemptions, such as transfers to family members, which excludes a significant portion of small business transfers and prevents workers from accessing ownership in multi-generational family firms.

For Conservatives

Encourages the retention of businesses within the state, potentially preventing local companies from being acquired and dissolved by out-of-state conglomerates or foreign entities.
Protects the fundamental right of legacy by explicitly exempting sales or transfers to family members, ensuring owners can pass their life's work to their children without government interference.
Maintains the owner's ultimate authority over the sale price, ensuring that the market value of the private property is not artificially capped by the employee notification process.
Infringes upon private property rights by mandating a government-enforced waiting period, restricting an owner's freedom to sell their asset immediately on the open market.
Forces private business owners to disclose sensitive financial intentions to employees prematurely, which could lead to internal instability or sabotage if a sale does not occur.
Interferes with the free market by creating procedural hurdles that could scare away potential third-party investors or buyers who do not want to wait for the employee review period to expire.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 58 additions

SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR RELATIONS" is hereby amended by adding thereto the following chapter: 28-61-1. Definitions. As used in this chapter, the following words shall have the following meanings unless the context clearly requires otherwise:

(1) "Owner" means the owner(s) of a qualified business prior to a qualified business sale.

(2) "Qualified business" means an entity that:

(i) Has operated a principal place of business in Rhode Island for at least one year;

(ii) Is a taxpayer subject to Rhode Island taxes pursuant to title 44 including, but not limited to, a C corporation, S corporation, limited liability company, partnership, limited liability partnership, or a sole proprietorship;

(iii) Is a privately held business;

(iv) Has at least three (3) employees not including the owner, or other similar pass-through entity;

(v) Meets the relevant size standards for a small business by industry, as set forth by the U.S. Small Business Administration in 13 CFR§ 121.201;

(vi) Is not a publicly traded company; and

(vii) Is not an exempt business as defined by one of the following circumstances: the sale or transfer of ownership to a family member; the sale or transfer of the business is necessitated by death or medical condition; the sale or transfer is compelled by court order; the sale or transfer of the business is necessitated in the event of deployment, natural disaster, or other emergency circumstance

(3) "Worker cooperative business" means:

(i) A workers' cooperative corporation organized under chapter 6.2 of title 7; or

(ii) A limited liability company (LLC) or limited liability partnership (LLP), in either case, whose bylaws, operating agreement or partnership agreement, as applicable, meets the following requirements:

(A) All persons who meet the definition of employee-owner ("worker-owner") according to the bylaws, operating agreement or partnership agreement of the business are voting members of the company, and have equal voting rights in all decisions brought before the membership; and

(B) Any profits distributed to said worker-owners by the company are distributed on the basis of their patronage in the company, with patronage measured based on the labor supplied to the company.

(4) "Worker cooperative business resource list" means a list of local and regional entities qualified to offer guidance, support, and/or technical assistance with starting, converting, or maintaining an employee-owned business. This resource list shall be created and maintained by the Rhode Island small business development center, or its designee, publicly visible and searchable on their website and updated on a regular basis. 28-61-2. Notifying current employees about the sale of a qualified business.

(a) In the event the owner of a qualified business decides to sell the qualified business, the owner shall notify all current full-time and part-time employees at the business.

(b) The notice shall be posted on the date listed in the notice in a prominent location to which all employees have access, or if no such place exists, via an existing electronic medium used to communicate with employees.

(1) Date of the notice;

(2) The owner's intent to sell the business;

(3) A date thirty (30) days from date of the written notice within which employees have an exclusive opportunity to officially initiate a process to potentially purchase the business as a worker cooperative. After this date, the qualified business owner may share the intent to sell publicly;

(4) Information about the worker cooperative business resource list, including the URL or website; and

(5) Any price the owner of the qualified business proposes for the business sale. 28-61-3. Electronic notification of requirements. Notification of the provisions of this chapter shall be included in the worker cooperative business resource list and communicated to potential qualifying businesses by the Rhode Island commerce corporation established pursuant to § 42-64-4. 28-61-4. Rules and regulations. The commerce corporation may issue reasonable rules and regulations consistent with this chapter to carry out the implementation of the responsibilities of this chapter.

SECTION 2. This act shall take effect January 1, 2027.