Farms and the Gig Economy

Farmers often save on payroll by hiring independent contractors. But, if a worker is legally an employee, that farmer could face penalties, fines, back pay, and back taxes for misclassifying their worker. The already complex law defining an independent contractor has recently grown more complicated as rules shift with the changes in administrations. The newest proposed regulation is currently open for comments. You can easily share your opinion with the federal Department of Labor (DOL) at the link above, but only until December 13th of this year.

Federal worker classification has traditionally been governed by the courts, meaning many judges have written copious pages describing a multitude of factors or tests. The Trump-era DOL tried to simplify and clarify the test for independent contractors with regulation. In 2021, the DOL issued a regulation on worker classification and laid out a simple test that relied on two core factors: one, whether a worker shared in the risk of profit or loss, and two, whether the worker had control over their work.

The Biden administration has now proposed a replacement regulation. This proposal returns to the so-called “economic realities test” and equally considers six factors. Those factors are:

  • The worker’s opportunity for profit or loss depending on managerial skill
  • Investments by the worker and the employer
  • Degree of permanence of the work relationship
  • Nature and degree of control
  • Extent to which the work performed is an integral part of the employer’s business
  • Skill and initiative of the worker

When it comes to farms and ranches looking to either of the recent regulations for practical guidance, it may not matter much. The new and old rules likely result in the same worker classification for most farmhands. A farm worker rarely controls their work or the pay they receive. Farmhands are almost always doing work fundamental to the farm enterprise. Most farm workers wouldn’t meet the independent contractor test of 2021 or the test under consideration now.

A true independent contractor can, however, exist in the agricultural industry. A person with experience with high tunnel construction could contract to help a farmer build a high tunnel. This is a time-limited job where the contractor likely will set the price, and if the contractor works efficiently and is skilled, their profit will increase. Building a high tunnel is vital to a farm but not a part of the day-to-day operation. Thus, this could be a job for an independent contractor under either administration’s test.

Much controversy around the changing tides of independent contractor status circulates around delivery workers of some capacity–Uber, Doordash, and FedEx drivers. For this class of workers, the Trump-era rule would have allowed for more independent contractors than employees because the drivers are often in charge of their routes, when they work, and if they work when profits would be highest.

This rule-making shift may signal that current regulators will be, on the whole, more employee-friendly. One concern relevant to some farms and ranchers is that if the new regulation passes, we might see an uptick in enforcement from the DOL.

Be aware, though, DOL enforcement isn’t the only way misclassification can come to a head. For example, contractors of Amick Farms in South Carolina filed a class-action lawsuit earlier this year against the company, alleging violation of minimum wage laws and other financial losses due to misclassification. That suit is ongoing, and we’ll keep you updated.

If you have questions about how to classify your workers properly, consider taking our Advanced Employment Law Self-Paced Course.