Oregon Enacts Law Giving Employee-Owned Businesses a Boost in Public Contracts

On June 11, 2025, Oregon Governor Tina Kotek signed House Bill 3646 (HB 3646) into law, marking a key development for the employee ownership movement in the state. This legislation, which we discussed previously in a previous blog post, aims to provide a substantial boost to employee-owned businesses in securing public contracts.

The new law allows Oregon state agencies to give a direct preference to businesses where employees own at least 50% of the company, either directly or through an ESOP. The bill does not specify how that 50% must be dispersed between employees. This is a significant step, as employee-owned companies have historically faced challenges in public procurement, sometimes even losing eligibility for other preferences upon transitioning to broad-based ownership. Now, qualified employee-owned businesses can be selected for public contracts even if their goods or services cost up to 5% more than bids from non-employee-owned competitors. This provides a direct path to more business for employee-owned companies, enhancing their growth and revenue potential. This preference creates a tangible competitive advantage, potentially driving more conversions to employee ownership by highlighting a clear benefit for businesses transitioning to this model.

By enacting HB 3646, Oregon has firmly signaled that it supports employee-owned businesses, recognizing their value to the state's economic landscape and encouraging broader adoption of models that benefit employees directly. Stay connected with the NCEO for ongoing updates on how states like Oregon are championing employee ownership across the US.