From bfca27ac66508e786a81860dc2532ed32cf74fcb Mon Sep 17 00:00:00 2001 From: JoshHeaps Date: Sat, 26 Sep 2026 09:17:25 -0600 Subject: [PATCH] Socialism: say how salaried staff share a cut, and keep the legal minimum wage out of workers' bids Co-Authored-By: Claude Opus 5.5 Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx --- JoshHeaps.Net/Content/Socialism/bankruptcy.md | 13 ++++++++++--- JoshHeaps.Net/Content/Socialism/downturns.md | 8 ++++++-- .../Content/Socialism/savings-guarantee.md | 2 +- JoshHeaps.Net/Content/Socialism/the-lock.md | 2 +- 4 files changed, 18 insertions(+), 7 deletions(-) diff --git a/JoshHeaps.Net/Content/Socialism/bankruptcy.md b/JoshHeaps.Net/Content/Socialism/bankruptcy.md index 2f8cd84..d342c22 100644 --- a/JoshHeaps.Net/Content/Socialism/bankruptcy.md +++ b/JoshHeaps.Net/Content/Socialism/bankruptcy.md @@ -72,8 +72,14 @@ A locked co-op isn't a charity. It's a business that makes and shares profits. T - **Only claims workers choose to hand over,** in writing. Workers who don't join the new co-op keep their claims. - **At full value, up to the amounts bankruptcy law already puts first:** unpaid wages and benefit contributions earned in the last 180 days, up to $17,150 per worker for wages ([11 U.S.C. § 507(a)(4) and (a)(5)](https://www.law.cornell.edu/uscode/text/11/507)). That's a deliberate transfer from other creditors to workers, capped per person, as Argentina chose. -- **The insurance pool's claims count too.** The [savings insurance pool](savings-guarantee.md) pays workers' final wages quickly. Normally, whoever pays a wage claim loses its priority ([§ 507(d)](https://www.law.cornell.edu/uscode/text/11/507)). Without a fix, that would leave workers nothing to bid with. So the pool keeps the priority, and it can hand the claims it paid to the workers' co-op for its bid, to be repaid by the new co-op over time. -- **No last-minute claims.** Pay deferred by a vote in the 180 days before filing ranks as an ordinary claim, not a priority one, and can't be used to bid. +- **The legal minimum is paid in cash, not handed over.** Federal law requires minimum wage and overtime to be paid in cash or a cheque ([29 CFR 531.27](https://www.law.cornell.edu/cfr/text/29/531.27)), "finally and unconditionally" ([29 CFR 531.35](https://www.law.cornell.edu/cfr/text/29/531.35)), and workers can't waive them by private agreement ([*Brooklyn Savings Bank v. O'Neil*, 1945](https://www.law.cornell.edu/supremecourt/text/324/697)). A stake in a new company isn't cash. Wage claims are bought and sold in bankruptcy, and handing one over at its full value isn't a discount, so this might be allowed. But the usual way a court blesses giving up wage claims is by approving a settlement of a real dispute over them ([*Lynn's Food Stores v. United States*, 11th Cir. 1982](https://law.justia.com/cases/federal/appellate-courts/F2/679/1350/13398/)), and there isn't one here. So the model doesn't rely on it. + - **The protected part** is every unpaid hour at the highest minimum wage that applies, federal, state or local, plus all unpaid overtime at the worker's own overtime rate, taken from payroll records. For salaried staff whose hours weren't recorded, it's counted at 40 hours a week. Any damages the law adds for late wages stay with the worker. + - **Some states protect more.** California bars employers from requiring a release of any wages due until they're paid, not just the minimum ([Cal. Labor Code § 206.5](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=206.5)), and no private agreement can get around its wage rules ([§ 219](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=219)). The bank's checked entry for each state ([Owners Are Still Workers](labor-law.md#is-the-profit-share-pay)) says which wages can be handed over there. Where it's unclear, only severance and benefit contributions can be. + - **The pool pays first.** The [savings insurance pool](savings-guarantee.md) pays up to eight weeks of each worker's unpaid wages in full, as it always does, and what it pays counts against the protected part first. Any protected wages beyond that stay the worker's own claim, and the court can't approve a bid that uses handed-over claims until the buyer has set aside cash to pay them. + - **Workers can hand over the rest:** wages beyond what the pool paid that the protected part doesn't cover, benefit contributions and severance, within the cap above. + - **Handed-over claims buy savings, not votes.** In the new co-op, they become credits in each worker's [capital account](capital-accounts.md). Votes stay one per member, so a manager with a larger claim doesn't get more say than an aide whose wages were paid by the pool. +- **The insurance pool's claims count too.** Normally, whoever pays a wage claim loses its priority ([§ 507(d)](https://www.law.cornell.edu/uscode/text/11/507)). Without a fix, most low-paid workers' claims would be paid by the pool and couldn't be used to bid. So the pool keeps the priority, and when a qualified workers' co-op bids, it hands the claims it paid to that co-op for its bid. The new co-op repays the pool over time. Each worker's own claims use the $17,150 priority first, and the pool's claim for that worker only ranks after them. +- **No last-minute claims.** In the 180 days before filing, pay deferred by a vote, pay left unpaid for more than one normal pay period while others were being paid, and any increase in severance terms rank as ordinary claims, not priority ones, and can't be used to bid. **8. If no qualified co-op buys it, the pieces go to anyone, but not the whole.** No buyer, together with anyone financially tied to it, may end up with substantially all of the business. The brand, the core technology or the main customer contracts count as substantially all, whatever their size, as the lock already says. A buyer of the pieces who hires more than a third of the members within two years owes the difference between what it paid and what the running business was worth, as set by the court's appraiser. The sale order says so up front. That money goes to the co-op's creditors, not the federation fund. @@ -103,6 +109,7 @@ A locked co-op isn't a charity. It's a business that makes and shares profits. T - **The federation fund bears the rest.** Creditors who never chose to lend are paid the lock's cost from the fund. That's a real call on money the co-ops put in. - **Other lenders may lend less, or not at all.** Some banks will refuse locked co-ops, or lend only against equipment they can take back. Lenders willing to fund a failing co-op through a rescue may be harder to find, because they can't sell the business to anyone. That's a real cost, and it's part of why the model needs its own bank. - **Workers' claims come ahead of other creditors when workers bid.** That's a choice to favor keeping a business running in its workers' hands. It's capped per worker, and it's paid for by other creditors. +- **Low-paid workers bring less of their own to the bid.** Their unpaid wages are mostly the legal minimum, which is paid in cash rather than handed over, so more of the bid rests on the pool's claims and on better-paid workers' claims. Whether the rule is needed at all depends on a legal question nobody has tested: whether a worker can freely hand over a wage claim at full value. - **Some viable businesses will still be broken up.** When no co-op can buy a failed co-op whole, a conventional buyer who would have kept it running and kept the jobs can't. While the co-op sector is small, this will happen. Whether to allow a conventional buyer as a last resort, with any surplus going to the federation fund, is an open question ([Open Problems](open-problems.md)). ## Draft text @@ -115,7 +122,7 @@ For readers who want to see what this could look like in the statute, here is a > > **Sec. 363(q).** In a case in which the debtor is a locked cooperative, (1) the trustee may use, sell, or lease property under subsection (b) or (c), including under subsection (f), only in accordance with the nonbankruptcy law governing locked cooperatives; (2) the rights of a lock-holder under that law are not an interest that may be sold free and clear under subsection (f); and (3) section 365 does not permit rejection of any agreement required by that law. > -> **Sec. 507(d) (amended).** Insert at the end: "except that an insurance pool established under [the bank's authorizing act] that pays a claim of a kind specified in subsection (a)(4) or (a)(5) is subrogated to the holder's right to priority." +> **Sec. 507(d) (amended).** Insert at the end: "except that an insurance pool established under [the bank's authorizing act] that pays a claim of a kind specified in subsection (a)(4) or (a)(5) is subrogated to the holder's right to priority, but such priority is subordinate to any claim of the same individual under subsection (a)(4) or (a)(5) that the pool has not paid." > > **Sec. 1123(e).** Notwithstanding subsection (a), a plan for a debtor that is a locked cooperative (1) may not provide for any transfer of property, merger, consolidation, or amendment of the debtor's charter except as permitted by the nonbankruptcy law governing locked cooperatives; and (2) need not comply with subsection (a)(6) as to any nonvoting interest permitted by that law. > diff --git a/JoshHeaps.Net/Content/Socialism/downturns.md b/JoshHeaps.Net/Content/Socialism/downturns.md index 6a09288..13f2275 100644 --- a/JoshHeaps.Net/Content/Socialism/downturns.md +++ b/JoshHeaps.Net/Content/Socialism/downturns.md @@ -28,6 +28,10 @@ Every locked co-op's charter sets this order. A co-op can go further, but it can 1. **Profit shares fall first.** That happens on its own: when profit falls, so do the shares, and so do team bonuses that depend on results ([Does Sharing the Profit Mean Less Effort?](free-riding.md#team-bonuses-the-members-design)). 2. **Then everyone shares the cut.** Before any layoff, the co-op cuts across the board. - **Pay above the going rate goes first.** Every worker has to be paid at least the going rate for their job for the hours they work ([How a Locked Co-op Is Taxed](taxes.md#wages-first)). So a cut in the *rate* of pay can only come out of pay above the going rate. Everything beyond that is a cut in hours. + - **Salaried staff share the cut the same way, set in advance.** Staff paid a fixed salary with no overtime, usually managers and professionals, have to get their full salary for any week in which they do any work ([29 CFR 541.602](https://www.law.cornell.edu/cfr/text/29/541.602)). A slowdown can still lower it, if the lower salary is set in advance for the length of the cut and isn't adjusted week to week ([Labor Department Fact Sheet #70](https://www.dol.gov/agencies/whd/fact-sheets/70-flsa-furloughs)). So: + - **Less pay means less work.** Their salary falls by the same percentage as everyone else's hours, with a written shorter schedule to match. Or they take whole weeks off unpaid, which the law allows since no pay is owed for a week with no work. Their hours are recorded for as long as the cut lasts. Work beyond the shorter schedule needs a manager's approval in advance and is paid on top of the salary at the old rate, which the law also allows ([29 CFR 541.604](https://www.law.cornell.edu/cfr/text/29/541.604)). + - **Their cut keeps pace.** If hours cuts deepen, theirs follows from the next pay period. Otherwise their salary changes only when the cut starts and ends. + - **Below the floor, they're hourly.** If the cut takes someone's salary below the federal floor of $684 a week ([29 CFR 541.600](https://www.law.cornell.edu/cfr/text/29/541.600)), or below a higher state floor, they're treated like hourly workers for as long as the cut lasts, with overtime and every other rule that goes with it. California's floor, for example, is twice the state minimum wage for full-time work ([Cal. Labor Code § 515](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=515)), which comes to $70,304 a year in 2026, and hourly workers there also get daily overtime and meal and rest breaks. - **Hours cuts go through work sharing** where the state has it, so workers get part of their lost pay back from unemployment insurance, where the state covers them ([Owners Are Still Workers](labor-law.md#unemployment-insurance-covered-in-most-states-not-all)). - **The bottom never takes the bigger cut.** Nobody's weekly earnings can fall by a larger percentage than those of anyone paid more. - **Benefits stay.** Health cover and retirement contributions continue as before. That's the model's own rule, and it's also what work sharing requires. @@ -39,11 +43,11 @@ Every locked co-op's charter sets this order. A co-op can go further, but it can ## Who decides -- **The board can act fast, once.** It can cut everyone's hours by 10% to 20% for up to 60 days without a vote, so the co-op isn't stuck waiting for a meeting while cash runs out. It can do that once in any 12 months. Anything after that needs the members. A board cut still counts in the test against [pushing people on probation out](high-turnover.md#no-pushing-people-out-before-theyd-join), whatever its size. +- **The board can act fast, once.** It can cut everyone's hours by 10% to 20% for up to 60 days without a vote, so the co-op isn't stuck waiting for a meeting while cash runs out. Salaried staff, the board's own members included, take the same percentage in the way set out above. The board can't set a different cut for itself. It can do that once in any 12 months. Anything after that needs the members. A board cut still counts in the test against [pushing people on probation out](high-turnover.md#no-pushing-people-out-before-theyd-join), whatever its size. - **Anything more goes to the members.** Cutting pay, cutting hours for longer or by more, and laying off anyone on the payroll, member or not, all need a vote of the members, by secret ballot, with at least 7 days' notice. - **A layoff always has an alternative on the ballot.** A plan that lays anyone off has to be voted on next to one that saves the same amount by cutting across everyone. The board costs both. The co-op's outside accountant checks the two costings, and the assumptions go out with the ballot. - **Choosing layoffs needs two majorities.** The layoff option passes only with a majority of all members and a majority of the lower-paid half, the same double vote [Who Sets the Pay](pay.md#two-majorities-not-one) uses. The lower-paid are the most likely to be let go, so they get a separate say. People on probation aren't members yet, so they don't vote, even though they're usually the first to go. Laying them off counts in the test against pushing people out before they'd join. -- **If nothing passes, the shared cut happens.** If the board's 60 days run out with no option approved, the costed across-the-board cut takes effect. Doing nothing isn't an option when the money is running out. +- **If nothing passes, the shared cut happens.** If the board's 60 days run out with no option approved, the costed across-the-board cut takes effect, for salaried staff too. Doing nothing isn't an option when the money is running out. ## The layoff order diff --git a/JoshHeaps.Net/Content/Socialism/savings-guarantee.md b/JoshHeaps.Net/Content/Socialism/savings-guarantee.md index 3797a8c..c6fa777 100644 --- a/JoshHeaps.Net/Content/Socialism/savings-guarantee.md +++ b/JoshHeaps.Net/Content/Socialism/savings-guarantee.md @@ -49,7 +49,7 @@ Every locked co-op belongs to a **members' savings insurance pool**. It protects - **Deferring is limited.** A struggling co-op can defer up to one year's premium, as a debt to the pool. While it does, new additions to its members' accounts aren't covered, and the pool watches its accounts monthly. Deferred premiums count as nothing in the pool's reserve, and if the co-op fails, they're paid ahead of its members' accounts. - **Who pays.** Current members pay for cover of their own slices, out of their account interest, in proportion to each person's protected balance. Members who take all their profit share in cash, as low-income members can, don't pay for cover they don't have. The co-op as a whole pays for final-wage cover, since everyone is covered, and for former members' payouts. Those are debts the co-op owes, and charging the premium to former members would take most of the interest on money they can't touch. - **Other ways to cover former members.** A co-op can instead put former members' unpaid payouts in a fully funded escrow account, or back them with a surety bond from an approved insurer. The pool is the default. If private options come in cheaper, that's a useful check on the pool's prices. -- **The reserve is kept safe.** It's held in Treasury securities by an independent custodian, out of reach of any co-op's creditors, as Europe's rules require of wage funds. It never holds the bank's loans or anything issued by co-ops, which would fail at the same time as the co-ops it insures. +- **The reserve is kept safe.** It's held in Treasury securities by an independent custodian, out of reach of any co-op's creditors, as Europe's rules require of wage funds. It never holds the bank's loans or anything issued by co-ops, which would fail at the same time as the co-ops it insures. The one exception is what it's owed back after a failure: when it hands the wage claims it paid to a workers' co-op buying the failed one ([When a Locked Co-op Goes Bankrupt](bankruptcy.md), point 7), the new co-op's debt to it is counted as worth nothing in the reserve until it's repaid, and can't be more than the wages the pool paid in that failure. ## What it should cost diff --git a/JoshHeaps.Net/Content/Socialism/the-lock.md b/JoshHeaps.Net/Content/Socialism/the-lock.md index 6363a14..60d6fa8 100644 --- a/JoshHeaps.Net/Content/Socialism/the-lock.md +++ b/JoshHeaps.Net/Content/Socialism/the-lock.md @@ -108,7 +108,7 @@ So "controlled companies are locked" needs rules for what control is, what happe Argentina changed its bankruptcy law in 2011 so that when a firm fails, its workers can form a co-op, keep the business running, and buy it, counting what they're owed toward the price ([Law 26.684, articles 189, 203 bis and 205](https://www.argentina.gob.ar/normativa/nacional/ley-26684-183856/texto)). This model borrows the idea, adapted to American law. The full rules, and the amendment to federal bankruptcy law they need, are in [When a Locked Co-op Goes Bankrupt](bankruptcy.md). In short: - **Only co-ops can buy the business whole.** Its own workers (as a new locked co-op), the federation, or any other locked co-op whose members do most of its work can bid. It's sold by open bidding among them. The minimum price is what the assets would bring sold off separately, set by an appraiser the court appoints. -- **Workers can keep it running while it's sold,** and count the unpaid wages they choose to hand over toward their bid, up to the amounts bankruptcy law already puts first. +- **Workers can keep it running while it's sold,** and count the unpaid wages they choose to hand over toward their bid, up to the amounts bankruptcy law already puts first. The legal minimum wage and overtime aren't handed over. The savings insurance pool pays them in cash first, up to eight weeks. - **No buying back your own failure cheaply.** People who managed the co-op in the two years before it failed can't get bank financing to buy it back. - **If no co-op buys it**, the assets are sold off separately to anyone. But no single buyer and its related companies may assemble enough of the pieces to add up to the business. - **A reorganization can't hand over control.** If a locked co-op reorganizes in bankruptcy instead of closing, the plan can't give voting shares to anyone but members. Creditors who vote against the plan still get what the business would be worth on the open market.