Westerman Stands with Employees, Small Business

April 4, 2017
Press Release


WASHINGTON – Congressman Bruce Westerman issued the following statement Tuesday (April 4) upon passage of H.R. 1343, the Encouraging Employee Ownership Act of 2017:

“Finding and keeping good employees is tough in today’s economy,” Westerman said. “Government red tape should not get in the way of small businesses trying to keep the best and brightest talent. That is why I voted for H.R. 1343, the Encouraging Employee Ownership Act of 2017. This bill increases the threshold for private companies offering their own securities as compensation. If companies are to thrive, they must not only attract but keep top talent. This bill will help companies does that and gives employees a stake in the businesses where they work.”

Background on H.R. 1343, the Encouraging Employee Ownership Act of 2017, according to the House Republican Conference:

  • The Rule 701 $5 million threshold, at which companies must provide additional disclosure which make it more expensive for companies to compensate their employees with the company’s stock and put private companies at risk of disclosing confidential financial information, has not been adjusted since 1999. If the disclosure threshold had been adjusted for inflation, it would be almost $7.5 million today. The SEC has the authority to increase the $5 million disclosure threshold via rulemaking changes to the Rule 701 threshold are unlikely without Congressional intervention.
  • H.R. 1343 will allow the employees working for privately held businesses ranging from relatively new start-ups to mature companies to take full advantage of the JOBS Act 12(g) employee shareholder provisions. Increasing the Rule 701 threshold gives private companies more flexibility to reward and retain employees with a company’s securities and permit private companies to keep valuable employee without having to use other methods to compensate them, such as borrowing money or selling securities. Most important, it provides the employees a greater ability to own a piece of the future successes of a company he or she believes in.
  • Updating SEC Rule 701 will encourage companies to attract and retain employees, and offer incentives to their employees, like through deferred compensation arrangements thus allowing greater employee ownership.