2016 New Labor Law and Farming

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- [Voiceover] On May 18th, 2016, the Department of Labor's final rule updating overtime regulations was announced.

This newest ruling came out of a process that started in 2014 with a notice of proposed rulemaking being publishing in the Federal Registry on July 6th of 2015.

To minimum anxiety or confusion on how these changes might impact our farm community, Penn State Extension has researched the topic, and is providing this interpretation.

It is recommended that individual employers work with their lawyer and accountant to be clear on how to manage these newest changes.

First question that comes to my mind is what are these new rules?

The newest rulings on overtime compensation only affects salaried employees.

Additionally, these are employees not fitting the official definition of a direct farm worker.

There is no impact on family members employed on the farm.

At certain times of the year, it is common for farm salaried employees to work in excess of 40 hours a week.

This was not typically an issue in the past because the salary benchmark for overtime pay was $23,660.

With these newest guidelines, they tells us that each salaried employee must be paid $47,476 a year.

Of course this is prorated for salary employees with less than annual employment.

If a salaried, white collar worker, does not make the benchmark, they are eligible for their hourly pay rate for hours over 40 per week.

Additionally, they're eligible for time and a 1/2 overtime pay if they work in excess of 40 hours per week and are involved in a non-farm business.

These newest provisions become effective on December 1st of this year.

Once we understand the new guidelines, we might consider the potential impacts on our farm business.

There are no changes that apply to our current hourly farm workers.

Department of Labor has a well defined classification for employees titled Agricultural Workers Exemption.

In general, this mean hourly employees directly involved in production on the employer's farm are not covered.

As long as our employees meet these criteria, there are no changes because of this newest ruling.

The salary benchmark of $47,476 does not include any credits good for housing or food.

If employees are provided housing, beef, produce, vehicle or such, the dollar value of these benefits does not count towards the dollar salary benchmark.

If we operate a farm-related business, we should check with our professional advisory team to be certain we are in compliance.

For example, a farm that also does custom harvesting off farm, should be certain they are following Department of Labor guidelines on employee compensation.

To continue with exemptions to the newest guidelines, it is all about either meeting or not meeting the agricultural worker definition.

If a farm does have employees affected by these newest Department of Labor guidelines, what should farm employers be doing?

Again, we remind employers these are regulatory issues with real consequences for non-compliance.

All farm employers should be certain to work with competent professional advice.

We suggest that immediately all farm employers with an affected salaried white collar employee, be recording the hours worked.

Being fully aware of the hours worked by these potentially impacted employees will help us decide a course of action.

All employers should also be certain they have each farm employee classified accurately.

We sometimes find employers considering classifying employees one way, to reduce the worker's compensation cost, without fully understanding how this impacts the employee's eligibility for overtime compensation.

Employers can change the relationship with employees.

Examples to get us thinking along these lines might be raising an employee's salary to meet the benchmark, remembering this also impacts other employee costs.

We can also reclassify a salaried employee to an hourly worker, subject to overtime or maybe with overtime limitations.

As we try to work through our decision making on this new information, there are several sources that can help us along the way.

The U.S. Department of Labor has a fact sheet on agricultural employees that fully describes these new guidelines, and it also describes the exemptions from the guidelines.

The U.S. Department of Labor also has an extensive frequently asked question sheet, it's available online, and result from our webinar they did a couple of months ago describing these new rulings.

And of course, our USDA has a chief economist with online resources and contact information as well.

Farm employee guidelines can be complicated, let's be sure we're doing our best to follow the regulations.