Farm Labor Contractor
On March 3, 2016, the Washington Supreme Court issued a decision that significantly impacts agricultural employers and farm and orchard managers who provide certain farm labor contracting services.
Essentially, the Court’s decision eliminates the ability of agricultural employers to provide custom farming services without obtaining a license as a farm labor contractor.
In the case of Saucedo v. John Hancock Life & Health Insurance, the Court held that a management company subleasing an orchard and managing its operations, for a fee, was a “farm labor contractor” under the Washington Farm Labor Contractor Act (“FLCA”), and its failure to register as such was a violation of Washington law, subjecting the company to substantial fees and penalties. The Court also found the property owners and other involved parties jointly liable for using the unlicensed management company. A property owner must now take affirmative steps to ensure that all operators are licensed as a farm labor contractor, by either inspecting the license or relying on written confirmation of licensing from the Washington Department of Labor & Industries (the “Department”).
The Saucedo decision implicates nearly all farming activities in Washington State, including vertically integrated operations conducted by related parties. For example, if an orchardist has two tracts, each owned by a separate entity, and another entity that does the actual farming, the farming entity is a farm labor contractor and needs to be licensed as such by the Department. The Court’s expansive interpretation of the FLCA appears to require registration as a farm labor contractor whenever “recruiting, soliciting, employing, supplying, transporting, or hiring agricultural employees” takes place, including under many management agreements, vertically integrated and other related party operations, paymaster agreements, and even under some leases.
Damages for violations of the FLCA include a fine of $500 per person, per violation. As part of its requirements the FLCA states that any entity or person acting as farm labor contractor:
- Must carry their license with them, including having a copy of the license in all vehicles used for farm labor contracting purposes; and
- Must have all employees sign a statement acknowledging that they are aware the entity is a farm labor contractor and that the employees have specific rights under the FLCA.
Therefore, for purposes of the penalties, if a party is found to be an unlicensed farm labor contractor, even with no other wrongdoing, both rules listed above will be violated, resulting in a claimed fine/penalty of $1,000 per employee.
While not directly implicated by the Saucedo decision, another important area of concern is vehicles and transporting employees. Under a previous Supreme Court decision, an employee who is paid additional compensation because he or she drives the vehicle that transports workers, even if such additional compensation is merely cost reimbursement, not only is the employer a farm labor contractor, but the employee driving the vehicle is also a farm labor contractor as he or she is transporting employees “for a fee.”
The licensing process consists of:
- An application;
- A bond in an amount which coincides with the number of individuals employed;
- Acknowledgement from the Employment Security Department, the Department of Revenue and the Internal Revenue Service that the farm labor contractor entity has no outstanding taxes owed or deficiencies assessed;
- Proof of insurance on vehicles used to transport workers; and
- A $35 filing fee.
The license must be renewed yearly.
The Saucedo Court’s expansion of the Washington Farm Labor Contractor Act makes it imperative for all agricultural operations to carefully evaluate their business structure in the context of farm labor contracting. This decision greatly increases the exposure for all parties who employ agricultural workers, whether directly, or through almost any other arrangement.