Critical legal information

The attached pdf document was submitted by Kate Doyle, a concerned attorney worker-owner.  It contains the legal information presented as a PowerPoint at the November 1 Informational Meeting at the Ramada.

Legal Specifics here: text of PowerPoint

The crux of it: as long as the co-op is governed by its member-owners, there is no reason to believe that we are out of compliance with the Fair Labor Standards Act or any other law.  It is only if we are no longer governed by our member-owners – that is, if the vote is extended to shareholders as currently proposed by co-op management – that we become subject to minimum wage law under FSLA.

The fear of legal risk is being used to manipulate this situation.  Don’t buy it.

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29 thoughts on “Critical legal information

  1. Simone

    Has Kate shown this to the board? The latest email from them said “We have also reached out to representatives of the group of members who are attorneys to arrange a meeting with the Co-op’s attorneys so that we could answer their questions and explore together any new information or perspectives on how best to approach these issues. To date, they have not responded to our invitation to meet with the Co-op’s attorneys.”
    Will she consider meeting with the co-op attorneys to share her findings?

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  2. Laura

    Hi Simone,

    It’s very nice that you are taking an interest in these legal issues. Are you a member of our co-op? It’s too bad that you missed our Sunday evening, November 1 Informational Meeting where there was a full presentation given to a packed to capacity room of about 100 or more member-owners about this very issue. We even had as a guest speaker the former NYS Commissioner or Labor discussing how ownership in a co-operative is the critical issue. We are, under our by-laws, owners of our co-operative, not shareholders and we get to make decisions.

    There were two members of the HWFC board in the audience at our Sunday evening presentation – Deb, the president and Rossana – so they got to hear everything discussed. They got this handout like everybody else and got to hear what the former NYS Commissioner of Labor had to say to the member-owners. So they have all this information already.

    But it’s great that you are getting involved Simone!

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    1. Simone

      Laura,
      I am indeed a member-owner and employee of Honest Weight. I am aware that as member owners we get to make the decisions. This is something I love about the co-operative model. I have been interested in these legal issues for a while. I am also sorry that I could not attend the meeting on November 1st, so I appreciate this information. I was actually asking a different question though, which was whether Kate would consider meeting directly with the co-op’s attorneys, as was suggested by the board.

      I recently learned of the decision made at the board meeting last night to overturn the initial decision to end the member labor program. I very much hope that Kate is correct, and that our member labor program is in compliance with the law. I think it could be very useful for her to speak directly to the attorneys so that they have all this information as well, and can point out any weaknesses they find in this legal argument so it can be made stronger if possible, in case of a lawsuit or other inquisition by the department of labor. I do not want the member labor program to end! I also do not want us to be operating outside the law. It seems that determining the legality of the program is of the utmost importance right now, and I hope that we can all work together to do that.

      Thanks!
      Simone

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  3. Laura

    Simone,

    Let’s see if Kate or someone else can respond to you, I cannot.

    When we are able to schedule a 2nd info meeting, I hope you can attend and get as much info as you need to assure yourself that owners of co-operatives are not shareholders or employees: we are owners. Our by-laws are quite clear on that issue.
    Laura

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    1. Simone

      Laura,

      I truly want the member labor program to continue and also care about the well-being and longevity of the coop. I would hope that we are on the same team. I work with and value many wonderful member-workers every week. I (and many other employees) have paid $100 for a share just like you and every other shareholder, and I work enough hours to have voting rights (the hours requirement is higher for employees than for member-workers). Therefore, I do not consider my employee status to negate my member-owner status. I am really hoping that Kate and others can help prove the legality of this program, or figure out how to modify it to make it legal, so that we are not in danger of facing penalties, and so I can continue to make a living wage cooking delicious, wholesome food in the coop deli with and for members of my community.

      Best,
      Simone

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  4. Carolynn

    On Friday, Oct 30, the Board, through Deb, requested a meeting with Member-Owner attorneys. The Board placed two conditions on the meeting: the Member-Owner attorneys must 1) sign a non-disclosure/confidentiality agreement; and 2) at least 24 hours before the meeting, turn over to the Board’s attorney(s) all legal arguments and legal support for the Member Owners’ position that the MLP is legal.

    We had been willing to meet, but we declined when presented with the two conditions.

    As to the legality of the MLP, because Members are not employees, but are owners, with managerial control over the operations of HWFC, please refer to the power point presentation by Kate Doyle, posted elsewhere on this site.

    Carolynn (on behalf of Kate and myself)

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    1. Shauna

      What the hell is up with all of the non-disclosure crap!?! That goes directly against the democratic process of a cooperative and it seems to be the first thing out of their mouths whenever we attempt a discussion/meeting.

      Liked by 1 person

  5. Pingback: GRASSROOTS ACTION IS POWERFUL! | hwfcinfohub

  6. Ed Miller

    It’s is generally true for corporations, that the voting shareholders are mainly in charge of electing the Board, and they empower that Board to effectively act for them. The voting shareholders also have the power to Petition for votes on specific changes, but it’s clear that their Board is generally in charge.
    I don’t see why cooperative corporations should have different rules, related to the above considerations.

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    1. Shauna

      The difference being we are not a corporation of shareholders, we are a cooperative of member-owners. We don’t just buy a share to add to our portfolio, we actively work and participate in the day to day running and governance of our coop.

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  7. Susan Mattice

    I have written a lot on the “infohub” site, so don’t want to get too detailed here, but I want to point out that Kate’s position is self-contradictory. She is correct to say that HWFC is a co-op because we are all member-owners, but she is incorrect to say that if non-working shareholders are given the vote, we would “no longer be governed by our member-owners”. Non-working shareholders ARE member-owners! As it stands now, we are governed only by working members. I would like to see the working member program continue; it has worked for decades. At the same time, the legal issue is NOT between government by the working versus government by all shareholders. Rather, the legal issue is whether some group of empowered persons (whether majority shareholders, which we don’t have, or some sort of unelected management group, which we also don’t have) has an “employer” relationship towards working members. The answer is no. The fact that non-working members have no say in the operation of the co-op is an entirely different issue, and one I would like to see addressed without trumping up some false dichotomy between us and those who work.
    The board cited a 50-year-old Maine case as one which addresses organizations like HWFC. I looked up the case, and although there are parallels, there were also three judges who wrote a reasoned dissent. There are other cases, including more recent ones, which state that a co-op is characterized by all member-owners having a voice in the operation of the co-op (which non-working members of HWFC are denied), and by members being compensated in proportion to their level of active participation, i.e., getting a discount which is based on hours worked, or not worked; and by the fact that nobody is permitted to own more shares than anyone else. Except for giving all member-owners the vote, we are clearly a co-op. To say that we would no longer be a co-op if ALL owners were allowed to vote is not supported by any legislated or case law I could find, and is contradictory to Kate’s own statement that we need to be “governed by our member-owners”. Since when are shareholders NOT member-owners? We have only a 2% discount by choice, but I did not give up my vote by choice when I stopped being a working member. It’s too bad that the question of member labor is being framed in such a way that hammers home the disenfranchisement of members who paid for a share and support the co-op by shopping there……especially when this tactic is divisive and does not address what is really at issue.

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  8. Pingback: GRASSROOTS ACTION TODAY – FROM 10:30am – 2:30pm – IS POWERFUL! | hwfcinfohub

      1. Julie

        What concerns me the most are these elements:
        The Board and Management team seem to have an agreement with an outside company who orders product for Honest Weight. Is this allowed under the bylaws? We were not asked nor were we informed about this partnership.
        The Board seems to have a blank check to pay attorney fees. Who gave them this blank check? Aren’t they in violation of bylaws?
        The Board and Management are not transparent. Aren’t they in violation of the bylaws?
        Honest Weight is in the red and the bleeding is becoming worse each day. Of COURSE Honest Weight is paying for those attorneys. How much?
        At the rate Honest Weight Board and Management are going, we are losing fiscal ground daily. The tipping point is nearing, and I for one would not want to inherit the financial mess that has been made of the Coop when this is all said and done.
        How can we stop the bleeding of the financial resources of the Coop?
        How can we go back to cooperative values?
        How can I vote at the special membership meeting even though I have saved hours? Morgan won’t return my phone calls.
        How can any member vote if there’s no member labor???????
        Who really runs the Coop today?

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      2. I address some of the issues Julie raises in my many blogs on Honest Weight. Here are my understandings of some of the questions she raises…

        1. There is no legal precedent making cooperative member worker programmes legal or illegal. This issue will not be addressed until a labour department makes a ruling and the ruling is challenged in court. Even then there can be dissents as court cases move up the line which allow for the courts to change their mind.

        2. Who runs HW? Interpretations vary. I argue that HW is run by the LT and their allies on the Board, which isn’t the entire Board. HW’s power structure like that of the US is oligarchic.

        3. How can you change this? Vote to replace the Board if you are not happy with their actions at the special meeting on the Monday after Turkey day. If you are happy with what is happening vote to stay the course.

        4. By and large our financial numbers have been up from last year. They do not meet projections which raise questions about the validity of the projections. Are they ideological? My understanding is that our millions in reserves are in decline but I haven’t been able to confirm this. Too bad we moved into the new store and took on all that debt that has to be paid back in a certain way, eh?

        5. Coops everywhere are being pushed by the National Cooperative Grocers Association, UNFI (the non coop distributor), and several consulting firms and consultants (like the Syracuse person at the lawyers meeting) all in favour of eliminating member workers. They use what happened to one and perhaps two coops in NM and Maine to feed member (or should I use the current favoured nomenclature, sharholder) fears. How valid these claims are is still uncertain given the lack of legal precedent.

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    1. Shauna

      I’m confused; the ex-commissioner of labor attended our meeting and said, point-blank, we were not out of compliance. Owners always have the right to work within their own company and forgo pay should they choose. Or to choose a different form of compensation, ie discount as opposed to paycheck.

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      1. Ronald Helfrich Jnr.

        The law, particularly where there is no case law as in the case of whether member worker programmes at “Coops” are legal or illegal, involves interpretation. When a ruling is made by the Labour Department–and apparently the powers that be at the Corporation got a phone call from them yesterday–then a precedent will be set (at least one other has been set). If the Corporation doesn’t like this ruling we can then go to court and establish legal precedent. Since appeals are possible multiple interpretations of the law by judges are possible. As we all know what was law (Dred Scott) can be overturned by later justices thanks to such dissents.

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      2. Shauna Johnson

        Right, I get precedence. So, if there is that much room for interpretation in these particular laws then neither side can say 100%, what they are offering is their opinion based on their interpretation.

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      3. Regulations are always interpreted by bureaucrats and different bureaucrats can disagree about the interpretation of regulations. I think getting an “official” interpretation is a good. It allows us to decide how we will respond if its a negative. We can go to court and possibly get it overturned. This way coops will know and can band together to fight. If its a positive the Board and LT won’t have that to hide behind anymore.

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  9. One of the issues with expanding the franchise has to do with proxies. Anyone who knows anything about proxy voting such as that at TIAA-CREF knows that proxy shares usually end up with the powers that be, in Honest Weight Corporations case, Board members and the Leadership Team. Ever wonder why the powers that be are pushing proxy voting so hard?

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      1. By the way, management urged us to move, to take on the loan, claimed meat would be the store’s messiah, keep increasing the number of goods made in China…Yet we still have financial problems. Who is to blame?

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    1. Jules I don’t know about that. There is no legal precedent so that issue could be fought out in court. The Coop in NM decided not to fight the cease and desist order so no legal precedent has, as I understand it, been set.Perhaps the Board at HW may be instrumental in setting one. I really doubt that they will fight to keep the member programme because a number of the powers that be prefer to let it die.

      I agree with you about the actions of the Board–I don’t know whether Ned went along with this; he told me he though it odd they went to the state rather than the feds–which might be construed as putting HW in danger. I guess that is one of the things they mean by fiduciary responsibility.

      Other coops are keeping the cooperative spirit alive if in some cases in a very slim way. Bloomingfoods and the coop in Ithaca still have members. Park Slope remains very much like, save for its hiring of staff, like the Coops I knew in the 1970s.

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