A Letter to Shareholders

Submitted by Kate Doyle, Owner-Worker and attorney & Concerned Owner-Workers

A Letter to Shareholders from Concerned Owner-Members

The Owner-Members working in this grassroots effort to save member labor and the Co-op – as it is – have been concerned about how to address all Shareholders of The Honest Weight Food Co-op (HWFC) with openness, respect and understanding.

We have heard the arguments asserting that “One Share – One Vote” is only fair, and considered them carefully, especially within the context of concern for the future of the Co-op. At this time, we have found the Board recommendation to be against the interests of the Membership and of HWFC as a whole. If shareholders are given the right to vote, then member labor – as it is – would end. The Owner-Workers would not control the business, and they would be considered employees according to Fleming V. Palmer 123 F. 2d 749. As is clear from the legal analysis below, the current member labor at HWFC is legal.

Please read the explanation below for a more thorough understanding of why retaining our traditional voting rights is in the best interests of the future of HWFC as a whole. We hope Shareholders will recognize the severe effects “One Share – One Vote” could have on HWFC.

 

Why Only Worker Members at HWFC have the Right to Vote:

by Owner-Member and attorney, Kate Doyle

Under the HWFC Bylaws, only worker members have a right to vote. The right to vote is not based upon purchasing a share in the corporation (shareholder), but upon being a shareholder who works in/for the store. This definition of “voting member” is critical.

One of the seminal cases we rely on is Fleming V. Palmer 123 F. 2d 749, wherein the Federal Court of Appeals found that members ofthat particular co-op were subject to the FLSA (Fair Labor Standards Act; minimum wage) requirements because they were really just employees. Those workers were deemed employees because they did not control the business. Thus, if the workers do control the business they are not employees, but rather they are owners who control the business.

HWFC currently has approximately 1235 working member-owners. These owner-workers collectively control how the business is run by holding the only voting rights granted under the Bylaws. Whatever these owner-workers vote for, or against, controls the company. Under the current voting powers, the owner-worker collective controls the business and therefore they are not employees.

However, we have over 12,000  shareholders. If the Bylaws were changed to make all those who simply purchase a share a voting member, then the owner-workers would no longer control the company (1,235/12,000 is only about one tenth of the voting power, and by definition the owner-workers could never, collectively control the business).

Anyone who wants a right to vote must and should work, and join the collective of owner-workers. Three hours a month are all that is needed, and the co-op can and should provide the necessary opportunity to those who wish to become owner-workers and obtain voting rights. This is not a matter of exclusivity; it is a matter of joining the collective to preserve control by the owner-members, and thus preserve the cooperative nature of our business. So long as the owner-workers control, no matter how many there are, they are not employees, and there is no conflict with the FLSA.

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7 thoughts on “A Letter to Shareholders

  1. I think this is a great idea for a closed coop. Currently there are not enough jobs at honest weight for members who want to work. Finally are there any pro bono attorneys who would fight the NYS DOL for Honest Weight? I advise against this but the idea has been mentioned by several people. The Board already told the DOL they were ending member labor. At this stage we can only try to lower the honest weight debt and start a new member labor run coop that is closed to the public.

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  2. Fleming v. Palmer addressed the question of whether members of a co-op were in charge of decision-making. If so, then the entity is a co-op. If not, and if another group of persons is instead in charge of decision-making, then the entity is not a co-op, and its workers are employees. That was the issue. IT DOES NOT FOLLOW that if shareholding (non-working) members participate in the decision-making, we’re not a co-op. This is a conflation of two issues. At HWFC, nobody gets rich as a shareholder; we set a limit of one share. We do not have an outside entity controlling HWFC. If we DID, there would be legitimate questions about whether we have a co-op. Unfortunately, there has been a history (and a continuation of that history) of espousing the unsupported opinion that if we consider our shareholders “members” and allow them to vote, it is equivalent to having an outside entity (or perhaps somebody with a huge number of shares) make our decisions. That is ridiculous, and there is no reason to prevent persons with one share from voting or from being called members.

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  3. To put my above statements more simply, Kate (and others) is/are saying that if working members aren’t SOLELY in charge of decision-making, they could be considered employees under the law. The legal case cited does not draw any such conclusion. (Nor does any other I could find.) It simply states that members of a co-op are in charge of running the co-op. It does NOT say that there cannot be different types of membership. If non-workers were to get the vote back (we had it in the past!), the working members would still be able to vote, and would still get a higher grocery discount than non-workers get. I don’t see the problem. In fact, based on the variety of cases related to this issue at all, the point is that all members of a co-op have a voice. So, how is HWFC dealing with this? By deciding that they won’t call shareholders “members”. That’s the bottom line.

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  4. Ron

    Again, the problem is proxies. Generally speaking proxies end up in the pockets of the powers that be. Cf. TIAA-CREF. They generally are used to maintain the status quo.

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    1. Could you please explain why there would be proxy voting if non-workers got their voting rights returned? I would assume they would either vote or not bother to vote, but I keep hearing about this proxy thing. How would that work, and why would it be allowed? Thanks.

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  5. Ron

    The powers that be have been pushing for proxy voting for years. There were, as I understand it, some legal issues revolving around the push for proxy voting the last time it was proposed. Additionally, one would want to look at the issue in the context of what we now know about the CDS campaign to end the traditional member labour programme and the NCGA campaign to standardise its “virtual branches”.

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    1. I am opposed to proxy voting, but I don’t think that’s a reason to deprive shareholders of voting rights. I think the voting members, both working and non-working, would vote down a proxy-voting system. There seems to be a view that non-workers would be easily manipulated by the Board, but I doubt that. I think the non-workers who care about the co-op would want to vote for themselves, and those who aren’t interested in voting would also not be interested in having someone else vote in their stead. Maybe I’m naive about that, but there seems to be a lot of unnecessary alarm about all the calamities that might occur if non-workers got the vote back. I’m aware of what came out about the CDS and the NCGA, and I support the member labor program, in which I might again participate at some point. I think it works to have a mix of working and non-working members, and I don’t think we should fear the supposed threat of proxy voting any more than we should fear the DOL regarding our member worker program.
      It frustrates me that the issue of returning the vote to non-workers has been tarnished by the fact that the Board and/or LT has/have been interested in it to some degree. Just because those parties may feel they could control the non-working voters, either by proxy voting or by leading us around by our noses, does not make it a foregone conclusion.

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