Hiring Help Without Hiring Anyone At All

Working with independent contractors rather than regular employees can save a farmer money. But it’s not a solution for every situation–only if the farmer can give up a good deal of control over the work should independent contractors be hired.

What’s the Situation?

Hiring employees can be expensive. A farmer must pay social security and Medicare taxes plus unemployment insurance or taxes. You can bet folks have been looking for ways to avoid these expenses while getting help on the farm. Many farmers may have heard about hiring independent contractors instead of employees. Businesses large and small save money this way, and the strategy could be a great deal for a farmer.

Where does the law come in?

The savings from hiring independent contractors accrues because they aren’t employees, so the farmer doesn’t have to contribute to the workers’ social security or Medicare taxes. Instead, independent contractors are responsible for paying their own self-employment taxes. To prevent abuse of this cost-savings device, the Internal Revenue Service can impose strict penalties on businesses that are simply disguising regular employees as independent contractors.

Details, please:

Wouldn’t it be convenient if a farmer could call up “Jill’s Weeding Service” whenever he needs help? Or what if a farmer hired a new college grad to take over the farmers market stand and create an online marketing program on her own? Could this approach give the farmer flexibility, freedom, and cost savings? It’s very possible, but before a farmer decides to classify his help as independent contractors, there are a lot of legal aspects of the employment opportunity to investigate. 

Broadly speaking, hiring an independent contractor is permitted in situations where you might hire a small business owner. Lets use hiring a plumber as an example. If you hire a plumber to fix the toilet, you hire him or her because of the plumber’s expertise and ability to do the job without oversight. You certainly don’t hover in the doorway suggesting a different brand of plumbing tape. Since you’ve hired another small business owner, you let the plumber do the job as the plumber sees fit. Although this is the basic principle behind who is and isn’t an independent contractor, the IRS has outlined more detailed guidance to help them investigate employee misclassification. Thinking about these questions beforehand will save the stress of an IRS investigation that ends in a stiff penalty for misclassifying your workers.

First, a farmer should ask how much control he or she wishes to maintain over the worker’s actions. Independent contractors don’t get told how to do their work. Instructing someone on how to do their work includes giving direction regarding tool usage, ordering the sequence of tasks, or anything beyond stating a broad objective. Take Jill’s Weeding Service: If you tell Jill only, “Keep my fields reasonably weed-free this season,” you aren’t controlling the means or method of her work. If, however, you say to Jill, “Weed the lettuce first because I’m harvesting this afternoon, and then take the flame weeder over carrots,” that is controlling her work, and you can’t classify her as a independent contractor even if she does own her own weeding business. Dictating which tools to use, when or where to perform tasks, and which individuals are to do which task are key indicators of control.

Second, a farmer must consider how much financial control he or she maintains. Independent contractors have control over their financial situation by, for example, providing the same services to other folks. Back to the plumber: While installing a washroom in the packing shed, the plumber might leave early one day to help another customer with a plumbing emergency. Independent contractors have other customers that they can choose to assist; employees don’t. Independent contractors control their own financial situation, often by accepting a flat fee or charge for time and materials rather than an hourly wage. To use the weeding scenario, if a farmer hires Jill’s Weeding Service to keep the fields weed-free all summer for $8K, Jill controls her profit by dictating the speed and timing of her work. An hourly farm employee does not have that option because she works for an hourly wage.

Third, the IRS will consider the formal classification of the relationship. If farmer and Jill have signed a contract saying that Jill is an independent contractor, the IRS will consider that factor. Finally, the IRS looks at whether the service is a key aspect of the business. Weed control is a key aspect of farming. But on some farms, direct sales are new or experimental. If a farmer who usually sells into the commodity market decides to dabble in direct marketing, the door to an independent contractor opens wider. The farmer could hire a person to be completely in charge of establishing and marketing a direct sales program, pay a flat fee plus commission, limit the relationship to the specific project, and sign a contract. Then the farmer could classify the worker as an independent contractor–and save money and gain flexibility by doing so.  Being able to save on payroll taxes and predict expenses allows the farmer to experiment with a new market without the costs of hiring. 

Independent contractors can be a great strategy, but only if you truly want to hire someone to work independently of your direction and you take the time to sign an actual contract.

What do you think?

  • I know farmers that have good success working with independent contractor weeding crews. What are the strengths and weaknesses of that approach to weeding?
  • Rarely do farmers excel in both crop production and marketing. Are independent contractors a solution to that problem or should a farmer strive to be a Jack/Jill-of-all-trades?

Workers’ Comp Laws: They mean business.

The penalties for not carrying workers’ compensation insurance when required to can be massive. Whether by choice or by ignorance, not following workers’ comp laws may place everything the farmer owns at risk.

What’s the situation?

June has a great little farm that makes enough profit to support June and one additional employee. This season she’s made some investments in a hoophouse and a new wash station, so her budget is really tight. Although she’s required to carry workers’ compensation insurance, she makes an agreement with her employee that if he gets injured he’ll just use his own insurance rather than make a workers’ comp claim.

Where does the law come in?

Not carrying workers’ compensation insurance could be a disastrous mistake. Employees in most states may not opt out of workers’ compensation coverage. Regardless of any private agreement, failing to carry required workers’ comp insurance can expose June to lawsuits, penalties, the closure of her business, and the loss of her personal assets.

Details, please: 

A few weeks ago I wrote a couple blog posts about what workers’ compensation insurance is and how to research state laws to determine whether farms are exempt from workers’ comp. To summarize, workers’ comp protects the employer from civil lawsuits and protects the employee from uncompensated injuries. Workers’ comp can be a good deal for farmers, although some states don’t require all farmers to carry the insurance.

Many states do require farmers to carry workers’ compensation. Every farmer needs to know what the rules are, because ignorance of the law is no excuse in the courtroom. Also, the state law will very likely prohibit an employee from waiving workers comp coverage, which means that, regardless of the reasons, farmers and their employees cannot agree to forgo workers’ comp.

Farmers might think, “Ok, I won’t put it in writing or anything. I’ll just ask my employees to carry their own health insurance and, if they are injured, they’ll use that.”  That probably won’t work in case of an injury, because once the health insurance company catches wind that the employee was injured on the job, they’re likely to refuse to pay compensation and a lawsuit will follow.

There’s no way around it: If workers’ comp is required, buy it. Just in case a farmer needs additional motivation, I’ll list some of the state penalties for failing to carry workers’ comp. I, like many farmers, am a risk-taker and it takes quite a bit to scare me. But I was scared in a hurry when I read some of these penalties. Here’s a sampling:

If a farmer does not have workers’ compensation insurance, the employee can sue the farmer under a tort claim, such as providing an unsafe work environment. If the insurance wasn’t required, the employee may have to slog through a long, expensive case to prove that the farmer did something negligent. But if the farmer was required to carry workers’ comp and didn’t, the case might be a slam-dunk for the employee. To penalize the employer for not carrying insurance, the law allows the employee to use the mere occurrence of the accident as proof that the employer was negligent. The employer is prohibited from claiming any defense except one: The accident never happened at all.

If the lawsuit isn’t enough, there’s more. In Wisconsin, an employer who fails to carry workers’ comp may owe a penalty equal to double the insurance premiums they should have been paying throughout. In many states, a penalty such as 10% of the total medical bills and compensation is added on to the actual bills. And don’t think your farm could avoid paying the bill by going out of business. Many state laws make the employer personally liable for uncovered employee injuries. That means non-farm assets such as the family home, vehicle, property, and bank accounts could be taken to pay the judgment. Also, a farmer could receive a court order to shut down the farm and cease operations immediately. In Arizona, Iowa, and several other states, the failure to carry workers’ comp is a felony offense that could land an employer in jail.

Saving money isn’t worth the risk of losing your farm, your home, and all your assets. Know the laws of your state and buy workers’ comp if it’s required.

What do you think?

  • I argue the risk of not carrying workers’ comp is too high. But others might argue the chance of injury is quite small. What do you think?
  • Why do the states care so much about workers’ comp if employees can simply sue the employer under a tort claim if they don’t have workers’ comp?

Answering the “Do I need workers’ comp insurance?” question on your own.

A prudent farmer should know if he or she is required by law to carry workers’ compensation insurance. When you can’t ask an attorney, doing your own legal research can work if you have a little time and tenacity. Here are ideas for learning the workers’ comp laws of your own state.

What’s the situation?

Farmer Andrew is ready. He’s got two acres of land that he leased from his uncle, a spot at a local farmers’ market, and a friend from college to help him out for the summer. Andrew’s finances are tight: He only wants to buy the essentials, so he’s choosing only basic tools. To reduce costs, he’ll wait on a wash station, a market display, and insurance.

Where does the law come in?

Andrew might not have much of a choice in choosing whether to buy workers’ comp insurance. Depending on his state’s laws, workers’ comp might be a required purchase for a beginning farmer planning to use employees. How is a guy to determine the legal requirements if he doesn’t want to call an attorney? Well, calling an attorney really is the quickest way to get the answer. If you can’t do that, this post is a quick guide to legal research avenues. 

Details, please:

I wish I could post a simple spreadsheet that has each state indexed to the farm-related rule. But such a spreadsheet wouldn’t be very simple at all. Usually workers’ compensation laws will cover almost all employees. But agriculture is special, and these laws often have exceptions allowing some farms–as defined by number of employees, size, the duration of  employment, and/or the amount of wages paid–to avoid the insurance requirement.

Thus, farmers will have to do a little digging to find a rule specific to their situation. The first thing to do is to call the workers’ compensation office. The state may have an information hotline that provides quick answers. However, it’s quite possible the department staff won’t be able to answer your question, especially if some interpretation of the law is necessary to make a judgment regarding your particular farm. A second option is to call an insurance agent who sells workers’ comp insurance. He or she might have encountered your situation before. But, again, if he or she doesn’t work with many farmers or is uncomfortable interpreting the law for you, you might not find your answer.

A farmer, being the DIY sort, might blaze a path forward and determine for himself if it’s required. Where would such a brave soul begin? Try the workers’ compensation office’s website: It might have a guide that specifically addresses farm employers. Or you might try the state’s insurance commissioner’s office for publications.

Finding resources on various websites can be time-consuming and distracting.  Are you lucky enough to live in Wisconsin? The Wisconsin Law Library collects information from agencies and even produces its own guides to legal topics. Look to see if your state has a similar government library. Your local law school may compile information as well. Law school libraries are often available for individual guidance–stop by or call the reference desk and ask a librarian where to find answers.

If all else fails, you might try reading the law yourself. Most states publish their laws on public websites, so you just have to find them. In Colorado, search for the “Office of Legislative Legal Services.” In Michigan, look for the “Michigan Legislature.” You get the idea. Once you find an index of your state laws, browse or search for the workers’ compensation title.

Perusing the workers’ comp statute might be overwhelming at first. If you can’t find anything about farming or agriculture, check the definition of “employer.” You might find that farms aren’t actually considered employers. Then consult the definitions to figure out what a “farm” is. After that, you might have to crunch some numbers to see if you are a “farm.” Statutes can be so disorienting that in the end you still aren’t certain if you have the answer. At this point especially, your local reference librarian may provide assistance.

I know this blog post doesn’t do much to answer the very simple question of which farms are required by law to purchase workers’ comp insurance. For that I apologize. However, I do hope this post gives you a few resources to learn your legal obligations, whether it’s workers’ comp or not.

 

Workers’ Comp: Protecting Employers and Employees

“Workers’ compensation” is the title for a system of insurance that covers injuries suffered by employees while on the job. What farmers might not know is that workers’ comp protects the farmer just as much as the farm worker. A key aspect workers’ comp is that when it is available an injured employee may not sue the farmer directly to cover medical expenses.

What’s the situation?

It’s the thing every farmer fears: One of the folks who comes out to help till fields–or pick and wash veggies, or move the cows from pasture to pasture–gets hurt on the job. Whether it’s a broken ankle or a chronic respiratory problem, an injury concerns everyone. Will the employee miss out on work? And who will pay for the medical expenses?

Where does the law come in?

Back before workers’ comp, employees had a couple of options if they were injured on the job: They could ask their employer to pay for medical bills, they could use their own resources to pay, or they could sue the employer for providing unsafe working conditions and be awarded damages. Nowadays workers’ compensation covers medical expenses and lost wages. Many businesses, including farms, are required to provide this insurance. Even if workers’ comp isn’t required, farmers should know how it could benefit their business.

Details, please:

Workers’ compensation is a familiar topic to many farmers.  Even those lucky enough not to have held a “real” job know about workers’ comp! In today’s world, insurance is a fact of life and workers’ comp is a an insurance policy. But there are some key differences between workers’ compensation and, for example, health insurance. A story might be the best way to explain the unique nature of workers’ comp.

Let’s say Farmer Jane buys workers’ comp to cover her employees. Then one day her employee, William, pulls a rototiller out of the shed and starts prepping a bed for spinach. All of a sudden one of the blades flies off the machine and hits William in the ankle. William heads to the hospital immediately, of course, but after that he files a claim with the workers’ compensation company. Before long, his medical bills are paid and he receives some of the wages he lost while his ankle healed.

So we have a happy ending, right? Yes, but that’s not the whole story. Workers’ compensation was envisioned to protect the employer as much as the employee.

Let’s say that Jane had just purchased the offending rototiller at a garage sale. Before she bought it, the former owner instructed her that the blades were damaged and must be replaced immediately. In this case, William would have a “tort” claim against Jane. Broadly speaking, a tort is a wrongful act that isn’t criminal. It’s a civil wrong. Examples of torts include letting hazardous ice build up on the sidewalk outside a store or installing unsafe equipment on a playground. Something is considered “wrongful” if the normal person in the same situation would have behaved in a safer manner. If William brought a tort claim, the court would ask if most farmers in the same circumstance would have put the rototiller in the shed for use by employees. If most farmers would not, then Jane may be liable for William’s damages under tort law.

Now Jane is really glad she bought workers’ comp! Where workers’ compensation is available, the injured employee may not bring a tort claim against the farmer, no matter how unreasonably the farmer behaved. (I should note that many industries are regulated for unsafe working conditions under other laws–those may still be the subject of a lawsuit.) The injured employee may seek compensation only from the insurance company. Also, there may be other limitations on the injured worker’s award, such as predetermined compensation rates rather than compensation for actual bills incurred in treating the injury.

As you can see, workers’ compensation protects Jane just as much, if not more, than it protects William. William gets his medical bills covered while Jane doesn’t have to worry about a lawsuit. Farmers in some states are required to carry workers’ comp. Even if farmers in your state aren’t, you might want to consider buying it to protect yourself and your employees.

What do you think?

  • Do you or your farming neighbors choose to buy workers’ comp insurance? Has it proved useful?
  • Insurance companies vary and it’s tough to decipher the fine print on the policy. Have you tried reading it to see what is actually covered?

Washington Takes its New Internship Law For a Spin

The new Small Farm Internship Pilot Project, passed by the Washington state legislature, is a great example of how elected representatives are exploring new ways to help direct-market farmers. The pilot project permits unpaid farm internships and grants the interns workers’ compensation insurance through a simple application process.

What’s the situation?

We’re seeing legislation proposed around the country that makes it easier for direct-market farms to be successful. For example, we need laws that help farms hire and protect good employees. The Washington law is one way to allow farmers to hire unpaid labor and protect the intern. Small farms in two counties were eligible to participate in Washington’s pilot project this summer.

Details, please:

If you’ve been following my series on apprenticeships and internships, you know the contours of federal law. Small farms are exempt from minimum wage. All other farms need to register their program and follow standards if they want to hire apprentices. If a farm wants to hire interns, the program must be only an educational service for the intern. You also know that no state law may be less strict than federal law or grant exceptions where federal law does not. However, states are free to adapt the laws or pass more stringent rules. This gives states the flexibility to address the specific concerns of their citizens. Take for example the state we’re talking about now: Washington does not exempt small farms from paying minimum wage.  

That’s where Washington’s Small Farm Internship Project comes in. The project extends a limited exception to the minimum wage for interns on small farms. However, the exception doesn’t apply to all small farms: It applies to only those farms that offer curriculum-based training qualify. Remember how federal law has all sorts of requirements for educational curricula and registration? Washington captures the same idea, but simplifies the process.

Here’s how the process worked: Any farm wishing to participate in the pilot project applied for a special certificate by filling out a form that asks several questions about the farm’s internship program. The state granted this certificate if the farm had an educational program based on actual curricula, if the farm supervised interns, and if the intern did not displace experienced employees. This simple approach is great for the time-crunched farmer.

The only potential complication with the Washington law is that it defines “small farm” differently than federal law. Under federal law, small farms are those who hire workers for fewer than 500 man-hours of labor in one calendar quarter (or about five employees in a three-month time frame). The Washington law defines small farms as those with less than $250,000 in sales. I know of a couple farms that hire more than 5 employees for the summer and take in less than $250,000 in sales. I admit they might be inefficient, but hey, it happens! That means that the farmer might meet the state exemption without meeting the federal exemption. A good lawyer would advise a farmer-client in such a situation that paying less than minimum wage might be fine by Washington State, but the federal government could still come a-knocking.

Lastly, the Washington law is a pilot project at this stage. The law calls for a report to be prepared about the program’s implementation; it will be exciting to see what happens next. Also, the reason the Washington internship project makes a difference is because the state doesn’t already extend the federal exemption to small farms. In other states that already exempt small farms, this type of law wouldn’t change anything. More creative solutions will be needed as we all continue to talk about the balance between wage rates, farm security, and employee security.

That concludes our chat about farms and minimum wage. However, that’s not the end of the Washington internship project for this blog. A major bonus of the law is that it grants interns state workers’ compensation insurance. I’ll be going over workers’ compensation in my next few postings.

What do you think?

  • Do you know about any other state programs that make farm internships or apprenticeships easier to offer?
  • Now that we’ve finished the minimum wage discussion, do you have any concluding thoughts? Any ideas about what states should do to make labor more affordable for the small farmer?
  • In my opinion, improving farm profitability should be a higher priority than lowering the wage paid to interns. Do you agree or not?   

Will Work For Food: Paying minimum wage with farm food and housing

Having realized how difficult apprenticeships and internships are from a legal standpoint, farmers might decide to pay the equivalent of minimum wage in money, food, and housing. That can be a great solution. However, relying on volunteers instead of employees may not be a good solution.

 What’s the situation?

A farmer who understands apprenticeships, internships and the minimum wage finds herself in a bind. She doesn’t have the cash flow to pay minimum wage but she doesn’t meet the standards to host an apprentice or an intern. So she comes up with one last idea: She’ll restructure her internship as a “volunteer opportunity” in exchange for food and housing.

Where does the law come in?

That hypothetical farmer is on the right track (legally speaking) in treating food and housing as wages, but she’s on the wrong track in terms of reclassifying an intern as a volunteer. For the purposes of the federal Fair Labor Standards Act–the “FLSA,” which mandates a minimum wage–food and housing may count towards wages. But even a volunteer might be entitled to the minimum wage if the individual is treated more like an employee.

Details, please:

If a farm intern is already working for low wages in exchange for an educational experience, it might seem like a good idea to avoid labor laws by calling that individual a “volunteer.” After all, that’s more or less what a low-paid intern is! But when we are talking about legal obligations under the FLSA we have to use the law’s definitions, and the FLSA states that “employ” is “to suffer or permit to work.” That’s not quite what I was expecting for a definition! But yes, to permit someone to work at a for-profit business, even without pay, may be to employ that person. If you think about it you can see what lawmakers are trying to prevent: Without this regulation, an exploitative employer could use coercion or deceit to convince a vulnerable person to work for free in order to avoid labor laws. As the Supreme Court affirmed, individuals cannot choose to decline the protections of the FLSA. The second reason for restricting unpaid volunteering at for-profit businesses is it that unpaid workers cause a downward trend in wages for the entire industry. Sure, this law wasn’t written with the ideal, socially responsible farm in mind, but it still applies to them.

A court will look to several factors in making a classification: if a farm volunteer comes regularly and frequently for their shift, if the volunteer is under the control of the farmer while they are there, if he or she was chosen for the position or can be dismissed from the position, and how important the work is to both the business and the worker. Importantly, the court will also look at compensation. The more food or other benefits a volunteer receives, the more likely they are legally an employee. An individual’s status as an employee is usually determined only after the court looks at the facts of the individual case, so it’s hard to make generalizations. The FLSA grants a special exception for volunteers of public agencies or non-profit food banks, but that’s it.

Farmers might be thinking, “I’m caught at every turn. I might have to pay my employees, my apprentices, my interns, and maybe even my volunteers minimum wage?” That might be the way it is. We don’t know exactly because the precise facts haven’t been litigated. But all is not lost. Farms might be cash-poor, but they are usually food-rich. Farms can supplement money wages with food and housing to total minimum wage.

If a farm offers food and housing, the total fair market value of all compensation should equal minimum wage for all the time worked. To determine the fair market value, look around at what similar accommodations go for. If you have a 1-room cabin with indoor plumbing and a small kitchenette, what’s the rent on a similar cabin in a similar location and with the same amenities? If you offer a yurt and there isn’t a yurt for rent your side of the Mississippi, things are a little harder. Let your best judgment be your guide or ask your neighbors what they think.

Finding the fair market value of food can be easy or difficult. If the farm is a CSA and each worker gets a share, the fair market value is whatever the farm charges for a share. Let’s say, for example, the farm makes all their seconds-quality produce available to workers. The problem is that the value of seconds produce is harder to determine, especially if the quality is variable. Further, how much are the employees actually taking?  If the employee doesn’t actually take food it’s going to be harder to convince a judge that the employee received part of their wages in food.   

Considering how troublesome it can be to set fair market value, getting an agreement in writing is a good practice. Agree with your intern on the value of the housing you provide and the amount and quality of the food they will accept. A signed contract isn’t a slam-dunk, but the clarity and honesty that a contract establishes goes a long way towards preventing problems.

After all these posts and long descriptions of internships and apprentices, the moral of the story is this: It’s easier to pay minimum wage than to wedge your program into an exception! Also remember that I’ve been describing federal law, and that many states have regulations that are more rigorous (but never less rigorous) than federal law. And don’t forget that what makes a person an employee for minimum wage purposes may not be the same as for workers compensation and unemployment insurance: We’ll talk about some of those issues next!

What do you think:

  • That wraps up my explanation of internships, apprenticeships and the federal minimum wage. Do you have any concluding thoughts on the role these programs should play on a small to medium socially conscious farm?
  • What are the most, or least, troublesome aspects of these programs?
  • Do you agree that it’s probably easier to pay minimum wage, or do you think I’m forgetting something about cash flow on the small to medium farm? I would love to hear your thoughts.

The Intern That Isn’t: Part 2

Under  federal law, interns are very different than regular employees. The six criteria for a valid internship make it difficult, but possible, for a farm to utilize interns. Farms must pay careful attention to program structure, not use interns as a labor source, and communicate clearly with interns.

What’s the situation?

Internships are a very common way for farms, and many other industries, to trade wages for an educational experience. The problem is that many farmers aren’t aware that the federal government has defined exactly what an internship is and isn’t. Failure to comply with internship standards opens the farm up to a potential lawsuit.

Where does the law come in?

The law clearly states that an intern cannot be an employee. Regardless of the title given to a worker, if they look like an employee, act like an employee and are managed like an employee, that worker is an employee. Employees are regulated by the Fair Labor Standards Act (FLSA), which requires farms to pay employees the minimum wage (with the exception of federally defined “small” farms).

Details, please:

My previous post introduced readers to the background on federal internship law. Let’s recap: Interns, apprentices, and employees are three distinct worker categories. Interns and apprentices both receive education, but they are completely different in terms of regulations. Apprentices are employees that may be paid less than minimum wage. Interns may also be paid less than minimum wage but the catch is that interns are not employees. Interns may not benefit the farm – interns work exclusively for their own benefit. That’s why they aren’t classified as “employees” and why they can be paid less than minimum wage.

Internships aren’t regulated by statute; instead the 6 criteria for an internship were established through a 1940’s court case. Since then those 6 criteria have stuck, and were recently reaffirmed by the Department of Labor (DOL) in Fact Sheet #71. I need to emphasize that Fact Sheet #71 applies to for-profit businesses. If your farm is a nonprofit organization (in that  your farm is a 501(c)(3), not simply a labor of love!) then these criteria do not apply to your intern program.

My previous post discussed two of the six criteria:

  1. The internship must be for the benefit of the intern.
  2. The intern must not provide the business with an immediate advantage, for example, by performing the regular, productive work of the business.

This week, we’ll talk about the remaining four criteria:

  1. The internship must be similar to an educational course.
  2. The intern does not displace regular employees.
  3. The intern is not entitled to a job at the conclusion of the internship.
  4. The intern and employer understand that the worker is not entitled to compensation.

If each of the six criteria aren’t met, the worker is an employee and falls under the regulations of the FLSA.

Number four states that an internship has to look like an educational course. At first, this seems do-able because we know the farmer provides instruction to new hires about the mechanics of farming. Let’s take tomatoes- you show the new guy how to trench seedlings, how to trellis growing plants, how to determine ripeness, and then how to clip, store, and display tomatoes for sale. That’s a thorough education. But I’m not sure that would satisfy the DOL. Fact Sheet #71 specifically states that the position must be “structured around a classroom or academic experience,” which is quite different than inserting educational content into a work experience.  If a farm has established curricula to teach tomato production, they stand a better chance of meeting this criterion.

Criterion four is a tricky one: the intern cannot displace regular employees. If a farmer hires interns instead of employees, she’s clearly not meeting this criterion. But what if the farmer decides to hire an intern or hire no one at all? You can hear him say, “My intern doesn’t displace an employee because I wouldn’t hire employees anyways. I would just work longer, harder hours if the intern wasn’t around.” It’s a good argument. But I don’t know of the court would buy it. These issues haven’t been litigated. A good lawyer could certainly argue that the farmer is not his own employee and therefore his intern doesn’t displace himself. But in that case you probably have a “small farm” and are exempt from the FLSA, including the requirement to pay minimum wage as a whole.

Criteria five and six are relatively straightforward. Farmers cannot use internships to trial-run potential new employees. Fact Sheet #71 seems to say that the trial-run exists according to the intern’s perspective. If the intern thinks she’ll be awarded a permanent position if she does well enough, the farmer might violate this criteria. Lastly, both farmer and intern must understand that the intern is not entitled to wages. Again, the emphasis should probably be on the intern’s perspective. Promising performance bonuses or a stipend if the intern works at least a certain amount of time would probably violate criterion six.

These criteria are challenging but still do-able. The bottom line is that interns are not employees. Internships are educational programs, not affordable labor mechanisms. If a farm does not structure their internship program in accordance with federal law and either the intern or the government files suit, the farmer could potentially be liable for employee back wages plus back taxes. I highly doubt the DOL will be showing up at the farm gate anytime soon. But regardless, every business owner should be aware of these regulations and use them to guide their decisions.

Next up: Can you just call your interns “volunteers” instead and avoid the six criteria? We’ll also talk about meeting minimum wage requirements with food and housing instead. Sooner or later we’ll discuss new state internship laws.

What do you think?

  • If we all know that most industries don’t follow internship criteria should farmers hold themselves to the criteria?
  • What makes farmers more or less likely than other industries to be sued on this issue?

The Intern That Isn’t: Federal law and farm internships

Regardless of an individual’s title, if an employee does work that benefits the farm then that individual does not meet the legal definition of an intern. Barring some other exception, that person is a regular employee and should be paid the minimum wage. This criteria make it a challenge for many farms to offer internships at less than minimum wage.

What’s the situation?

Many farms all across the country host interns each summer. Internship programs vary widely in terms of the size of the farm, the type of work done, and the compensation offered. This rite of passage is proudly recounted on the resumes of many young farmers. For the sake of learning, some of these interns don’t mind working for very low wages.

Where does the law come in?

Just like with apprenticeships, there  are federal standards for an internship. If those standards aren’t met, then the intern is actually a regular employee and must be paid the minimum wage.

Details, please:

In case you missed previous posts about apprenticeships, here’s the 30-second version of how to create a federally-compliant apprenticeship program: Draft educational curriculum lasting at least 144 hours, demonstrate that you are a qualified instructor, register with the federal government, and show that you can’t otherwise find any qualified workers. Then you can have an apprentice at less than minimum wage for a short time period–perhaps 3 months. Obviously, most farmers are looking for a different option.

So what about internships? Are internships an easier way to balance wages with an educational experience? In a word: No. Many internships–whether we’re looking at a farm, an advertising agency, or an engineering firm–don’t comply with federal law. A real “internship” has to satisfy six criteria in order to pay less than minimum wage. Over the next month I’ll talk about each of them, but this post will cover only two criteria. (If you just can’t wait, download the Department of Labor’s fact sheet and read all six.)

First, an internship must be for the benefit of the intern. An intern gets benefit out of training that is generally applicable to all businesses in an industry rather than training that applies only to the business hosting the intern. Sounds easy enough, right? The basics of farming–seeding, cultivation, harvest, and delivery–are applicable to all farms. Yes, different farms have different precise methods of seeding but an employer could easily strike a balance with this criterion.

Second, an internship must not provide the host business with an immediate advantage. The employer receives an immediate advantage when the intern performs the routine, productive work of the business on a regular basis. Assisting customers and filing or clerical work are specifically included as “productive work.”  When it comes to farming, those same basics I mentioned above–seeding, cultivation, harvest and delivery–are each routine, productive farm tasks. Even though those tasks provide interns with skills and positive work habits, the fact that their work benefits the employer makes the individual an employee, not an intern. Only through an apprenticeship program can you get “credit” for your educational program such that you can pay less than minimum wage. The intern is very different than an apprenticeship because the intern benefits him or herself, and not the business.

This doesn’t seem to make much sense right? Why would a farmer hire an employee just for the benefit of the employee and not the business? If you are asking yourself that question, you are on the right track: That is exactly the legal distinction. An intern does not need to be paid minimum wage because he or she is not actually an employee. Employees help the business. A person who spends time at the business for educational purposes is not benefiting the business. Perhaps the history of this exception will help explain the legal distinction.

Interns are treated very differently than apprentices under the law. The Fair Labor Standards Act requires that all employees be paid minimum wage and overtime (with some exceptions) and the regulations lay out detailed requirements for an apprentice. Internships are not mentioned anywhere in the FSLA and there are no corresponding regulations on internships. So how do we know they don’t have to be paid minimum wage? We know it because of a court case, not because of the statutes.

In 1947 the Supreme Court had to decide if unpaid prospective railroad brake operators were “employees” under the FLSA. These young railroad brakemen followed experienced brakemen around the yard, eventually doing a little operation of the brakes themselves. These trainees were practicing how to operate train brakes so they could secure a job after their training finished. The railroad company had neither hired them nor promised them a job; it simply allowed them to follow experienced brakemen around and practice. A labor union was upset at the situation and sued to require the railroad to pay these trainees minimum wage, like other employees received. Since the trainees provided no benefit to the rail company, and even hindered its operation as they braked aimlessly across the rail yard, the Supreme Court said they were not employees and not entitled to minimum wage.

That 1947 case has defined an unpaid internship ever since. In March of 2010, the Department of Labor issued a fact sheet reaffirming that each of the six criteria outlined in the railroad case are essential if an employer intends to pay an intern less than minimum wage. Many folks think the fact sheet is a sign that the Obama administration is going to take a harder look at internships, perhaps because of the difficult economy.

So, that’s the long introduction to internships. To summarize, if you have a helper that benefits your farm, you don’t have an intern. The term “intern” can only be used for a training position that is for the individual’s benefit, not the businesses benefit. Of course, that’s not all. Next time I’ll talk about the other four criteria, and after that we’ll get into new state internship laws and providing housing and food in lieu of wages.

What do you think?

  • Internship requirements are in the media these days. Has the increased attention caused you or your farming neighbors to think twice about hiring interns?
  • Interns shouldn’t be an excuse for not hiring normal employees. But do you think farmers are using interns as an excuse? Is the choice between interns or no help at all, and which is the better option? 

Apprenticeships- The high price for low cost labor

By Rachel Armstrong

If a farmer wants to pay less than minimum wage to an apprentice, she has to apply for a special certificate. One look at the requirements to receive the certificate and most farmers will close the book on apprenticeships. The new agriculture–local, organic, urban, or whatever your flavor–might not be right for this employment alternative yet.

What’s the problem?

A farmer decides to check the law on apprenticeships. After reading statutes, she decides the paperwork is worth it if she can manage her labor costs by providing her employees with a good educational experience. Then she reads that apprentices must be paid minimum wage. She thinks, “What?! What do I have to do to provide education to my employees in exchange for a lower wage?”

Where does the law come in?

Not only does a farmer wishing to have an apprentice program have to register the position with the federal government, he has to pay minimum wage. If the farmer can show that lower wages are necessary to avoid curtailment of employment opportunities and that there is a shortage of experienced workers, he may receive a special certificate to pay less.

Details, please:

My earlier blog post talks about apprenticeships from a legal perspective. Here’s the summary, straight from the statutes: “Apprentice means a worker who is employed to learn a skilled trade through a registered apprenticeship program. Training is provided through structured on-the-job training combined with supplemental related theoretical and technical instruction.” The catch is that having an apprentice doesn’t get the employer out of paying minimum wage. Only a “special certificate” will exempt a farm from paying minimum wage to its apprentices.

A certificate is available only if a farmer asks for one specifically and the government approves the request based on an individual review of the farmer’s application. To convince the authority that a farmer deserves a special certificate, he would first have to show that subminimum wages are essential to “avoid curtailment of employment opportunities.” Personally, I’m having a hard time figuring out when paying less than would accomplish that. But don’t blame me–those aren’t my words! What do you think it means? If that ambiguity isn’t trouble enough, there’s more. If the farmer wants to pay subminimum wage for more than 6 weeks of full-time work, he needs to show that extraordinary circumstances justify an extension. After some solid research, I can’t find a better explanation of what these phrases mean legally.

Even if a farmer could show that extraordinary circumstances exist, she also needs to show that there is currently an inadequate supply of experienced workers. She has to show that all the farmer’s current workers are offered full-time employment at regular wages when they conclude their apprenticeship and she still can’t find enough workers. Here’s where things really go awry for the farm employer: We can probably agree that most farm employees are not offered a regularly paid position at the conclusion of their educational time with the farm.

The requirements for an apprenticeship are stiff and for good reason. Earlier, I mentioned how apprenticeships are geared towards industries where the learning is accomplished through doing. The second goal of apprenticeship programs is to create a steady supply of technically qualified workers. Here farm work diverges from plumbing or brick laying. The plumbers’ union might want more and more young plumbers, because they enter the workforce as private contractors employed at a prevailing wage. It is not like that with farmers. Simply put, the apprenticeship is not a way to make hiring help more affordable, though many farmers hope it might be.

It’s very possible that many elements of the new agricultural community, including urban and local food industries, could grow to the point where there is a job available for every apprentice who completes their training. We can dream, right? Some programs like CRAFT are helping move us in that direction by joining up with farmers to provide great educational programming. For now, farmers need a solution other than apprenticeships to manage labor costs and support beginning farmers. We’ll continue to explore options in the next few weeks!

What do you think?

  • What justifies subminimum wages and how difficult should it be for the employer to earn an exception? Are these requirements too steep?
  • Do you disagree that farm apprentices find regular employment quickly and there is a labor shortage?

The Farmer’s Apprentice

Under the Fair Labor Standards Act (FLSA), an apprentice does not have to be paid the minimum wage. But an apprenticeship must be registered–and the paperwork is abundant. On the plus side, the FLSA also defines the exact expectations for the farmer and apprentice.  The benefits of being within the law, and of having clear communication, might be worth the tradeoff.

What is the problem?

Farmer Joe has a young farm business. It’s not especially lucrative, but he envisions his farm as providing more than money. The farm provides an experience for his employees as well as for the eater. Sharing the farming lifestyle is what it’s all about: Joe can’t pay his employee much in terms of wages, but he makes up for it with education and patient instruction. If something went wrong, could he still end up in a lawsuit?

Where does the law come in?

An apprentice is exempt from federal minimum wage laws. Here’s the catch: An apprentice program is legally defined. If a farmer’s program doesn’t meet the requirements, it’s not really an apprenticeship. If Farmer Joe doesn’t register his apprenticeship and the employee sued for back wages, that employee might win.

Details, please:

My earlier post introduced the basics of the federal labor laws establishing which operations have to pay minimum wage and overtime. Let me summarize for you: A legally defined “small farm” does not have to pay minimum wage or overtime. If you are a medium-sized farm, you do have to offer minimum wage, but not overtime. All farms are exempt from overtime.

That sums it up, except…. interns and apprentices! For the next few weeks, I’ll write all about legal internship and apprenticeship programs. Today it’s apprentices. I think this structure is well suited to many farm operations, and I think farmers should take a close look at this kind of program.

It’s obvious why this exception exists. Sometimes the best way to learn is simply to do the work. It’s hard to relay the nuances of insect and disease detection, the ripeness of an eggplant, or how to trellis tomatoes without actually doing the job. Plus, these jobs need to be learned under the pressures of mugginess, mosquitoes, and an impending market if the lessons are going to sink in! The law acknowledges this unique aspect of some industries.

I say “some industries” because not just any employer can start an apprenticeship. The federal government has to specifically add the industry to an approved list of apprentice-able jobs–fortunately, the federal has listed farm workers as apprentices. Also, the farmer has to register papers with the federal government. It’s not an apprenticeship unless it’s a registered apprenticeship. After the farmer does the hiring, the apprentice herself must be registered.

A registered apprenticeship program must meet several requirements. First, the apprenticeship program must be in writing and must specify who is the apprentice’s sponsor. The plan must include metrics: Is it a skills-based apprenticeship where the individual graduates upon learning the necessary tasks? Or is it time-based? If the farmer chooses the latter, the apprentice must work at least 2,000 hours in the position, or about one year of work. The farm’s apprentice program must include a written description of processes to be learned and an approximation of the time spent on each module. Not only that, the farm needs to provide “organized, related instruction” for about 144 hours per year, or a little more than 3 weeks. And yes, that does mean classroom-style learning.

But wait, there’s more! After the farmer finishes explaining the program itself, the farmer will have to explain herself. If you are a very young individual with little experience in farming and no educational background, you might have a hard time getting approval. The law requires that the farmer be experienced and attend adult education training of some sort.

As you can see, the requirements of a farm apprenticeship are stiff. Would you like to read more? Make yourself a cup of tea, get comfortable, and follow this link. (If you read it, you might find a small provision requiring you to pay minimum wage. I’ll explain that later.)

Now that you’ve read over my summary of the requirements for an apprenticeship, are you ready to throw up your hands? I don’t blame you, but I’d give it a second thought. Isn’t it a good idea to have an established learning plan anyways? It certainly does clear up expectations. And, if my experience on farms is any guide, unclear expectations are at the root of most problems between farmers and employees.

An apprentice program is like organic certification. Some folks choose not to certify because they know their production methods respect the earth and don’t want anyone else’s approval. But some folks go for certification because they know the record-keeping process and forced attention to detail make them a better grower in the long run. A formal apprenticeship program might make you a better employer over the long run, too.

What do you think?

  • The privilege of paying less than minimum wage comes at a steep cost. Is that the way it should be, or should employee-employer be allowed to negotiate more?
  • Is farming customarily learned on-the-job? Schools offer degrees in agronomy, dairy production, horticulture and more. Should we be sending potential farmers to school, not to the field, anyways?