The Employee Ownership Financing Act establishes the Office of Employee Ownership within the Department of Labor, outside the Employee Benefits Security Administration, within 90 days of enactment. This office will be responsible for carrying out the existing Employee Ownership Initiative and a new Employee Ownership Loan Program. A Director, appointed by the Secretary of Labor, will head the office and manage its staff to fulfill these functions.

The new Employee Ownership Loan Program aims to increase employee ownership and participation in company decision-making throughout the United States. Loans or loan guarantees will be provided to eligible entities, such as employee stock ownership plans (ESOPs) or worker-owned cooperatives, to purchase or expand companies that are or will become at least 51 percent employee-owned. These loans feature specific terms, including interest rates covering costs or matching market rates, and a repayment period not exceeding 15 years, while adhering to IRS and ERISA requirements. To qualify, companies must meet preconditions such as ensuring 51% employee equity ownership with full voting rights, having independent directors, establishing an employee committee for meaningful involvement, offering diversified retirement options, and providing quarterly progress updates.

The bill establishes an Employee Ownership Loan Program Fund in the Treasury, into which all loan repayments and related receipts will be deposited. This fund will be continuously available to the Director, without further appropriation, to make new loans or loan guarantees and cover associated administrative costs. However, the aggregate principal amount of outstanding loans and loan guarantees from this program is limited to $500,000,000 at any one time.

The Act also amends the Worker Adjustment and Retraining Notification (WARN) Act to establish an employee right of first refusal before a plant closing. If an employer orders a permanent shutdown, they must offer affected employees the opportunity to purchase the facility or company through an ESOP or eligible worker-owned cooperative. This offer must include a fair market valuation by an independent third party and comprehensive financial disclosures. Furthermore, if good-faith negotiations commence within 60 days, the plant must remain open for at least 30 days beyond the negotiation period.

To facilitate these purchases, the bill provides exemptions from certain prohibited transaction rules under ERISA and the Internal Revenue Code for ESOPs acquiring a company, plant, or facility due to a plant closing. Finally, an Advisory Council on Employee Ownership will be established, comprising 7 members representing employees, companies, providers, and associations, to advise the Secretary of Labor on implementing the Act. The bill authorizes $500,000,000 for the loan program fund for fiscal year 2026, plus additional sums for administrative costs and other functions.