AB 746: Inmate Cooperative Program.

Existing law creates specified programs that employ inmates, including the joint venture program, which is established by the Secretary of Department of Corrections and Rehabilitation within state prisons that allows a public entity, nonprofit or for-profit entity, organization, or business to employ inmates confined in the state prison system for the purpose of producing goods or services. Existing law also establishes the Prison Industry Authority within the department for the purpose of developing and operating industrial, agricultural, and service enterprises employing prisoners in institutions under the jurisdiction of the department and for the purpose of creating and maintaining working conditions within the enterprises to ensure prisoners employed have the opportunity to work productively, to earn funds, and to acquire or improve effective work habits and occupational skills. Existing law requires, upon appropriation by the Legislature, the Office of Small Business Advocate within the Governor’s Office of Business and Economic Development to establish the California Employee Ownership Hub that would, among other things, work with all California state agencies whose regulations and programs affect employee-owned companies, and businesses with the potential to become employee owned, to enhance opportunities and reduce barriers.

Existing law, the Cooperative Corporation Law, governs the organization and operation of cooperatives, including, among others, worker cooperatives. Existing law defines a worker cooperative as a corporation formed under the Cooperative Corporation Law that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation. Existing law requires specified information to be included in the articles of incorporation or bylaws, including, among other things, the apportionment and distribution of net earnings and losses of a worker cooperative. Existing law makes the violation of specified provisions under the Cooperative Corporation Law a crime.

This bill would require the Department of Corrections and Rehabilitation to establish the Inmate Cooperative Program to facilitate operations of inmate worker cooperatives within state prison facilities. The bill would authorize a group of inmates who seek to establish a worker cooperative to apply to the program by submitting an application to the warden of the facility. The bill would require the warden to approve an application only if the applicant, or a cooperative community partner acting on their behalf, submits a plan of operation to the warden containing specified information, including, among other things, the cooperative’s draft bylaws, which describe the cooperative’s mission, the cooperative’s internal governance structure, an initial management structure, and compensation structure. The bill would define a cooperative community partner as a nonprofit organization, cooperative association, cooperative corporation, or individual that supports the inmates with the establishment, operation, and governance of certified inmate cooperatives.

This bill would require a group of inmates seeking to form a worker cooperative to incorporate as a worker cooperative following the approval of an application by the warden. The bill would require the Inmate Cooperative Program to certify the worker cooperative following approval of an application by the warden and incorporation of the cooperative. The bill would require the department to enter into a contract with the cooperative to outline the terms of operation, responsibilities, and compliance requirements. The bill would require a certified cooperative, as a condition to operate in a state prison facility, to write into their bylaws that their cooperative community partner is required to deduct 40% from each inmate’s gross wages and deposit the wages into a specified account. The bill would authorize a certified cooperative to engage in the production of goods, agricultural products, or services for the cooperative’s use and sale.

This bill would require the California Employee Ownership Hub to choose a cooperative institution, which would, among other things, assist in the selection of a financial institution that would steward and manage an account that would be used to, among other things, create economic opportunities for survivors of crime and other persons impacted by their interactions with the criminal justice system with grants for specified purposes. The bill would define a cooperative institution as a nongovernmental nonprofit organization, cooperative association, or similar entity that is dedicated to supporting, overseeing, and promoting cooperative enterprises. The bill would require the financial institution to submit an annual report to the Governor detailing the account’s activities, resource allocations, and measurable outcomes of funded initiatives.

This bill would also require the department to deduct from inmate wages mandatory deductions for restitution orders and fines, among other things. The bill would require the department to provide certified cooperatives with access to necessary equipment, materials, and resources to support their operations, with no obligation for the department to fund these resources. The bill would prohibit an employee of the department from serving as a member, officer, or board member of any cooperative established under the Inmate Cooperative Program or from having any direct or indirect financial interest in the cooperative or its operations.