Various state and federal laws require agricultural employers to classify their workers to help determine the legal responsibilities that the employer owes to the worker. Agricultural workers are generally classified as either an employee or an independent contractor. Agricultural employers need to know whether they are hiring employees or independent contractors for several reasons. First, if the employer has hired an employee, the employer owes certain legal obligations to the employee. These include federal and state requirements for wages, hours, antidiscrimination, workers’ compensation, safety, and unemployment insurance. The employer does not owe the same legal obligations to independent contractors. Second, if an employer misclassifies a worker as an independent contractor when they should have been classified as an employee, that employer could be subject to legal fines and penalties. Third, the employer’s liability for the worker’s actions depends on whether the worker was an employee or an independent contractor.
Who is an Employee?
There are several tests that can be used to determine if a worker should be classified as an employee. These include a test that the Fair Labor Standards Act (“FLSA”) uses called an Economic Realities Test, the Internal Revenue Service Standard test, and the various tests that states use. While these tests all differ slightly, one of the main things they have in common is a focus on the amount of control an employer has over the work being performed. Generally, if an employer can direct and control how a worker is doing their job, that worker is an employee. Some other factors to help determine whether a worker is an employee include looking at who has trained the worker, who sets the work schedule, whether the worker full time, and who gives the instructions for when, where, and how the work is performed. If the employer exerts this much control, the worker is likely an employee.
In most cases, a worker is likely to be considered an employee rather than an independent contractor. Volunteers, trainees, and students can even be considered employees in certain situations. For example, an employee-employer relationship could be formed if a farmer has a student interning and performing services around the farm. While unpaid internships in the public and non-profit sectors are generally allowed, for-profit businesses, including farms, might be subject to the FLSA and have to pay the students or interns for their work. However, determining whether a student or intern is an employee is subject to each unique set of circumstances. Seasonal farm workers can also be considered employees if the circumstances are right, and the factors weigh in favor of an employer-employee relationship.
If a worker is an employee, the employer owes certain legal obligations to them. These legal obligations stem from various federal and state labor and employment laws which lay out minimum wage requirements, overtime pay, migrant and seasonal worker protections, and tax requirements. For example, employers are required to withhold income taxes and pay unemployment taxes on employee wages. Additionally, employers must give employees a Form W-2 that shows the amount of taxes that were withheld from the employee’s pay.
An employer may also be potentially liable for the actions of their employees. This liability is called “vicarious liability.” Under vicarious liability, an employer can be held responsible for their employee’s actions if the employee acted in the ordinary course of their employment. For example, courts have held farmers liable for spray drift damages resulting from an employee’s application of an herbicide. However, an employer cannot be held liable for the actions of the employee if the action was not done in the ordinary course of their employment. For example, suppose an employee who is employed to apply herbicide is involved in a car accident after getting off work and drinking at a bar for several hours. In that case, the employee was not acting in the ordinary course of their employment. Therefore, their employer cannot be held vicariously liable for the accident that the employee caused.
Who is an Independent Contractor?
Agricultural workers may also be classified as independent contractor. Employers do not owe the same legal responsibilities to independent contractors as they do to employees. The same tests and factors that are used to determine whether a worker is an employee are also used to determine if a worker is an independent contractor. Once again, the determination comes down to the control factors. Unlike an employee, an independent contractor performs their work without control from the employer. Some examples include crop dusters, well drillers, and custom harvesters. For these types of jobs, the independent contractor brings their own supplies, has the right to control their work, and usually has a written agreement for the job being completed. However, the existence of an independent contractor agreement does not automatically classify a worker as an independent contractor. The ultimate deciding factor is still the amount of control the employer has over the worker. Much like determining who is an employee, whether someone is an independent contractor is determined on a case-by-case basis by looking at the entire set of circumstances.
The employer is not responsible for withholding and paying taxes for independent contractors as they are required to do for employees. It is the responsibility of the independent contractor to properly pay their own taxes. Unlike the employer-employee relationship, an employer is also generally not vicariously liable for the actions of an independent contractor. However, there are a few exceptions. For example, an employer could be held responsible for the independent contractor’s actions if the employer is negligent in hiring an independent contractor, or the independent contractor is being hired to perform a dangerous job.
Penalties for Misclassification
While employers may want to say that all their workers are independent contractors to avoid the responsibilities of having an employee, there are penalties for misclassification. Employers who misclassify their workers could be subject to legal penalties. The workers could bring a lawsuit for unpaid wages, and the employer could be subject to federal and state employment taxes, additional fines, and criminal penalties. Failure to properly classify workers can result in major penalties from the Department of Labor and the Internal Revenue Service, which may increase in severity if the misclassification was intentional or found to be fraudulent.
The National Labor Relations Board is responsible for enforcing the National Labor Relations Act, which protects employees. While the National Labor Relations Board has not consistently found that misclassification of an employee as an independent contractor on its own violates the National Labor Relations Act, some states have found that misclassification by itself is enough to be considered a violation of state labor laws. For example, in July 2022, the California Agricultural Labor Relations Board found that an employer, Cinagro Farms, Inc., misclassified its workers as independent contractors. The case was brought after Cinagro Farms terminated workers who complained about not receiving paystubs, which employers are required to supply to employees. An administrative law judge found that Cinagro Farms unlawfully terminated the workers in violation of the California Agricultural Labor Relations Act. The Labor Relations Board also found that Cinagro Farms’ misclassification of its employees as independent contractors was willful. As a result, Cinagro Farms was subject to civil penalties, including compensating the fired workers, making whole the fired workers for any wage and economic losses, and paying the tax withholdings required by state and federal laws.
Determining who is or is not an employee is an important part of figuring out an employer’s legal responsibilities and liabilities. In general, determining whether a worker is an employee or an independent contractor comes down to how much control the employer has over how the worker performs their job. Failure to properly classify a worker can open the employer up to various legal ramifications such as lawsuits and financial penalties.
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To view the IRS Standard, click here.
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For more National Agricultural Law resources on the labor, click here.