Fair Labor Standards Act in Agriculture
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The Fair Labor Standards Act (FLSA)[i] is the primary federal law regulating labor employed in businesses engaging in interstate commerce, which includes agriculture in all its forms and sizes.[ii] The FLSA applies a federal minimum wage, regulates overtime pay and recordkeeping requirements, and limits child labor. The FLSA is administered by the U.S. Department of Labor’s Wage and Hour Division, which promulgates more detailed regulations. Implementation of FLSA’s requirements in North Carolina – along with various other federal laws – is effectively delegated to the North Carolina Department of Labor’s Wage and Labor Bureau, who enforces the federal standards under authority of state statute which references FLSA standards.[iii] (Click here to access a powerpoint presentation on FLSA)
Whether a particular employee’s work is exempt from FLSA requirements requires a two-part analysis. First: are the tasks performed agricultural labor? If the answer to the first question is “yes,” the second query is: does the amount of labor employed by the operation qualify as exempt, or does the person performing the tasks qualify as an exempt? Regardless of size of operation or person performing the task, if the work is not considered agricultural labor within the FLSA definition, that labor is subject to the minimum wage, overtime requirement, and child labor restrictions of FLSA.[iv]
Definition of Labor in Agriculture
For labor to qualify for the several exemptions from FLSA’s requirements for minimum wage, overtime and child labor, the work must first be considered agricultural. The definition of “agriculture” as defined in FLSA is critical to qualification for exemptions from minimum wage and overtime requirements. For the exemption to apply, the work (“the tasks”) must be work in production agriculture limited to the locus where crops are grown. Though there are thousands of jobs that support agricultural production and commerce – from before the first seed is planted to when the product is processed and distributed — only those jobs close to the core of raising the commodity from the soil or on the soil are considered agricultural. To this end, the FLSA defines agriculture as “farming in all its branches and among other things includes the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities.., the raising of livestock, bees, fur-bearing animals or poultry, and any practices (including any forestry, or lumbering operations) performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.”[v] This definition is often referred to as the “3(f) definition.”
The 3(f) definition effectively divides farm labor into primary and secondary categories of activity: the “primary” are those activities tied directly to production from the soil, and the “secondary” are those labor tasks incidental to (i.e. supporting) production from the soil. This distinction was first established in Farmers Reservoir Co. v. McComb, where the United States Supreme Court ascribed to this definition of agricultural labor a primary meaning and a broader secondary meaning for purposes of FLSA exemptions.[vi] Precedent set by the case still informs determinations of whether work incidental to agricultural production qualifies as exempt agricultural labor, and courts since that time have clarified when an activity is considered farm labor or labor that supports the business of farming. While primary category activities are somewhat easier to classify as agriculture, the secondary “incident to” tasks become more difficult to discern as falling under the definition.
The Department of Labor (DOL) FLSA regulations take illustrative effort to make employers aware of when activities qualify as exempt agricultural labor. [vii] As a general matter, the regulations state that “[e]mployment not within the scope of either the primary or the secondary meaning of ‘agriculture’ as defined in section 3(f) is not employment in agriculture. In other words, employees not employed in farming or by a farmer or on a farm are not employed in agriculture.”[viii]
In the primary category of the definition, labor qualifies as agriculture wherever and by whomever it is performed, regardless of the motive for production.[ix] The regulations generally emphasize intentional production “from the soil,” and the gathering of wild products or animals is not considered farming.[x] The raising of a variety of animals, including fur-bearing animals, bees, and even race horses, is primary agricultural production.[xi] However, the DOL regulations are explicit that the conversion of the agricultural commodity into a processed product is not considered exempt agricultural labor.[xii] Generally, such determination is made considering “the type of product resulting from the [processing] practice – as whether the raw or natural state of the commodity has been changed… [because it ]…marks the dividing line between processing as an agricultural function and processing as a manufacturing operation.”[xiii]
In regards to the where the secondary category dividing line crosses from agriculture to manufacturing, there are a number of factors to consider: 1) the type of product resulting from the practice (i.e., whether the raw or natural state of the commodity has been changed); 2) the value added to the product as a result of the practice; 3) whether a sales organization is maintained for the disposal of the product; 4) the length of the period during which the operations are performed (when considered together with the amount of investment, payroll, and other factors discussed above); and 5) whether products resulting from the activity are sold under the producer’s own label rather than under that of the purchaser.[xiv]
The secondary “incident to” category must be performed on the employing farm by the operator or his/her employees to qualify as agricultural labor for the FLSA exemptions, and can be more of a challenge to qualify due to variables of location and purpose of activity. The 3(f) “secondary” definition requires non-production activities to occur on a farm to count as agricultural labor, and as such distinguishes activities performed “incident to or in conjunction with… production” off the farm as non-qualifying. For example, if an employee of a farm performs post-harvest work on the farm (such as washing and packing vegetables or processing poultry on-farm), such labor would be considered “incident to” and thus defined as agricultural labor. However, such definition requires that the commodities processed on the farm come from that farm. Post-harvest handling by one farm’s employees of another farm’s product does not fit such labor into the secondary category.[xv] Likewise, if the employee were to perform these activities off the farm, they lose their 3(f) categorical inclusion. If labor performed incident to production is performed on a farm different from that of the employer, that employee labor loses its agricultural labor primary or secondary definition.[xvi]
Consider the following scenario:
Jimmy, operator of Black Dog Farms, LLC, allows his neighbor, Robert, operator of Kashmir Farms, LLC to bring his produce for washing by Black Dog’s employees. Though Black Dog’s employees are performing tasks incidental to farm production – the washing of vegetables – the product is from a separate farm, Kashmir. Therefore, the hours spent washing Kashmir’s vegetables are not considered 3(f) agricultural under FLSA.
Note that farm means land in cultivation under one farmer (whether individual or entity such as a partnership or limited liability company) and includes all of the land tended by that farmer, whether owned or under a bona fide lease.[xvii] That said, agreements regarding use of another’s land when the payment therefore is based on factors beyond straight cash rent or sharing of expenses under a share lease – such as provision of separate farm labor by the lessor or payment by lessee only for marketable product – may draw scrutiny.[xviii] Labor performed on the same land as the farming operation but which is not farming – say operation of a gravel pit or clearing of forested land for use other than farming – is also not 3(f) agricultural labor.
Consider the following scenario:
Pete, operator of Pinball, LLC, owns certain ditch clearing and grading equipment. Pete directs an employee with sufficient skill to operate the equipment to perform routine ditch clearing for drainage, as well as grading work on farm paths on land tended by him (both owned or rented). Such work is considered incident to his “farm.” However, if Pete directs his employee to provide ditch clearing, grading and other such work on the farm of his neighbor, Roger, the employee falls outside of the “incident to” 3(f) definition, and that work is subject to federal minimum wage.
Arguably, if Pinball, LLC’s employee was directed to do some road grading, or to dig a pond, etc. on land rented by Pinball, LLC but where such improvements did not at all benefit Pinball LLC’s production on that rented land (i.e. the improvements are solely to benefit the landowner), that labor would likely fall outside the 3(f) definition.
Factors that qualify labor in the secondary 3(f) category are generally viewed as a whole, and no one factor controls. Such factors include the general relationship of a particular labor task to farming as evidenced by common understanding, competitive factors, and the prevalence of its performance by farmers in general. Other factors considered include the size of the operation and respective sums invested in land, buildings and equipment for the regular farming operations and in plant and equipment for performance of the practices related thereto. Also, the amount of the payroll for each type of work performed for the operation, the number of employees and the amount of time they spend in each of the activities, and the extent to which the labor tasks are performed by ordinary farm employees and the amount of interchange of employees between the operations. Also relevant is the amount of revenue tied to each activity, the degree of industrialization involved, and the degree of separation established between the activities.[xix]
Consider this variation:
Arguably, if Pinball, LLC’s employee was directed to do some road grading, or to dig a pond, etc. on land rented by Pinball, LLC but where such improvements did not at all benefit Pinball LLC’s production on that rented land (i.e. the improvements are solely to benefit the landowner), that labor would likely fall outside the 3(f) definition. However, what if it is customary in the area that farm tenants offer land improvement services in competition for productive farmland?
Note that the regulations do supply various descriptive activities related to thirteen commodities as falling within the secondary 3(f) definition. For example, for eggs: Handling, cooling, grading, candling, and packing. For nursery stock: Handling, sorting, grading, trimming, bundling, storing, wrapping, and packing. And for poultry: Culling, grading, cooping, and loading.[xx] In regards to poultry, North Carolina allows an exemption for on-farm processing of 1000 birds per year,[xxi] and though the birds are killed and processed on the farm under prescribed conditions, it would seem likely that labor for such processing is not exempt 3(f) labor.
Consider this scenario:
Eddie, operator of Eruption Strawberry Farm, LLC, purchased cleaning and packing equipment for his strawberry crop. Operating the packing equipment – cleaning and packing strawberries into clamshell packaging – are several employees. When Tony instructs his employees to pack strawberries and place the label Eruption Strawberry Farm, LLC on the package, it is likely such packing labor falls into the secondary 3(f) definition. What happens if Eddie accepts strawberries from Pinball Farms and packages them along with his strawberries under his label? What happens if Eddie contracts with a distributor, who supplies a different label to the packaging of Eddie’s strawberries?
In summary, the categorization of labor not directly tied to the raising of the commodity should be carefully documented, and any such labor should be focused only on the products and commodities of the employing farm. Preparation for market appears well within the secondary “incident to definition,” but care should be taken the more that product is prepared for sale direct to the wholesale or retail customer, and does not itself cross into realm of a separate distribution operation.
With these exempt primary and secondary agricultural labor categories in mind, the following sections describe how FLSA’s provisions apply to this labor.
Minimum Wage and Overtime
The FLSA requires all employers to pay their employees $7.25 per hour.[xxii] This is a federal minimum, and no state may allow a lesser minimum wage. Though states may require a higher minimum wage under state law, North Carolina accepts the federal minimum as the state minimum wage,[xxiii] as does Virginia.[xxiv] FLSA specifically applies federal minimum wage requirements to agricultural labor generally.[xxv] Additionally, FLSA requires most employers to pay one and a half times the employee’s regular rate of pay when the employee works in excess of forty hours in one week.[xxvi] Farm labor is exempt provided such is incident to the farming operation, and applies to the same qualifications noted above as exempt from minimum wage.[xxvii]
However, for 3(f) agricultural labor as discussed above, FLSA limits application of the minimum wage and hour requirement (i.e., overtime pay) based on the size of farm and the person performing the labor.
Size of Farm: The 500 Man-Day Limit
The Fair Labor Standards Act exempts farms from federal minimum wage that employ a smaller number of workers engaged in 3(f) agricultural labor.[xxviii] A farm employer becomes subject to the minimum wage and hour requirement when that farm employed agricultural labor in excess of 500 “man days” in any quarter in the past year.[xxix] A “man day” is defined as “any day during which an employee performs any agricultural labor for not less than one hour.”[xxx] Note that the 500 man-day minimum is measured by quarter, not full calendar year.
Consider the following illustration:
Phil operates Foxtrot Farm, LLC, a medium-size direct market vegetable operation. Foxtrot Farm, LLC employs two young college grads who manage and perform various tasks including planting, field work and post-harvest handling, from April 1 to October 31 (about 36 weeks), each working six days per week. The “man-day” calculation is: 2 x 6 x 36 = 432 man-days spread over two quarters (or 216 per quarter). Unless Foxtrot Farm, LLC hires another 284 man-days of labor during either of these quarters, his farm is exempt from FLSA minimum wage requirement.
The U.S. Department of Labor FLSA regulations offer the illustration that “500 man-days is approximately the equivalent of seven employees employed full-time in a calendar quarter.”[xxxi] However, temporary or part-time employees working during a particular quarter, such as the harvesting season, adds to the man-day threshold. As noted below, agricultural employees otherwise exempt from certain FLSA requirements (discussed below, e.g. family members, local piece rate labor) do not count toward the 500 man-day threshold. However, where labor supplied by a contractor creates a joint employer relationship as to the workers (see below), these workers do count toward the man-day threshold.[xxxii]
Class of Worker
The FLSA creates several categorical exemptions from payment of minimum wage.[xxxiii] These exempt categories are available regardless of size of farm. A farm employer is exempt from paying federal minimum wage and overtime for agricultural labor performed by immediate family members. Immediate family members include only those individuals in the farm employer’s lineage including ancestors and descendants. Therefore, the definition includes parents, spouse, children, step-children, foster children, step-parents and foster parents.[xxxiv] The definition does not include siblings of the employer or their descendants (i.e. brothers, sisters, cousins, nephews and nieces). As noted above, immediate family members do not count toward the 500 man-day quarter threshold.[xxxv]
Consider the following example:
Foxtrot Farm, LLC, along with the two college grads, also employs Phil’s spouse as business manager and bookkeeper, who works approximately 20 hours per week all year, or 20 x 52 = 1040 hours (÷ 4 = 260 hours per quarter). The includable man-hours remain at 284 for quarters 2 and 3, and Phil remains exempt from minimum wage for any employee performing agricultural labor.
Another exempt class of labor is the hand harvest laborer. The hand harvest laborer is one who is paid on a piece rate for harvest (e.g. bushel, pound, etc.). However, piece rate work must be customary in the area where the farm is located to be exempt. In addition, the hand harvest laborer must live close-by and commutes daily to the farm, and be someone who did not work in agriculture more than thirteen weeks the previous year. Hand harvest laborer may not perform any other task on the farm (i.e. such as tasks “incident to” production) and are thus limited to harvest, or the exemption is lost. This category of labor also does not count toward the 500-man day threshold.[xxxvi]
Another exempt sub-category of hand harvest labor is the piece rate laborer sixteen years of age (again when piece rate labor is customary in the area), and who is employed on the same farm as his parent or person standing in the place of his parent, and is paid at the same piece rate as employees over age sixteen are paid on the same farm.
Extending the above example:
For September and October, Foxtrot Farm, LLC – with the same employees in the above example – adds 20 people who each work an average of 30 days each hand harvesting during this period, an additional 600 man-days (or 300 in Q3 June through September and 300 in Q4).
In addition to the above more general exemptions, FLSA lists other agricultural labor exempt from minimum wage any employee engaged in the processing of maple syrup,[xxxvii] and any employee engaged in the transportation and preparation for transportation of fruits or vegetables from the farm to a place of first processing or first marketing within the same State.[xxxviii] The latter exemption appears to add to the man-day number.
FLSA agricultural minimum wage exemptions also apply to employers in commercial fishing or aquaculture as to employees involved in catching, taking, propagating, harvesting, cultivating, or farming of any kind of fish, shellfish, and crustacea, including any processing performed while at sea.
Child Labor Restriction and Exemption
Generally, a person is legally employable at age sixteen.[xxxix] In agriculture, the minimum age of sixteen applies for work performed during normal school hours in the school district where the minor resides. A sixteen-year old may perform any farm job, even one declared hazardous by the Secretary of Labor’s authority to create a minimum age of eighteen.[xl] Outside of school hours, the age drops to fourteen.[xli] Minors age twelve can perform farm work with written consent of a parent or guardian, and may be employed under the age of twelve if on the farm operated by their parent or guardian.[xlii]
Regarding the minimum wage requirement, a farm employer may pay a person under age twenty a minimum wage of $4.25 for 90 calendar days starting from the date of employment,[xliii] after which the farm employer must pay the usual rate. The FLSA specifically prohibits a farm employer from firing a minimum wage rate employee to take advantage of the lower 90-day youth rate.[xliv] For farms affiliated with legitimate student learning (e.g. intern) or apprentice programs, FLSA provides further exemption from minimum wage.[xlv]
Remember, the exemptions discussed above – minimum wage, overtime, and child labor exemptions – only apply to agricultural labor under the 3(f) definition. Work on a farm that does not qualify from as agricultural labor does not qualify for the above exemptions.
Required Notices and Recordkeeping: No Exemption for Farms
The Fair Labor Standards Act requires employers to post notices in the workplace outlining the rights conferred by FLSA. Though often supplied in several languages, English is the only requirement. Poster notices are available at no cost and downloadable in printable from the Department of Labor website.[xlvi]
Concerning FLSA recordkeeping requirements, employers – including farm employers – must make, keep and preserve records for each employee including wages paid, hours worked, overtime paid, job title, and other records required by regulation. Records must be preserved for three years.[xlvii]
Compliance with FLSA can be a challenge, and while the Department of Labor may not actively audit every farm for compliance, violations of labor laws (FLSA included) are normally discovered upon employee complaint to the relevant state or federal agency. What can begin as an informal agreement between amicable parties can become cauldron of factual inconsistencies when the employer and employee fall out, which is not uncommon. Upon investigation by the agency, discrepancies are discoverable.
Farm operations are noted by the Department of Labor as facing particular challenges with recordkeeping, specifically not keeping/maintaining records of the names and permanent addresses of temporary agricultural employees, dates of birth of minors under age 19, or specifically recording hours worked by employees being paid on a piece rate basis. As noted above, such records are critical to determining farmer exemptions (e.g. minimum wage) under FLSA. Farm operations are also particularly susceptible to not separating those jobs that are considered farming and those that are considered farm-related, a critical distinction in regard to FLSA overtime pay requirements.[xlviii]
[ii] Pursuant to the famous decision of Wickard v. Filburn, 317 U.S. 111 (1942), farm production – however minor and not crossing state lines – is considered to be interstate commerce, subjecting all farm labor to the purview of federal power.
[iv] Unless, of course, some other exemption in some other occupation or industry applies.
[v] 29 U.S.C. § 203(f). This definition is referred to in regulation as “3(f)”
[vi] 337 U.S. 755 (1949). Farmers Reservoir held that employees of an irrigation company who kept irrigation water supplied to farm customers – an act critical to farming – were not working on a farm incident to farming and thus not exempt from minimum wage. Noting that “[farm] [t]ools are made by a tool manufacturer, [t]he compost heap is replaced by factory-produced fertilizers… [p]ower is derived from electricity and gasoline… [and] [w]heat is ground at the mill,” the Court in Farmers Reservoir stated that “the question as to whether a particular type of activity is agricultural is not determined by the necessity of the activity to agriculture, nor by the physical similarity of the activity to that done by farmers in other situations… The question is whether the activity in the particular case is carried on as part of the agricultural function or is separately organized as an independent productive activity.” (337 U. S. 755, 761) (emphasis added) This quote from Farmers Reservoir in full is reiterated in 29 C.F.R. §780.104.
[vii] See generally 29 C.F.R. Part 780
[viii] 29 C.F.R. §780.105(d).
[ix] 29 C.F.R §780.106. The regulations emphasize that farming attached to some other primary industrial activity in an urban area is nonetheless farming.
[x] 29 C.F.R. §780.114
[xi] See 29 C.F.R. §780.119-127
[xii] See 29 C.F.R. §780.118 regarding the milling of grain or processing sugarcane to raw sugar.
[xiii] 29 C.F.R. 780.147
[xiv] See FIELD ASSISTANCE BULLETIN NO. 2013-1 (April 29, 2013). “A processing activity may result in some amount of change from the raw or natural state of a product and still be included in secondary agriculture. For example, the cleaning, ripening, and shelling of agricultural commodities fall within the scope of secondary agriculture. See, e.g., 29 C.F.R. 780.151. If the processing activity makes “important changes” to the product, however, then the activity will be viewed as manufacturing rather than agricultural processing. WHD Opinion Letter, 2001 WL 58865 (Jan. 17, 2001) (citing Maneja v. Waialua Agric. Co., 349 U.S. 254, 268 (1955))”
[xvi] 29 C.F.R. § 780.141
[xvii] 29 C.F.R. §780.140
[xviii] Id. See Mitchell v. Huntsville Nurseries, 267 F. 2d 286 (5th Cir. 1959)
[xix] 29 C.F.R. § 780.145
[xx] 29 C.F.R. § 780.151
[xxvi] Id. §207(a)(1)
[xxvii] Id. §213(a)(6)
[xxviii] See 29 CFR § 780.301(c). The legislative history of FLSA reveals that Congress meant to apply the minimum wage requirement to larger farms while exempting smaller “family” farms.
[xxx] 29 U.S.C. §203(u). A descriptive example of the “man day” is provided by 29 C.F.R. §305(a): “500 man-days is approximately the equivalent of seven employees employed full-time in a calendar quarter. However, a farmer who hires temporary or part-time employees during part of the year, such as the harvesting season, may exceed the man-day test even though he may have only two or three full-time employees.”
[xxxi] 29 C.F.R. § 780.305
[xxxiii] 29 U.S.C. §213(a)(6)
[xxxiv] 29 C.F.R, § 780.308
[xxxv] 29 C.F.R, § 780.309
[xxxvi] See C.F.R. §§780.310-318 for details concerning piece rate labor.
[xxxvii] 29 U.S.C. §213(a)(15)
[xxxviii] Id. §213(a)(16)
[xliii] 29 U.S.C. § 206(g)(1)
[xliv] 29 U.S.C. § 206(g)(3)
[xlvii] See generally 29 CFR Part 516. For a summary of recordkeeping requirements, see Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA)
[xlviii] Fact Sheet #22: Agricultural Employers Under the Fair Labor Standards Act