Structuring Labor on the Small Farm
North Carolina’s agricultural economy is characterized by diversity. NC farmers produce a wider range of products than many other states in the nation, including both commodity and specialty products. In addition to holding the rank as North Carolina’s top industry, agriculture accounts for nearly a quarter of NC’s workforce (2012 agricultural census).
Farm workers range from migrant and seasonal laborers to live-in, year-round apprentices. This range in the nature of farm employment often comes with uneasiness among farmers about the best way to structure on-farm labor programs. Meanwhile, despite North Carolina’s top production numbers, the hard fact remains that NC is losing farms and farmers at a higher rate than any other state. As a result, many farmers see it as their duty to mentor future growers through on farm work experience in order to preserve the agricultural economy in NC.
Unique apprentice programs on small farms are now becoming a popular way for farmers to fulfill labor needs while passing on the knowledge and passion that is necessary for future farmers to thrive. The purpose of this publication is to look at internship or apprenticeship programs on NC farms in the context of NC labor laws, in order to assist farmers in understanding how to structure and maintain successful labor programs within their farm operation.
We will define an intern or apprentice (used interchangeably here) as a person who agrees to trade labor on a farm in exchange for a learning experience in farm management. This agreement between farmer and worker is unique in that the farmer often trades the ultimate efficiency of a traditional paid worker for a (typically) more novice employee. In exchange, interns often work for less than a living wage, as their mentor relationship with their host farmer is considered to be a portion of their compensation. Interns often live with the host farmer and farm family, or in separate housing on the farm property. Other “in-kind” wages often include food or other products from the farm. While apprentice programs can include none or all of the above benefits in terms of the farmer-to-intern agreement, there are myriad ways in which farmers can structure their work programs to fit appropriately within their farm operation.
The IRS uses a system of many factors to determine a worker’s classification as either an independent contractor or an employee, and while no specific factors weigh more heavily than others in this classification process, there are factors that may make the determination easy for farmers to discern in their situation. For example, an independent contractor typically uses his or her own tools, requires little training, and is given the desired results at the end of the work as opposed to step by step instructions as to how to achieve the results. By contrast, an employee will use the equipment and tools belonging to his or her employer, and the employer will maintain control over the work of the employee. Using these and other classification factors, it is usually correct to classify farm workers as employees rather than independent contractors.
The exception to this generalization is a situation that the US department of labor calls “joint employment”. Joint employment refers to farmers who employ farm labor contractors—people who for financial or other compensation recruit other workers for the farmer, and sometimes provide room, board, and transportation for those workers. This situation is typical on farms where migrant labor is employed. In these cases, the person serving as the farm labor contractor may be classified as an independent contractor. In most other farm labor situations, farm workers should be considered employees.
Becoming an Employer
Ongoing work on the farmer’s part to maintain employer status include obtaining and paying premiums on workers compensation insurance, filing taxes quarterly using the proper form 941, or if the farm’s annual tax liability is $1,000 or less, the farmer may pay taxes annually using form 943. Farmers must begin filing taxes annually as soon as they have paid $2500 or more in wages to workers within a tax year, or as soon as at least one employee has been paid more than $150 in cash wages. Farmers should also register for unemployment insurance tax, if they are paying more than $20,000 in wages per calendar quarter, or if they are employing 10 or more worker(s) for 20 or more weeks in a calendar year.
In addition, accurate time sheets detailing hours of work and specific activities will assist the farmer with payroll, and with claiming agricultural exemptions (see page 4). A simple timesheet template is provided in appendix A. Farmers should always keep detailed payroll records, including dates, amounts, and forms of payment, and if applicable, the value of in-kind wages. A sample payroll spreadsheet is provided in Appendix B. It is also important to include periodic employee evaluations (that are shared and signed by the employee), notice of raises, and any disciplinary actions that were taken against the employee during their time of employment. Be sure to not keep any personal information on the employee pertaining to political or religious views, private life, or anything not directly pertaining to their employment with your farm.
The list of recordkeeping priorities may seem excessive, especially to growers with little experience employing workers. However, it is important to know and record detailed information about farm workers and the nature of their work because these facts tie in to how their labor is regulated. For example, an intern with a permanent residence that is out of state (this is common, as many interns still list their parents’ address as their home address) may be considered a migrant worker, and as such, that intern’s farmer employer may be subject to different rules than would seem intuitive.
Wage & Hour Laws, Agricultural Exemptions
Common exemptions are as follows:
- The 500 man-day exemption:
– A “man-day” is defined as any day in which any one worker labors for at least one hour. If a farmer employs labor for fewer than 500 man-days in a year, that farmer is exempt from paying minimum wage and overtime. In general, farmers who employ fewer than five workers annually will qualify for this exemption. However, if farmers employ more than five workers during a year, and fewer workers in other times of the year, the farmer will not qualify. Please keep in mind that these are federal, not state, standards. You are required to comply with your states standards, if different than what is listed above.
- The Family Exemption:
– A farmer who employs his or her spouse, children, or other family members is exempt from wage and hour requirements with regard to family employees.
- The 13 week/25 mile exemption:
– Farmers are exempt from wage and hour regulation regarding any worker whose permanent residence is within 25 miles of the farm workplace and who commutes to work for 13 weeks or fewer in a year.
– Other exemptions apply to farmers who employ commuting, hand harvesters paid on a piece-rate basis and employed in agriculture for 13 weeks or fewer annually, farmers who employ minors for hand harvesting, with their parents, and pay on a piece-rate basis that is equal to that of non-minors in the same operation, and farmers who employ workers strictly in range livestock operations.
It is important to note that all of these exemptions require good recordkeeping (as defined above), and all of these exemptions specify the type of work that qualifies. Workers must be engaged in “agricultural labor” in order for the farmer employer to claim these exemptions. Agricultural labor is defined as labor related to the production and sale of commercial food and fiber products. Labor on behalf of a cooperative of growers or completed in a cooperatively owned facility does not qualify for the exemptions. If a farmer claims an exemption, he or she must be able to justify that the labor situation on the farm is compliant with the rules of that exemption. Thorough recordkeeping (as defined above) on each employee will assist if an exemption is ever called into question.
As with minimum wage and overtime, there are some exemptions to social security and Medicare withholdings that are worth mentioning. The IRS refers to this as the $150 and $2500 test. If a farmer pays less than $150 to an employee in annual wages, those wages are not subject to social security, Medicare, or federal tax withholdings. If the farmer pays less than $2500 in total wages to all employees, those wages are also not subject to withholdings. Very few scenarios will qualify for exemption under these tests, but they are important to note because they make it easier for farmers to hire workers on a trial period, for example, or for a short-term project.
In-kind, or non-cash wages are also considered a part of payroll. Farmers should note in employee files the value of in-kind wages, as many of these count as fair compensation in agricultural employment. For example, many farmers provide housing to workers. As long as the housing is not valued over its fair market value, or as long as the farmer is not somehow also profiting from that housing, the farmer can include it as a portion of employee wages. With regard to housing, farmers should be aware of Federal Occupational Health and Safety (OSHA) regulations, and MSPA regulations, as these govern on-farm housing. Farmers qualifying for the “500 man-day exemption” are considered exempt from MSPA regulation with regard to housing requirements, but they will not be exempt from OSHA regulations unless they are housing fewer than 10 employees annually. The OSHA regulations dictate the condition and safety of the housing itself, and also require farmers to register their housing with the government within 45 days of occupancy.
Other in-kind wages include food or other products from the farm. Non-cash wages are not subject to withholdings, but their evaluation is factored in to the $2500 test. In other words, if a farmer pays both cash and non-cash wages, and together the value of those wages exceeds $2500, the cash wages paid are then subject to withholdings.
To date, the educational value of a farm work experience is not a recognized non-cash wage in NC unless the worker is also receiving college credit for the experience. In that case, the college or institution providing academic credit will dictate the educational value of the work. However, without an academic entity backing the work experience, farmers may not value their mentoring or the intern’s learning as part of in-kind or non-cash wages.
Many farmers may think the task of acquiring workers overwhelming, and in some cases it can be a long process. In North Carolina, there are several popular resources for advertising internship programs, and the state is well-known as a place where one can learn about agriculture through work trades. The Organic Growers School maintains an annually updated database of farmers seeking employees, called Apprentice Link. Farmers may apply to be listed on this database through the Organic Growers School website. The database is online, and therefore accessible to potential interns from all over the globe. Parties interested in NC farm work can search the database for farms that fit their interest area.
Additional resources for advertising labor programs are listed on the OGS Labor Resources page. The resource list in Appendix C also lists these websites for farmer reference.
As farmers in NC continue to build successful and rewarding labor programs, our state will gain even more recognition as a place where aspiring farmers will want to settle and learn the trade. Many workers spend several seasons on NC farms as they test out and learn about different management styles and types of farming operations. Word-of-mouth is a powerful tool for farmers seeking to find their first interns, and talking to fellow farmers will prove helpful in learning the details of structuring a labor program.
Appendix A: Resource for Hiring Farm Workers
- Directory of Topics (including child labor on farms, OSHA regulation, piece‐rate operations, and join employment, among others)
- The FLSA for Agricultural Employers
- The Migrant and Seasonal Worker Protection Act
Organic Growers School:
- New England Small Farm Institute: Print and online resources for organizing mentorship on the small farm, as well as teacher training resources. Also, legal resources specifically oriented to farming in the North East.
- Meeting Prospective Apprentices (Maine Organic Farmers & Gardeners Association): Guidelines for Farmers.
Appendix B: Sample Employee Timesheet
Appendix C: Sample Payroll Spreadsheet
OGS Farmer Programs are made possible by our farmer network and our funding partners: CLIF bar Family Foundation, Southern Sustainable Agriculture, Research and Education UNFI Foundation, WNC Bridge Foundation, Harry Chapin Foundation, Walnut Cove, New Visions, and USDA Rural Development. Our Growth Partners (year-round program support) are: Carolina Farm Credit, Earth Tools, Buchi, Living Web Farms, Gaia Herbs and Chelsea Green Publishing. Our Media Sponsors are WNCW, Asheville FM and BPR. .