California agricultural employers must be mindful of the federal, state, and local laws on the books, many of which pose traps for the unwary. Here are some of the most important employment and labor legal issues warranting particular vigilance by agricultural employers.
Use of Farm Labor Contractors and Joint Employment
Employers in California are directly liable to workers supplied by farm labor contractors when those labor contractors fail to correctly and completely pay wages or fail to provide workers’ compensation insurance coverage to their employees. Employers are prohibited from shifting liability for Cal-OSHA compliance to labor contractor for workers supplied by the labor contractor. Employers using workers from farm labor contractors are liable to such workers for unpaid wages, even if they have already fully paid the labor contractor. Carefully select labor contractors and reevaluate existing contractor relationships, focusing on the contractor’s compliance with labor laws, especially with respect to payment of wages.
Agricultural employers must ensure that labor contractors’ service agreements provide for indemnification for liability – i.e., the labor contractor’s violations of laws; and legal fees and costs incurred in defending such claims. Agricultural employers must periodically monitor labor contractors to ensure compliance with relevant labor laws, such as through period audits of time records, pay stubs, and workers’ compensation insurance certificates to encourage compliance.
California Labor Code section 1683 requires that anyone acting as a farm labor contractor be licensed by the Division of Labor Standards Enforcements, keep his/her license up-to-date, and keep it in his/her possession. Federal law has similar registration requirements. Before performing any "farm labor contracting activities," farm labor contractors are required to apply to the Department of Labor for a Certificate of Registration authorizing the applicant to engage in "farm labor contracting activities."
Independent Contractor (1099) v. Employee (W-2) Classification
Misclassification may lead to significant scrutiny by both the California Labor Commissioner and the Employment Development Department. If an employer plans to use more than a few independent contractors on a regular basis, a review of the practice and the particular agreements is a good idea. If the employer controls how someone does the work and when that work is done, then it is likely that person is legally an employee. The ultimate question of classification is a matter of law, and not up to the employer and worker.
Review the classifications here.
Background Checks and Criminal History Inquiries
California and many cities have passed “ban the box” ordinances, limiting inquiry into an applicant’s criminal history. Read our detailed advisory here. Generally, California employers may not inquire into or consider the conviction history of the applicant or include on any application for employment any question that seeks disclosure of an applicant’s conviction history, until after a conditional offer of employment is made. Read our detailed advisories here and here. The California state “ban the box” law, however, does not apply to a position as a farm labor contractor per California Government Code section 12952(d). Local laws may apply though.
Form I-9 Compliance and the Immigration Worker Protection Act
This is important because of ICE’s increased audit efforts and the Trump administration’s position on immigration. All employers must complete the Form I-9, Employment Eligibility Verification, for all employees hired after November 6, 1986, which includes owners of the company. The current version of the I-9 form must be used.
Under the recently signed Immigrant Worker Protection Act, California employers are required to comply with various prohibitions and requirements with regard to worksite inspection by immigration enforcement agents. The law specifies certain prohibitions on employer conduct if an immigration enforcement agent seeks to enter the employer’s place of business or requests employee records, subject to specific exceptions. It also requires employers to comply with notice requirements to employees if the employer is aware of an upcoming inspection of I-9 forms or other employment records. It prohibits employees from re-verifying employment eligibility of any current employee at a time or in a manner not required by federal immigration law.
Wage Order Application for Overtime Purposes
The Fair Labor Standards Act exempts from its overtime wage provisions employees who are employed in agriculture as defined by that Act. But, California state law still applies. For the purposes of overtime pay, various California Wage Orders are potentially applicable to agricultural employees. Wage Order No. 14 covers field harvesting workers that perform tasks, including but not limited to, harvesting, growing, spraying, tree propping, and picking. Generally, it covers workers not engaged in changing the nature of the crops.
The Wage Order states that an employee is given overtime pay after working 10 hours in a day or 60 hours in a week. It provides that overtime is paid for the first eight hours worked on the seventh (7th) consecutive day of work in a workweek, and for two times the employee's regular rate of pay for all hours worked over eight on the seventh (7th) consecutive day of work in a workweek. An employee may work seven (7) workdays in one workweek with no overtime pay when the total hours of employment during such a workweek do not exceed 30 and the total hours of employment in any one workday do no exceed six (6). Wage Order No. 14 also permits minors to work on a piece rate basis if at least 80 percent of the minors employed on this basis are paid 85 percent of the minimum wage rounded to the nearest five cents.
Assembly Bill 1066 requires employees currently covered under Wage Order No. 14 to be paid overtime after: 9.5 hours worked in a day effective 2019; 9 hours worked in a day effective 2020; 8.5 hours worked in a day effective 2021; and, 8 hours worked in a day effective 2022. For employers with 25 or fewer employees, the same changes phase in later over four years, between 2022 and 2025. In addition to the eventual requirement of paying overtime at one and a half times an employee’s regular rate, after eight hours in a workday or 40 hours in a workweek, agricultural employers will have to pay double time after 12 hours in a workday. AB 1066 also removed the “one day’s rest in seven” exemption previously enjoyed by agricultural employers. Read our detailed advisory here.
Wage Order No. 13 applies to employers who pack, process, or otherwise prepare only their own farm products on their own premises. Wage Order No. 13 covers workers engaged in “any operation performed in a permanently fixed structure…on the farm…for the purpose of preparing agricultural…products for market…and includes all operations incidental thereto.” Thus, Wage Order No. 13 generally covers workers engaged in altering crops to facilitate their marketing, including, but not limited to, workers that work in a permanent packing structure and perform tasks related to washing, sorting, grading, packing, and shipping. Wage Order No. 13 provides that an “employee” covered under the Wage Order is given overtime pay after working 8 hours in a day or 40 hours in a week. Employees are also permitted to work more than six days in a week on the condition that any work by an employee in excess of seventy-two hours in any one workweek shall be voluntary.
Wage Order No. 8 applies to employers who handle any farm product produced by another farmer. Wage Order No. 8 covers workers engaged in “industries handling products after harvest,” which includes, but is not limited to, the grading, sorting, cleaning, drying, cooing, slaughtering, picking, plucking, pasteurizing, ripening, or otherwise preparing any agricultural, horticultural, egg, poultry, meat, seafood, or dairy product for distribution.
Wage Order No. 8 differs from Wage Order No. 13 in that it applies to the handling of any agricultural products other than the grower’s own after harvest. Wage Order No. 8 provides that an “employee” covered under the Wage Order is given overtime pay after working 8 hours in a day or 40 hours in a week. Employees are also permitted to work more than six days in a week on the condition that if any employee works in excess of seventy-two hours in any one workweek, that employee shall have a 24-hour period off duty. An employer can have employees that work under both Wage Order Nos. 13 or 8, and Wage Order No. 14.
Local Minimum Wage and Paid Sick Leave Regulations
Effective January 1, 2018, the California state minimum wage is $11.00 per hour for workers at businesses with 26 or more employees and $10.50 per hour for workers at small businesses (25 or fewer employees). In addition to federal and California state law, California cities and counties have ordinances that require compliance. If the city or county where the workplace is located has a higher minimum wage that California’s then the employer must pay the employee the higher rate. This requires review of employment applications, minimum wage rates, and paid sick leave policies to ensure compliance with applicable local ordinances. Read our detailed advisory here.
Employee Arbitration and Class Action Waiver Agreements
These agreements require an employee to waive the right to a civil court jury trial, and instead to arbitrate before a private arbitrator; and waive the right to bring a class action claim in any venue. Waiving the ability to sue as a class action plaintiff effectively protects the employer against a class action, almost certainly the greatest (and most uninsurable) employment risk. An enforceable arbitration agreement frequently devalues the case in the eyes of the employee’s attorney.
There are limits, however. Agreements must be fair to be enforceable (not “unconscionable”), and California Private Attorney General Act (“PAGA”) class representative actions cannot be waived. And, even though an employer may not have any union-represented employees, the National Labor Relations Board still has the ability to enforce certain laws aimed at affording employees the opportunity to organize. Read our detailed advisory here. The issue is before the U.S. Supreme Court, which is expected to clarify the limits of enforceability.
Employee Restrooms. Agricultural employers are required to provide potable drinking water, toilets, and hand washing facilities to hand-laborers in the field. In addition, all single-user restrooms must be designated as all gender. Read our detailed advisory here. Failing to do so may be negative evidence in any harassment or discrimination claim, and may constitute a violation of the California Building Code.
California’s Fair Pay Act requires employers to demonstrate that any wage differential is based on a bona fide factor other than gender, race, ethnicity, or any other protected characteristic. The statute lowers the burden of proof for employees claiming discriminatory pay practices by prohibiting an employer from paying lower wage rates for “substantially similar” work. And, employers can no longer ask for prior salary history from applicants. Read our detailed advisories here and here.
Paystub and Payroll Practices
There are specific requirements for payroll schedule, pay checks, and pay stubs, per California Labor Code sections 205, 205.5 and 226a. Payroll schedule requirements are:
- Agricultural employees (excluding workers employed by a farm labor contractors) may be paid “twice during each calendar month, on days designated in advance by the agricultural employer as the regular paydays [so that] [l]abor performed between the 1st and 15th days, inclusive, of any calendar month shall be paid between the 16th and the 22nd day of the month during which the labor was performed [and] [l]abor performed between the 16th and the last day, inclusive, of any calendar month shall be paid for between the first and seventh day of the following month.”
- Workers employed by a farm labor contractor must be paid “at least once every week on a business day designated in advance by the farm labor contractor.” Payment must include all wages earned up to and including the 4th day before the payday.
- An agricultural employee that is boarded and lodged by the employer may be paid “once in each calendar month a day designated in advance by the employer as the regular payday.” No two successive paydays shall be more than 31 days apart, and the payment shall include all wages up to the regular payday.
- Employees must be able to cash their pay checks “on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument,” except that “if the drawee is a bank,” the bank’s address need not appear on the pay check, so long as it may be cashed “without discount [i.e., without fee], at any place of business” of the bank.
- Pay stubs must include the nine items enumerated in Labor Code 226a, including the gross and net “wages earned,” the “total hours worked by the employee,” “the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis,” and “all applicable hourly rates...and the corresponding number of hours worked at each….” This means that the appropriate rates of pay for paid sick leave, vacation/PTO, overtime worked at different rates of pay in the same pay period, and meal/rest break premium pay should be confirmed. And, the “total” portions of the pay stub should only include the proper items. Farm labor contractors must also provide to farmworkers employed by the contractor a detailed payroll record of all wages and hours worked that farmworker.
Commission Agreements and Bonus Plans
California employees who are paid a commission must have a written, signed agreement reflecting the precise method by which commissions will be calculated and paid. Draws against commissions may violate rest period rules if the employee is non-exempt. Read our detailed advisory here.
Bonus plan agreements are recommended so that the terms of the bonus are clear. In addition, non-discretionary bonuses and commissions earned by non-exempt employees must be included in the employee’s regular rate of pay/overtime pay calculation. Read our detailed advisory here.
Meal and Rest Breaks
A timekeeping system that “automatically deduct[s] a half hour for meal breaks” is a common and often risky practice. Rather than automatic deductions, employers should instead use counseling to address those situations where the weekly/monthly time records reveal an employee’s non-compliance with the meal period policy, by taking no meal break, a late meal break, an interrupted break, or a short meal break. Read our detailed advisory here.
An employer’s timekeeping system should produce a report of the missed, short or late meal breaks for each payroll period so those issues can be addressed. If the employer caused the short, late or missed meal or rest break, the employer must pay the one hour meal period premium penalty pay.
Timekeeping for Non-Exempt Employees
It is important to review non-exempt employee time records with corresponding paychecks to determine whether overtime is calculated properly, and to identify potential risks re: piece rate pay, reporting time pay, travel time pay, and/or split shift pay.
“Rounding” clock- in/out times may be defensible, but invite high-stakes class action litigation. Read our detailed advisory here. “Reporting time” pay applies in situations where employees who are required to report to work for a scheduled period of time, but at the employer’s request work less than half that time; in that scenario, the employees are entitled to be paid for just the time worked, as long as the time worked is at least half of the scheduled time. But, if the employee is not provided with work for at least half of the scheduled time, or there is no set period of time, the employee is entitled to the greater of 2 hours of pay, or half of the usual or scheduled day of work, up to a 4-hour maximum.
“Piece rate” work is when work is paid according to the number of units or tasks an employee completes or produces. An employee can be paid piece rate in addition to, or as an alternative to, an hourly rate or salaried rate. However, all requirements that apply to hourly, non-exempt employees still apply to piece rate employees. Employers must pay piece-rate employees for rest period, recovery periods, and all other periods of “nonproductive” time separately from and in addition to their piece-rate compensation.
The rate of compensation for the rest and recovery period is the higher of: (a) an average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods or (b) The applicable minimum wage. Further information and the formulas for computation are available here.
Piece rate employees, like hourly, non-exempt employees, are entitled to overtime pay. The overtime calculation is different, though, as it requires employers to calculate the employee’s regular rate of pay. To do this, employers must take the straight time wages and divide by the total actual hours worked.
While commute time – i.e., the time spent commuting from home to work and from work to home – is not compensable (unless the employee is under the employer’s control during the commute), all other travel time is compensable. Travel time – i.e., where there is an “assigned” work place and the employee is required to travel to another site – is compensable, subject to an offset of the time it normally takes an employee to commute to his/her assigned workplace. Thus, time spent by an employee while traveling between job sites (e.g., from field to field or from a field to some location to receive instructions or tools) must be compensated.
Plus, when the employer provides transportation to employees and requires them to ride in company-provided transportation, the time spent traveling must be compensated. In contrast, travel time need not be compensated where an employee may choose whether to ride in company transportation. Travel time may be compensated at any rate, as long as it is at least the minimum wage, the travel time is separately recorded, and the employer and employee agreed to the travel-time pay rate before the employee incurred the travel time.
Employees must be given a day of rest. Read our detailed advisory here. AB 1066 also removed the “one day’s rest in seven” exemption previously enjoyed by agricultural employers.
California Labor Code Section 2802 requires reimbursement of business expenses. Two potentially problematic issues are: reimbursement for mobile devices; and, employee uniforms. Reimbursement is required for an employee’s personal cell phone and voice and data plan when the phone is also used for business purposes. Read our detailed advisory here.
Having policies and practices in place are key to avoiding a class action alleging failure to reimburse for work-related cell phone usage. Such policies include “Bring Your Own Device” (or “BYOD”) agreements that govern use of devices for work purposes, which can help limit exposure to off-the-clock work and reimbursement issues, as well as provide for the protection of sensitive employer information.
Clothing or footwear of a distinctive design or color is considered a uniform. If an employer requires the use of a uniform, then it must provide those uniforms to employees at no cost to the employee. And, the employer must also replace a uniform at no cost to the employee, unless the original uniform was destroyed through the employee’s gross misconduct.
The employer generally must also maintain uniforms at no cost to the employee, unless the uniform is made of fabric requiring nothing more than ordinary washing and drying; in those circumstances, an employer can reasonably require the employee to maintain the uniform. However, employers must themselves maintain, or else reimburse employees, for maintaining, those uniforms requiring ironing, dry-cleaning or special laundering.
Drug testing is limited in California to pre-employment and circumstances giving rise to “reasonable suspicion.” Employers may not automatically drug test after workplace accidents, nor may they randomly drug test (unless as part of a U.S. Department of Transportation testing scheme). The legalization of marijuana in California for recreational purposes warrants a review and likely updating of workplace drug and alcohol policies. Read to our detailed advisory here.
Leaves of Absences
Leaves in California are tricky. Navigating the interplay of the various types of legally-protected medical leaves – e.g., paid sick, workers’ compensation, FMLA (and state law equivalent), and ADA/FEHA disability – can be difficult. Read our detailed advisory here.
California law does not permit an employer to inquire about the actual medical condition itself; the employer may only ask about the restrictions resulting from the condition. And, once FMLA/CFRA leave is exhausted, employers must nevertheless continue the interactive process and consider unpaid ADA/FEHA disability leave as a possible reasonable accommodation. Read our detailed advisory here.
Anti-Harassment Training and Policies
California requires sexual harassment training, which is interactive and at least two hours in length, for all supervisors within six months of hire, and retraining every two years thereafter. California mandates sexual harassment prevention training for farm labor contractor licensees and their supervisors, as well as training of non-supervisorial employees, including agricultural employees, in how to prevent, identify, and report sexual harassment. Training is required at the time of hire, and at least once every two years.
In 2017, California signed into legislation Senate Bill 295, which expands on the mandated sexual harassment prevention training required to receive a farm labor contractor’s license. Training must be conducted or interpreted in a language that employees can understand, and farm labor contractors must provide proof of all their materials and resources utilized for training, and must report the number of employees trained. The new law requires the Labor Commissioner to publish the total number of agricultural employees trained the previous calendar year. Any violation of the new requirements will result in a $100 civil fine for each violation.
Required Notifications and Posters
In addition to the posters required to be posted by California employers pursuant to various California and federal laws, agricultural employers may also be required to post the following notices:
- all applicable California Wage Orders (Nos. 4, 8, 13, and 14);
- the Federal Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA) Worker Information and 'Worker Rights" notice;
- the Agricultural Employees Federal Minimum Wage rate under the Fair Labor Standards Act;
- an Employer’s right poster for Agricultural H-2A workers;
- the California Minor Children Notice stating that minor children are not allowed to work on the premises unless permitted to do so by law and unless permits have been secured by the minor children;
- farm labor contractors must display at the workplace and on all vehicles transporting employees, the rate of compensation, in English and Spanish; and
- farm labor contractors must post a public notice regarding the reporting of slavery and human trafficking, printed in English, Spanish, and one other language that is widely spoken in the county where the workplace is located
Some agriculture employers provide their farm employees with housing for free or at less than its fair market value. Doing so may impact overtime pay, workers’ compensation premiums, and taxes. Under both federal and California law, the premium pay owed an employee for working overtime is computed based on the employee’s regular rate of pay. The calculation for the employee’s regular rate of pay must account for non-monetary remuneration, such as board, housing, and utility services that an employer furnishes to an employee. There is an exception for facilities whose cost is to be excluded from wages under a collective bargaining agreement covering the employee.
Housing may not be credited against the minimum wage without a voluntary written agreement between the employer and the employee. When credit for housing is used to meet part of the employer’s minimum wage obligation, the amounts so credited are capped under the California Wage Hours.
Federal law has similar requirements. An employer’s payroll is used in calculating the premium for the employer’s workers’ compensation insurance policy. Such remuneration includes “all substitutes for money.” Housing provided to an employee is generally remuneration only if (1) the employee’s wages are reduced by an amount equal to the value of such housing or (2) the housing is provided expressly in lieu of wages. Housing an employer provides for farm employees, however, is not subject to either condition. The market value of such housing is always included as payroll.
Any fringe benefit an employer provides to an employee is taxable and must be included in the employee’s pay unless the law specifically excludes it. The amount to be included in an employee’s pay is the amount by which a fringe benefit’s value exceeds the sum of (1) any amount the law excludes from pay and (2) any amount the employee paid for the benefit. The amount is subject to income and employment taxes and must be reported on the employee’s IRS W-2 form, Wage and Tax Statement.
Unless the housing provided meets all three of these tests, such housing is a taxable fringe benefit, and its value must be included in the employee’s wages: (1) it is furnished on the employer’s premises or place of work; (2) it is furnished for the employer’s convenience; and (3) the employee must accept it as a condition of employment.
Even the most compliant employers face wrongful termination, discrimination, retaliation, wage-hour, and harassment lawsuits. The only “silver bullet” against protracted and expensive litigation is an enforceable separation agreement that contains a general release of all known and unknown claims. While a separation agreement may not legally provide for the release of certain claims, such as those for workers’ compensation or unemployment benefits, a carefully crafted agreement used in appropriate circumstances will go a long way toward significantly reducing risk.
Aaron Colby is an experienced employment litigator who develops policies and practices that help organizations manage risk and avoid workplace issues, and he regularly defends companies across a wide range of employment disputes.
Paul Rodriguez focuses his practice on employment issues, representing employers in single-plaintiff, multi-plaintiff, and class action disputes.