by Sally Colby
Nearly everyone who employs workers in an agricultural enterprise is prepared for changes to overtime rules in 2020. Attorney Christopher Schulte, who has extensive experience in agricultural employment and immigration law, explained the generalities of the new law regarding overtime for AmericanHort, defining overtime as the duty of the employer to pay 1.5 times wages for workweeks during which a given employee works more than 40 hours.
Schulte explained that overtime is the result of Fair Labor Standards Act (FLSA) passed as part of FDR’s New Deal. FLSA applies to businesses with more than $500,000 in gross annual sales. Schulte said the original concept behind the requirement was to create a penalty for employers. “It wasn’t so much to help workers as to make employers hire more people to cover the same position,” he said. “Rather than have one worker doing 80 hours a week, they would hire two workers to do 75 or 80 hours a week to improve employment at the depth of the Depression in 1938.” FLSA was meant to help those working long weeks, but it also pushed employers to better manage their workforce by hiring additional workers.
The new rule is centered on changes in the salary threshold, and may result in changing previously exempt workers to non-exempt status. Prior to Jan. 1, 2020, the salary threshold was $455/week ($23,660/year), which hasn’t changed since 2004. The new threshold as of Jan. 1 is $684/week ($35,568/year). Schulte said the Department of Labor estimates 1.3 million more workers will now receive overtime.
Schulte said commonly used FSLA overtime exemptions exist in agriculture, white collar jobs (salaried workers in management positions), motor carrier and outside sales. The white collar exemption includes three basic categories: executive, administrative and professional. The executive category includes people running the company, but not necessarily those in top positions dressed in suits. “It can be people who are managing a division,” said Schulte. “This goes down to a crew leader job on nurseries or farms. It covers anyone who directs the work of two or more workers. They look at whether the worker has the ability to hire or fire workers, or if their recommendations are given particular weight.”
Those not working in the field with non-manual duties related to the business operation have administrative status. “That is going to be pretty much anybody who exercises discretion and independent judgment – a bookkeeper or someone who is making choices or a farm manager who is making planting decisions,” said Schulte. “Not just someone answering the phone, but someone who has some level of choice or control over the operation.”
Schulte said professional status may come up in some contexts, such as a company with a landscape designer on staff. This status would also include a learned professional such as an agronomist who performs work that requires advanced knowledge in a field of science.
The motor carrier exemption applies to larger vehicles traveling across state lines. “For the motor carrier exemption, it’s safety-related,” said Schulte. “If you grow plants and take them to a garden center across state lines, or if you know it will be eventually transported across state lines by someone else.”
Outside sales refers to making sales or taking orders. Schulte said the key to defining outside sales is that the majority of work is off-site. On-site sales people are not exempt unless they are supervising other people or otherwise administrative.
The most common exemption is agriculture. “The exemption applies worker-by-worker and week-by-week; there’s no such thing as a blanket exemption,” said Schulte, adding that this exemption has potential for misinterpretation. “It doesn’t go with the business, it goes with the worker. Eligibility for and exemption from overtime are worker-by-worker. If one worker handles things grown by someone else or is engaged in something that’s not eligible for it, that worker could get overtime, but it doesn’t mean everybody working there gets overtime – it’s just that one worker based on what they do, or one crew. It’s week-to-week, so they could be exempt some weeks and not get overtime – they could work 60 hours and get paid straight time – then there could be weeks where they do some of the non-exempt activities and they get overtime for that week.”
Schulte said nurseries and sod farms are eligible for the exemption, although there may be gray areas regarding installation work. “If you’re growing trees or sod and deliver and plant and do some of the initial watering at the client’s location, that is considered agriculture and can be considered exempt,” he said. Ongoing landscaping services such as plant maintenance and mowing are not exempt agriculture.
Within the ag exemption are primary and secondary categories. Primary agriculture includes planting, watering, weeding and caring for plants. Secondary agriculture involves the transportation of a product from farm to market and is included. Employees who serve as office staff (payroll, etc.) are also secondary and potentially overtime exempt. “People who are kitchen workers and are feeding workers on site are considered secondary ag,” said Schulte. “People who are handling payroll for farmworkers could be secondary ag and potentially overtime exempt. The person who does payroll could also be exempt as a salaried administrator – they’d be doubly exempt.” Schulte noted that when workers start interacting with customers, such as in a retail setting, that’s where the exemption ends.
Moving material on trucks for shipment is a classic example of secondary ag. “Depending on the size of the truck and where the truck is going, the people loading trucks are sometimes considered to be ‘affecting safety’ so that could be exempt under the motor carrier exemption,” said Schulte. “If you’re loading a truck that involves other people’s plants, you might be exempt from that time to the extent it’s considered as work that’s affecting safety.”
The ag exemption is an all-or-nothing interpretation. “Within a given week for a particular worker, if they do 99% exempt things and do one thing that is not exempt, they lose it for the entire week,” said Schulte. “It isn’t forever, and it isn’t for everyone. If they work 55 hours planting, watering, moving plants, setting up hoop houses, that’s all fine. Then they spend 10 minutes unloading a truck with plants brought from another nursery that are going to be unloaded then loaded onto another truck to combine an order – those are not things you’ve grown and aren’t going to stay there long enough for you to grow them. That’s outside work and non-exempt, so you lose it for the entire time.”
In the case of a greenhouse that sells both wholesale and retail and employs laborers who work on both sides, exemption status depends on what employees are doing. “If things they’re growing will be sold by other people from the nursery’s own farm stand, that’s fine,” said Schulte. “If their work is behind the scenes and they’re growing it, it’s their work that matters, not what happens to it after it leaves their hands. If the worker is engaged in the commercial side of it, that’s what could throw it off.”
Schulte said the most common way to lose the overtime exemption is handling (shipping/selling) plants that are grown by a different employer. If the job involves “flipping” plants someone else has grown, it’s treated as non-exempt. However, not everything has to be grown from seed started by the grower – growers can take in young plants and grow them to more maturity. “As long as there’s some growing being done, there’s care put into the plant to nurture and grow them to a greater level of maturity, and that’s okay,” he said.
The “Regular Rate” final rule, proposed in March 2019, will allow employers to exclude certain things from an employee’s regular rate of pay. “When calculating overtime for a worker, you look to the phrase ‘regular rate of pay,’” said Schulte. “For most, it’s straightforward time and a half. For example, for those working on piece rate, no two workers will have the same base rate and pay will vary from week to week.” Schulte added that the point is to provide more certainty and not fear of being out of compliance.
Schulte said good record keeping is paramount for ensuring compliance. “Better to have three documents than one,” he said. “You may never need some of the things you keep, but you’d be surprised how often cases ‘turn’ on that extra piece of paper. Also track what work was done. If you have field workers who are only planting and watering, there’s no concern about their exemption. It’s more important when there’s a mix of work – sometimes they’ll be handling outside plants. Make a notation on their pay stub or record their time.” Schulte suggested maintaining a work roster that tracks which employees did certain work in case the Department of Labor questions that aspect. He also suggested, to the extent possible, separate exempt and non-exempt records.
The FLSA has a three-year look-back period for document retention, but usually reviews the most recent two years of records. Schulte suggested holding records for three years after the week the work was done.
A common employer mistake is thinking H-2A workers are exempt and not paying H-2A and corresponding U.S. workers overtime. “Usually that’s true, but there are times they might get overtime,” said Schulte. “One and one-half times AEWR [Adverse Effect Wage Rate] is pretty steep. There are different ways you can qualify as agricultural work to be H-2A eligible. They’re still working in ag, but some of that ag involves work for others.”
Schulte said the FLSA definition of ag determines whether H-2A can be used, but there’s also an IRS definition of ag. “You can use the IRS definition but still have to pay overtime,” he said. “If you are handling outside products, that’s okay as long as 50% of what you’re handling is your own. It still qualifies as ag for H-2A purposes. But as soon as you touch that first plant, you’re going to lose that FLSA exemption and pay overtime. It doesn’t give you blanket protection – it’s something to watch out for.”
Employers should understand both federal and state regulations regarding overtime, and should always consult their own legal counsel for specific advice.