Corey Rosen
House Ways and Means Committee chair Mike Kelly (R-PA) and committee member Jimmy Panetta (D-CA) have introduced the Promotion and Expansion of Private Employee Ownership Act of 2025. The proposal does not yet have a bill number. The bill was introduced with six cosponsors equally split between both parties. The bill is identical to S. 2515 in the last Congress.
Corey Rosen
ESOP legal experts suspect that the recent unanimous Supreme Court decision in Cunningham v. Cornell University, No. 23-1007 (U.S. Apr. 17, 2025) will make it easier for plaintiffs to file lawsuits against ESOP fiduciaries. The issue in Cornell related to ERISA’s prohibited transaction provisions and the many statutory exemptions. Under ERISA, fiduciaries are prohibited from causing plans to engage in transactions with parties in interest, subject to exemptions, including the adequate consideration exemption that authorizes ESOP stock transactions in employer stock. The question in Cornell was whether plaintiffs could adequately plead a violation of ERISA’s prohibited transaction provisions by simply stating that a transaction with a party in interest occurred, or whether plaintiffs must also plead that an exemption does not apply. Federal circuit courts have been split on this question, with some holding that plaintiffs had to plead facts to plausibly state that an exemption did not apply and others holding that plaintiffs do not have to address the exemptions. In Allen v. GreatBanc (7th Cir. 2016), the Seventh Circuit held that the plaintiffs stated a plausible breach of ERISA’s prohibited transaction provisions merely by alleging that the ESOP’s stock value dropped after the sale, that the ESOP transaction was financed by the seller, and that the loan’s interest rate was high. The Seventh Circuit did not require the plaintiffs to plead the absence of any prohibited transaction exemptions.
Corey Rosen
Corey Rosen
The Annual Economic Survey of Employee Share Ownership in European Countries, 2024 (PDF) from the European Federation of Employee Share Ownership shows that while the number of employee share plans has increased, the percentage of employees participating in these plans has decreased somewhat. The report is primarily focused on large publicly traded companies in Europe. Most of the plans that are broad-based are some form of stock purchase plan. The report says that 6.7 million employees participate in employee ownership plans in Europe, or about one in five employees in all large public companies. Nonmanagement employees own an average of 1.7% of the shares in these companies.
Corey Rosen
Matthew Licina
Facing a budget deficit, Washington Governor Bob Ferguson is looking to potentially eliminate the state’s employee ownership program, which just got underway in 2024 and is similar to one in Colorado. Representative Adison Richards, a Democrat, has introduced HB 2047, a bill that would eliminate the program and its funding.
Corey Rosen
In Why Does the Department of Labor Allow ERISA Regulation Through Litigation By Plaintiff Lawyers?, a September 2024 post on his private blog FID Guru, Daniel Aronowitz, the nominee to head the Department of Labor’s Employee Benefits Security Administration (EBSA), urged Congress to reform ERISA litigation rules. He wrote, “Congress must act with ERISA litigation reform. In the 1990s, the trial bar was filing frivolous securities fraud cases against public companies, using investors with as little as one share of stock. Congress acted with the Private Securities Litigation Reform Act of 1995 (PSLRA), creating a higher pleading standard to combat securities fraud abuse. It has not been a perfect solution, but at least Congress tried to reduce frivolous litigation.”
Corey Rosen
California Republican Senator Suzette Valladares has introduced SB-713, a bill that would:
Corey Rosen
Massachusetts Senate bill S. 1950, An Act to Promote Employee Ownership, would exempt capital gains from the sale of a Massachusetts business with 500 or fewer employees from capital gains taxation. The bill was introduced by Democrat Julian Cyr and referred to committee. Long-term capital gains in the state are taxed at 5%.
Corey Rosen
Seventeen of the Forbes 2024 list of the largest 100 privately held companies (ranked by sales) have some form of employee ownership. Five are 100% ESOP-owned, four are minority ESOP-owned, two have profit-sharing plans primarily invested in company stock, one is an employee ownership trust, and one is a broad-based partnership available to employees at all levels. Supermarkets, convenience store chains, engineering, and construction are the most common industries among the employee ownership companies. We also compile a list of the largest employee-owned companies for our yearly Employee Ownership 100. That list includes only companies for which we have reliable external verification that their plans are broad-based, and it also focuses on majority and 100% employee-owned firms and the active participants they cover.
