Do You Need a Farm Labor Contractor License?
The Farm Labor Contractor Act (“FLCA”), RCW 19.30.010 et seq., was enacted to protect farm workers against exploitation by farm labor contractors. The last time the Supreme Court addressed the FLCA was in 2012, in Perez–Farias v. Global Horizons, Inc., 175 Wn.2d 518, 286 P.3d 46 (2012). There, the Court noted that “[a]s regular practice, farmers secure farm workers through the services of farm labor contractors, who act as intermediary between farm workers and farmer.” The industry typically thinks of the farm labor contractor as “the guy in the truck.” Unscrupulous farm labor contractors have been known to recruit workers, load them in trucks, deposit them at farms, collect the contractor’s fee and be long gone before the workers realize that the contractor misrepresented the nature of the work and/or the pay it would bring. To remedy this risk, a farm labor contractor is required to have a license, provide notice of the terms and conditions of employment and post a bond. The FLCA is designed to hold the guy in the truck accountable. The FLCA also makes the farmer that knowingly uses an unlicensed contractor jointly and severally liable along with the contractor. Workers can collect damages from the guy in the truck and/or the farmer.
Today the Washington Supreme Court is again being asked to interpret the FLCA in Saucedo v. NW Management and Realty Services. In the Saucedo case, the Court will decide whether a farm management company (“an entity who is paid a per acre fee to manage all aspects of farming—including the hiring and employing of agricultural workers as well as making all planting and harvesting decisions, subject to approval—for a particular plot of land owned by a third party”) constitutes a farm labor contractor under the FLCA. The Court will also answer whether the provisions of the FLCA “make jointly and severally liable any person who uses the services of an unlicensed farm labor contractor . . . even if that person lacked knowledge that the farm contractor was unlicensed.” We anticipate the Court will issue its ruling on this case sometime this upcoming summer or fall.
The Saucedo case is a bit unusual because NW Management was at all times acting as the farmer. There was no “guy in the truck.” NW Management did not act as an intermediary, but rather hired, employed, directed, controlled and paid its own workers. The definition of a “farm labor contractor”, however, is quite broad. It includes anyone who “for a fee” recruits, solicits, employs, supplies, transports or hires agricultural employees. RCW 19.30.010. While a “fee” under the FLCA certainly includes payments made directly for recruiting services, the term “fee” has also been held by another Court to be something as minor as reimbursement for a tank of gas, even when no other payment was made to the recruiting party.
According to the Department of Labor and Industries (“L&I”), a farm labor contracting relationship can arise in many unexpected ways. For example, if your crew boss uses his van and gives employees a ride to work and you reimburse the crew boss for gas, or allow him to fill his tank with the farm’s fuel, the crew boss is “transporting” for a “fee” and should have an FLCA license (unless an exemption applies). Moreover, L&I claims that if you “loan” workers to a neighbor, but continue to pay the workers on your payroll and then the neighbor reimburses you, you should have an FLCA license. Similarly, if you own and farm property under separate entities and one of those affiliated entities (or another affiliated entity) employs and pays workers who work on different entities’ ranches and the other entities reimburse the employing entity, the employing entity should have a license.
Failure to have a license, post bond and give the appropriate notices can be disastrous. Violation of the FLCA is a misdemeanor and may also result in civil penalties of $1,000 for each violation. In addition, a worker may sue for statutory damages even if the employer did not make any misrepresentations and the worker did not suffer any actual damage. Statutory damages are set at a mandatory $500 per worker per violation. The statute of limitations is three years. An example of how the penalties can add up would be if L&I is correct and you are required to obtain an FLCA license when you “loan” workers to a neighbor, but personally pay the workers and receive reimbursement from your neighbor for the labor costs. If you have historically “loaned” your neighbor 50 workers each year without obtaining a license and without providing the required notice of terms and conditions, you would have exposure for $150,000 because you would have committed at least two violations ($500x2=$1,000) for 50 workers ($1,000x50=$50,000) over the course of three years ($50,000x3=$150,000). When you begin talking about relationships with multiple neighbors or affiliated farms or larger pools of shared labor, the potential exposure for statutory damages increases dramatically.
In contrast, obtaining a license requires an application, a $35 fee, tax compliance certificates, the posting of a $5,000 to $20,000 bond (depending upon the number of employees), and, if you intend on transporting workers, proof of auto liability insurance. Once licensed, farm labor contractors have additional obligations including providing notice of the terms and conditions of employment, which generally track (with a few exceptions) with the employee disclosures required under the federal Migrant and Seasonal Workers Protection Act.
Whatever the Court’s decision in the Saucedo case, there will be more focus and scrutiny on possible farm labor contractor relationships by workers, worker advocates, and L&I. Now is the time to review your operations and business structures and determine if you should obtain a farm labor contractor license or if you are using the services of someone who recruits, solicits, employs, supplies, transports or hires agricultural employees who should have a license.
FLCA Applicability at a glance:
- Do you pay or provide gas to any employee who drives other employees to work?
- Are you engaged in custom farming or farm management?
- Do you loan workers to or share a crew’s labor with neighbors or relatives?
- Do you own land or orchards as separate entities and have one of those entities (or another entity) employ and pay workers for their work at the various properties?
If you answered “yes” to any of the questions above, you should strongly consider obtaining a Farm Labor Contractor license for the 2016 growing season. Consult counsel for a more fact-specific analysis.