Checklist with Explanations

□ If you plan to offer less than the minimum wage, verify your eligibility

The Connecticut minimum wage is currently set at $10.10 per hour, which is higher than the current $7.25 per hour federal minimum wage. Connecticut farms generally need to pay their employees at least the higher Connecticut minimum wage for all work performed.

While federal law provides a broader minimum wage exemption for agricultural labor, Connecticut’s minimum wage exemption for agricultural labor applies only to minors. Farms in Connecticut must follow the stricter state minimum wage laws.

Farms in Connecticut may pay individuals from ages 14 to 18 who perform agricultural labor as low as 70% or 85% of the Connecticut minimum wage. The permitted decrease in rate depends on the size of the farm. Even so, the federal minimum wage of $7.25 may still apply to these younger agricultural workers. (Child labor laws are beyond the scope of this resource. It involves a high level of complexity as a web of federal and state laws are in place to protect young workers.)

A farm can quickly resolve any legal risk by paying at least the Connecticut minimum wage to all its workers, including minors. Connecticut farm businesses wishing to take advantage of the exemption for minors must pay close attention to the rules if they wish to avoid the risks of noncompliance.

□ If you do not plan to provide overtime, verify your eligibility

Farms are exempt from paying overtime to farm employees under Connecticut and federal laws. The state and federal exemption to paying overtime only applies to workers performing agricultural labor.

Whether work is “agricultural labor” under the law is not always intuitive. That’s because it’s based on legal definitions. It is also because the definition of “agricultural labor” has not been litigated very much. Litigation helps clarify legal definitions. For now, we’re left with a broad definition that does not account for the realities of modern and direct-to-consumer farms.

Diversified farms are sprouting up in Connecticut and throughout the country. These farms typically engage in activities—such as selling at farmers’ markets, making value-added products, organizing on-farm events, and so on—that fall outside the traditional scope of farming activities. Unfortunately, the legal definition of agricultural labor has not yet evolved to meet this new type of diversified farm. Without any statutes or case law for guidance, it can be challenging to draw the line between agricultural and non-agricultural labor.

Agricultural labor certainly includes growing and harvesting crops, raising livestock or poultry, and preparing unmanufactured farm products for market and delivery to market. Generally, agricultural labor includes work done on a farm in connection to farming operations. Conversely, most if not all work done off farm is likely not farm labor. For example, because sales at a farmers’ market are conducted off the farm they are most likely not agricultural labor. Similarly, marketing activities such as pitching products to restaurants and grocery stores are likely not agricultural labor. In addition, some work done on a diversified farm is tangential to agricultural production, for example, making value-added products, planning and hosting agri-tourism, or on-farm events such as dinners, weddings, and potlucks. These activities most likely do not fall within the agricultural labor definition.

If the employee performs non-agricultural labor tasks, the farm must pay at least the overtime rate for all hours worked over 40 in that week (i.e., 1.5 times the Connecticut minimum wage per hour worked over 40). If the employee performs exclusively farm labor in a week, no overtime is owed for hours worked over 40.

□ Follow laws of payment, notice requirements, and working conditions

Connecticut’s laws related to payment of wages and employment conditions apply regardless of whether a farm is exempt from minimum wage or overtime requirements. Farms must pay workers on a regular pay day at least on a weekly basis. The employer can request a less frequent pay schedule by submitting a letter to the Director of the Wage and Workplace Standards Division of the CT Department of Labor.

Each payment must include all wages earned to within eight days of the pay day. Farms must provide a pay stub with each payment that includes the date of the pay period, the total hours worked, gross earnings with a separate entry for overtime earnings if applicable), and all itemized deductions and net earnings. The paystub must be provided in print form unless the employee agrees in writing to receive it electronically. If the farm provides electronic paystubs, they must provide the employee the opportunity to access and print their statement of wages.

All employers must also display a poster notifying employees of the minimum wage rules. This poster and other required posters can be found on the Connecticut Department of Labor website: http://www.ctdol.state.ct.us/ gendocs/Labor_Posters.htm. The posters can also be found by searching for the agency name with the phrase “mandatory posters.”

Connecticut labor laws require employers to give employees at least a thirty- minute meal break after seven and one-half hours of work if five or more workers are on duty. The break must be given at least after the first two hours and before the last two hours of work. The employer and employee can negotiate more or less breaks, but both must agree in writing.

□ Secure a workers’ compensation policy

In Connecticut, all businesses with one or more employees are required to secure workers’ compensation. This requirement applies whether the employee is full-time, part-time or contract. Business owners such as members of LLCs, corporate officers, partners in partnerships, and sole proprietors are not required to be covered by workers’ compensation insurance.

Farms can purchase workers’ compensation through private insurance companies. Cost and services vary considerably from company to company. Beginning farms with no record of claims experience or farms having difficulty obtaining workers’ compensation coverage can contact the Connecticut Insurance Department, which provides coverage to employers who cannot obtain insurance elsewhere.

Alternatively, farms can obtain approval to self-insure individually or as a group. However, this requires that the farm set aside significant amounts of money to cover potential injuries. To begin the self-insurance process, the farm would need to file an application with the Connecticut Workers’ Compensation Commission. The WCC is the primary agency that handles workers’ compensation claims and issues. For information on self-insurance, or other questions about workers’ compensation, contact the WCC at (800) 223-9675.

Overall, the cost of workers’ compensation is determined by several factors including the classification of the labor performed, the frequency of injuries by workers performing that labor, and the total dollar value of the business’ payroll, among other factors. For farm businesses that use only traditional employees and pay cash (not in-kind) wages, a quote is easy to come by. Farm businesses that pay wages in the form of food and lodging may have a harder time determining the value of their payroll and will need to work more closely with their insurance providers. Likewise, a farm seeking coverage for interns, volunteers, and other non-traditional employees may need to work closely with their insurance provider to ensure coverage is secured for all individuals performing work for the farm. Insurance rates may vary, so farms may want to contact several different authorized carriers to compare rates.

□ Verify eligibility to work in the United States.

Farms may only hire individuals who are eligible to work in the United States. The employer satisfies the duty to verify eligibility by properly completing Form I-9 (for employees not hired through a worker program). This form is available from the U.S. Citizenship and Immigration Services agency. It is available online and instructions are included. The form is not submitted to the agency. Rather, the employer copies the necessary documentation and keeps the form on file. The completed forms should be kept for the longer of the following: (1) three years after the worker began employment, or (2) one year after the worker leaves the position. The forms and documentation must be available if an enforcement agency inspects the farm.

□ Set up to withhold federal and state income taxes.

Farms are required to withhold a percentage of an employee’s wages and remit the withheld portion to both the IRS and the Connecticut Department of Revenue.

A farm must begin withholding state and federal income taxes when either of the following happens: the farm pays a total of $2,500 or more in wages to all employees performing agricultural labor, or any individual employee performing farm labor receives cash wages of $150 or more per year. Most farms with an employee will have to withhold income taxes. Note too that this rule applies only for farm labor. Farms employing workers performing non-agriculture tasks must withhold state and federal income taxes once any wages are paid.

To begin the federal income tax withholding process, the farm needs a completed IRS Form W-4 from the employee. This form allows employees to choose the number of withholding exemptions. Form W-4 is not sent into an agency; it remains in the farm’s files. The farm then uses the tax tables in IRS Publication 15 (Employer’s Tax Guide) to determine the withholding amount per paycheck based on the individual’s pay, exemptions, and payment frequency. Form W-4 and the Employer’s Tax Guide can be downloaded from the IRS website: https://www.irs.gov/. The farm must record the amount withheld and remit it to the IRS. The due date is dependent on the total tax owed. For most farms, the tax must be deposited monthly. The IRS uses an online system, the Electronic Federal Tax Payment System (EFTPS), and deposits must be made electronically. Farms must register with the EFTPS system ahead of time as it can take a few days to receive the passwords. Registration can be completed at www.eftps.gov/eftps/.

To begin the withholding process in Connecticut, farms must register with the Connecticut Department of Revenue Services (DRS) for withholding by submitting a completed Form REG-1. Registration can also be completed online at https://portal.ct.gov/. There is no fee to register with DRS. All new employees must also complete form CT-W4, which can be downloaded on the DRS website. The amount of income withheld each pay period is determined by the CT income tax withholding tables, which are updated each year. The most recent tables are available on the DRS website (search (“CT income tax withholding tables”).

Agricultural employers may request annual filer status by submitting a completed REG-1 (in paper or electronically) and explaining that you have only agricultural employees. Farms that are granted annual filer status will need to file Form CT-941 for the entire year. The due date for annual filing is January 31. Farms not granted annual filer status must file Form CT-941 on a quarterly basis, which is due no later than 30 days after the end of a calendar quarter (i.e., April30, July 31, October 31, and January 1).

All farms must also file with DRS the state copy of each employee’s Form W-2 along with Form CT-W3. The due date is on or before January 31. Wages paid to employees for the entire year are reported on CT-W3. Even farms that are exempt from withholding income taxes must file Form CT-W3 with the DRS on January 31. If the farm is not registered to withhold Connecticut income tax, it should enter the words “Agricultural Employer” in the space reserved for the Connecticut tax registration number on Form CT-W3.

□ Set up to withhold Social Security and Medicare contributions from employee wages.

Most farms are required to withhold Social Security and Medicare taxes from the worker’s paycheck. The same rules apply as for withholding federal income tax: The obligation begins when the farm’s total payroll for employees exceeds $2,500 or an individual’s wages exceed $150 per year.

Where the amount of income tax to withhold is determined by using the IRS’s tables, Social Security and Medicare taxes are calculated as percentages of the employee’s wages for that pay period. The most recent percentages will be listed in IRS Publication 51 (Agricultural Employer’s Tax Guide). Currently, 6.2% of wages are withheld for Social Security and 1.45% for Medicare. Each time the employee receives a paycheck, a portion of the Social Security and Medicare taxes are withheld. This is then remitted to the IRS through the same EFTPS process used for remitting withheld income taxes.

□ Arrange to pay the farm’s contribution to the employee’s Social Security and Medicare account.

In the checklist item above, we explained that a portion of Social Security and Medicare taxes owed by the employee must be withheld from the employee’s paycheck. In this checklist item, we are discussing the Social Security and Medicare taxes owed by the employer. These are two different taxes—the employee is taxed and the employer is taxed. The employee’s tax is deducted from wages. The employer’s tax is paid by the employer, and may not be deducted from wages. The taxes go to the same agency for the same ultimate purpose, but are separate.

The farm is taxed at the same threshold where the employee must be taxed. (See the $2,500 or $150 rule above.) Currently, the farm is taxed at the same rate as the employee, although this may change: 6.2% of wages are withheld for Social Security and 1.45% for Medicare. The most recent percentages will be listed in IRS Publication 51 (Agricultural Employer’s Tax Guide).

Although the employee’s and employer’s shares of Social Security and Medicare taxes are technically separate, they are deposited at the same time through the IRS’s EFTPS process.

Farms that work with a payroll service provider can escape the details of withholding and remitting taxes. Payroll service providers help employers determine which taxes are owed and assist in coordinating payment of the taxes. Farmers who can afford a payroll service may find it well worth the money.

□ Arrange to pay federal and state unemployment taxes, if required.

Unemployment tax is paid by the farm and is not deducted from an employee’s wages. This tax contributes to a compensation fund available to individuals who have become unemployed. Most employers are required to pay unemployment tax immediately; however, farms are exempt until the operation reaches a certain size. Connecticut and the federal government follow the same rules for farms. When a farm owes unemployment tax to the federal government, the farm will also owe it to the state.

The farm must begin paying federal and state unemployment taxes when either of the following happens: (1) the farm pays wages of $20,000 or more to workers during any calendar quarter of the previous two years; or (2) the farm employed 10 or more workers for any part of a day (even if not at the same time during the day) during any 20 or more weeks in the last year, or in the year before that. After a farm crosses either threshold, the farm must begin paying into federal and state funds.

The farm will pay federal unemployment tax on up to $7,000 of each employee’s wages. The tax is determined by percentage; the latest percentage is listed in IRS Publication 51. Federal unemployment tax is paid through the same EFTPS procedures as income withholding and Social Security/Medicare taxes.

The farm will pay Connecticut unemployment tax on up to the state’s current taxable wage base for the calendar year. The taxable wage base was $15,000 in 2019. Each year, the farm will receive a notice from the CT Department of Labor (DOL) indicating their individual unemployment tax rate for the calendar year. The tax rate depends on the experience of the business. In 2019, the range of the tax rate was 1.9 to 6.8. The rate for new employers was 3.4.

To pay the CT unemployment tax, farms must first register their business with the CT DOL. They can register on-line by using the internet Employer Registration System (https://wage.ctdol.state.ct.us/CTERS/index.aspx) or by downloading the application from the CT DOL website and then mailing or faxing it.

Unemployment tax returns and payments must be submitted electronically. The two methods of payment that the CT DOL accepts are the ACH Credit Payment option and electronic funds transfer (ACH Debit). Detailed information and payment links are available on the CT DOL website. Generally, the quarterly tax forms and payments must be made no later than 30 days after the end of each calendar quarter (i.e., April 30, July 31, October 31, and January 1).

Just as with minimum wage, overtime, and workers’ compensation, the rule above is for farms assigning farm labor to their employees. For non-farm enterprises (which may include diversified farms engaging in separate, non- agricultural enterprises, such as packing other farmers’ produce, hosting on-farm events and agri-tourism, and so on as discussed in the minimum wage section), farmers may need to follow the regular unemployment tax rules.

For non-farm businesses, federal and state unemployment tax is owed when either of the following happens: (1) the business has one or more employees during some portion of a day in 20 different calendar weeks in either the current or prior year (whether consecutive weeks or not); or (2) the business paid out $1,500 or more in gross wages during any calendar quarter of the current or previous year.