Washington Administrative Code › Title 326 - Minority and Women's Business Enterprises, Office of › Chapter 326-20 - Certification › Section 326-20-080 - Factors considered in determining control

Current through Register Vol. 24-14, July 15, 2024
(1) In determining whether disad-vantaged
			 owner(s) control a business, the office must consider all of the facts in the
			 record, viewed as a whole.
(2) The
			 disadvantaged owner(s) must demonstrate the ability to make independent and
			 unilateral business decisions needed to guide the future and direction of the
			 business.
(3) The certifiable
			 business must not be subject to any formal or informal restrictions limiting
			 the customary discretion of the disadvantaged owner(s). Restrictions through
			 corporate charter provisions, bylaw requirements, contracts or any other formal
			 or informal devices, such as cumulative voting rights, voting powers attached
			 to different classes of stock, employment contracts, requirements for
			 concurrence by nondisadvantaged partners, conditions precedent or subsequent,
			 executory agreements, voting trusts, limitations on or assignments of voting
			 rights, preventing the disadvantaged owner(s), without the cooperation or vote
			 of any nondisad-vantaged individual, from making any business decision are
			 prohibited. This subsection does not preclude a spouse or registered domestic
			 partner cosignature on the office's spouse or domestic partner nonparticipation
			 statement.
(4) Disadvantaged
			 owner(s) must possess the power to direct or cause the direction of the
			 management and policies of the business and make daily and long-term decisions
			 on matters of management, policy, and operations.
(a) Disadvantaged owner(s) must hold the
			 highest officer position in the company, such as chief executive officer or
			 president.
(b) In a corporation,
			 disadvantaged owners must control the board of directors.
(c) In a partnership, one or more
			 disadvantaged owners must serve as general partners, with control over all
			 partnership decisions. In order for a partnership to be controlled by
			 disadvantaged individuals, any nondisadvantaged partners must not have the
			 power, without the specific written concurrence of the socially and
			 economically disadvantaged part-ner(s), to contractually bind the partnership
			 or subject the partnership to contract or tort liability.
(d) Nondisadvantaged or immediate family
			 members may be involved in a certified business as owners, managers, employees,
			 stockholders, officers, or directors. They must not possess or exercise the
			 power to control the business or be disproportionately responsible for the
			 operation of the business.
(e)
			 Disadvantaged owner(s) of the business may delegate various areas of the
			 management, policymaking, or daily operations of the business to other
			 participants in the business, regardless of whether these participants are
			 disadvan-taged individuals. Such delegations of authority must be revocable,
			 and the disadvantaged owner(s) must retain the power to hire and fire any
			 person to whom such authority is delegated. The disadvantaged owner(s)
			 managerial role in the business's overall affairs must be such that the
			 recipient can reasonably conclude the disadvantaged owners actually exercise
			 control over the business's operations, management, and policy.
(f) Disadvantaged owner(s) must demonstrate
			 the ability to make basic decisions pertaining to the daily operations of the
			 business independently and have an overall understanding of, managerial and
			 technical competence and experience directly related to, the type of business
			 in which the business is engaged and operating. The owner(s) are not required
			 to have experience or expertise in every critical area of operations or given
			 field than managers or key employees. They must have the ability to
			 intelligently and critically evaluate information presented by other
			 participants in the business's activities and to use this information to make
			 independent decisions concerning the business's daily operations, management,
			 and policymaking. Generally, expertise limited to office management,
			 administration, or bookkeeping functions unrelated to the principle business
			 activities of the business is insufficient to demonstrate control.
(g) If state or local law req uires the
			 persons to have a particular license or other credential in order to own or
			 control a certain type of business, then the disadvantaged person(s) who own
			 and control a potential certifiable business of that type must possess the
			 required license or credential. If state or local law does not require the
			 applicant to possess such a license or credential to own or control a business,
			 the office must not deny certification solely on the ground the person lacks
			 the license or credential. However, the office may take into account the
			 absence of the license or credential as one factor in determining whether the
			 disadvantaged owner(s) actually control the business.
(h) The office may consider differences in
			 remuneration between the disadvantaged owner(s) and other business participants
			 in determining whether to certify a business. Such consideration must be in the
			 context of the duties of the persons involved, normal industry practices, the
			 business's policy and practice concerning reinvestment of income, and any other
			 explanations for the differences proffered by the business. The office may
			 determine a disadvantaged owner controls a business although that owner's
			 remuneration is lower than that of some other participants in the business. In
			 a case where a nondisadvantaged individual formerly controlled the business,
			 and a disadvantaged individual now controls it, the office may consider a
			 difference between the remuneration of the former and current controller of the
			 business as a factor in determining who controls the business, particularly
			 when the nondisadvantaged individual remains involved with the business and
			 continues to receive greater compensation than the disadvantaged individual.
(i) In order to be viewed as
			 controlling a business, a dis-advantaged owner cannot engage in outside
			 employment or other business interests that conflict with the management of the
			 business or prevent the individual from devoting sufficient time and attention
			 to the affairs of the business to control its activities. For example, absentee
			 ownership of a business and part-time work in a full-time business are not
			 viewed as constituting control. However, an individual could be viewed as
			 controlling a part-time business that operates only on evenings or weekends, if
			 the individual controls it all the time it is operating.
(j) A disadvantaged individual may control a
			 business even though one or more of the individual's nondisadvan-taged
			 immediate family members, participate in the business as a manager, employee,
			 owner, or in another capacity. Except as otherwise provided in this subsection,
			 the office must make a judgment about the control the disadvantaged owner
			 exercises vis-a-vis other persons involved in the business as the office does
			 in other situations, without regard to whether or not the other persons are
			 immediate family members. If the office cannot determine the disadvantaged
			 owners, as distinct from the family as a whole, control the business, then the
			 disadvantaged owners failed to carry their burden of proof concerning control,
			 even though they may participate significantly in the business's
			 activities.
(k) When a business was
			 formerly owned or controlled by a nondisadvantaged individual, whether or not
			 an immediate family member, and ownership or control was transferred to a
			 disadvantaged individual, and the nondisadvantaged individual remains involved
			 with the business in any capacity, there is a rebuttable presumption of control
			 by the nondis-advantaged individual unless the disadvantaged individual now
			 owning the business demonstrates to the office, by clear and convincing
			 evidence, that:
(i) The transfer of ownership
			 or control to the disadvan-taged individual was made for reasons other than
			 obtaining certification; and
(ii)
			 The disadvantaged individual actually controls the management, policy, and
			 operations of the business, notwithstanding the continuing participation of a
			 nondisadvantaged individual who formerly owned or controlled the
			 business.
(l) In
			 determining whether its disadvantaged owner controls a business, the office may
			 consider whether the business owns equipment necessary to perform its work.
			 However, the office must not determine a business is not controlled by
			 dis-advantaged individuals solely because the business leases, rather than
			 owns, such equipment, where leasing equipment is a normal industry practice and
			 the lease does not involve a relationship with a prime contractor or other
			 party that compromises the independence of the business.
(m) A business operating under a franchise or
			 license agreement may be certified if it meets the standards in this paragraph
			 and the franchiser or licenser is not affiliated with the franchisee or
			 licensee. In determining whether affiliation exists, the office should
			 generally not consider the restraints relating to standardized quality,
			 advertising, accounting format, and other provisions imposed on the franchisee
			 or licensee by the franchise agreement or license, provided the franchisee or
			 licensee has the right to profit from its efforts and bears the risk of loss
			 commensurate with ownership. Alternatively, even though a franchisee or
			 licensee may not be controlled by virtue of such provisions in the franchise
			 agreement or license, affiliation could arise through other means, such as
			 common management or excessive restrictions on the sale or transfer of the
			 franchise interest or license.
(n)
			 The disadvantaged individual(s) controlling a business may use an employee
			 leasing company. The use of such a company does not preclude the individual(s)
			 from controlling their business if they continue to maintain an
			 employer-employee relationship with the leased employees. This includes
			 responsibility for hiring, firing, training, assigning, and otherwise
			 controlling on-the-job activities of the employees, as well as ultimate
			 responsibility for wage and tax obligations related to the employees.