I was so excited when AmericanHort announced a few weeks ago they were going to host a webinar called “Avoiding Audit Surprises: The New Overtime Rule and Other Federal Labor Topics.”
This is a topic we’ve been discussing for years with the horticulture industry. It’s our goal to help people in the industry to look at their entire business as a whole, not just their greenhouse or their bottom line.
So it was great to see AmericanHort, which supports close to 16,000 member and affiliated horticulture businesses, take up the mantle of this conversation. It’s also a timely topic of conversation with changes in the overtime legislation for salaried employees could affect many in the industry set to start soon.
While Chris Schulte from CJ Lake (a law firm that studies government legislation and regulation) gave the presentation, I couldn’t help think how familiar it all was. Obviously, the new legislation wasn’t familiar, but his conclusions were exactly what we’ve been saying for a while
Overtime legislation highlight year-end changes for employers
Schulte spent most of his presentation talking about a May 18 Department of Labor ruling that will change overtime requirements for salaried employees. The law is due to take effect Dec. 1, but there are a couple of lawsuits on the table looking to delay the start date.
The May 18 ruling was meant to update the current salaried employment laws and effectively allowing more people to qualify to earn overtime pay. According to Schulte, 4.2 million U.S. workers will fall under the new ruling in mostly retail and restaurants, and cause a $1.1 billion increase in worker pay each year.
The law would affect mostly the people who are in the Executive/Administration/Professional (EAP) bracket. An employee qualifies as an EAP exemption in a three-pronged test: Salary basis (are they paid a fixed amount?), duties (primary duty is 50 percent +1 white-collar, supervise more than two employees, rules vary by state), and the salary level test (paid at least $455/week or $23,660 annually not counting bonuses and commissions).
In the new ruling, the salary basis and duties tests will remain the same. However, the salary level would see its first increase since 2004, doubling to $47,466 with up to 10 percent as non-discretionary. The law would also force revisiting the limit every three years based on the wage growth in the lowest-income census region.
As you may know, the horticulture industry has its own set of rules for salary/overtime exemptions. And if someone doesn’t qualify for an exemption under one, they still may qualify under the other.
However, the agriculture exemptions aren’t cut-and-dry either. First of all, agriculture is divided into primary (“hands-in-the-dirt” employees) and secondary (work essential to an operation done “on the farm”) ag for exemption purposes.
Schulte gave a great example of a sales manager. Let’s say a greenhouse grower has both an inside sales manager and an outside sales manager who both make a $50,000 before bonuses and commissions. They both are salaried employees and both manage a staff of three people.
This means both of them wouldn’t qualify for the exemption based on their annual salary. But let’s look at their Ag exemptions.
Most likely, that inside sales manager would stays at the greenhouse’s main operation site full time. Under the rules, even though this person isn’t doing primary ag work, they are still essential to the business operations. Therefore, this person would be exempt from the overtime rules.
Now let’s say the outside sales manager is out of the office 70 percent of the time visiting customers on site. They may come in to the office one day a week to work and have meetings, but primarily they’re out on the road. This means they would not qualify for the exemption because they didn’t do most of their work “on the farm.”
To make it even more convoluted, this rule is for work done at a certain time and not overall. So if the outside sales manager schedules a two-week training session at the greenhouse office during the off-season, he would qualify for the exemption during that time.
Schulte went on to explain even more of the exemptions to the ag exemptions, like handling other grower’s crops. So if your company does more work finishing other greenhouses young plants before shipping them off to retail, you may not qualify. Except if you grow these plants longer than a certain time period. Or if it falls under the de minimis rule for contract fulfillment.
How do you like them apples? (Oh yeah, and don’t even get me started on the so-called “cider house” rules. That goes even further down the wormhole.)
Immigration, ACA, OSHA legislation also affecting horticulture industry
Not to be left out, the other challenges HR directors in the horticulture industry face (immigration, OSHA, ACA) got their day in the sun in Schulte’s webinar. And the confusion continued in this part of the lecture as well.
New legislation for the H-2A and H-2B visa programs are still being debated in Washington. And from what Schulte said, there still seems to be a wide gap of opinion between the folks in Washington and in the horticulture industry. Honestly, I think it’s caused by our representatives not completely understanding the industry’s nuances more than flat-out politicking.
Here’s a prime example that Schulte gave: There are some in Washington who are second-guessing the growing season or the seasonal aspect of some agriculture jobs:
Representative: “You say you’re a landscaper in Maine, but why aren’t you mowing lawns in January and February?”
Landscaper: “Because they’re under two feet of snow?”
I know many of you up north are scoffing at this exchange, but I grew up in Florida. When I moved to North Carolina, I was shocked that pools weren’t open year-round. That was a completely foreign concept to me. It’s common sense, but it’s something that I never had to ponder until it was in front of my nose. The representative on the committee discussing this issue may have been from Southern California and never had to ponder something like that until it was in front of that person’s face.
There are some other immigration issues still being argued in Washington, such as corresponding employment, emphasis on recruiting U.S. workers, H-2A housing and processing, contract payment deadlines, and processing delays with increased program numbers.
The immigration rules then pour over into the ACA legislation. Since H-2 workers are considered “lawfully present,” they must be treated like U.S. workers as far as tabulating ACA requirements.
Schulte said that Social Security number issues are cropping up with the ACA reporting. The IRS wants to make sure that current employers have the right Social Security numbers associated with the right people. “The IRS is not concerned with immigration,” he said. “They’re just concerned with getting the money.”
It’s true that the Department of Homeland Security has been aggressively going after illegal aliens for years, they’re now focusing more on gang members, criminals and other more dangerous people, Schulte said. However, this hasn’t stopped Form I-9 audits for seasonal workers, which Schulte said is tripping up many horticulture employers right now.
Around the same time as the overtime ruling, the federal government also introduced updates to OSHA in an effort to improve tracking of workplace injuries and illnesses. The labor department is looking to roll out better electronic reporting and a searchable OSHA database over the next several years. Also, new anti-retaliation provisions for OSHA are also set to go into effect Nov. 1.
Advice from the legal team: Be prepared for any legislation
Schulte ended his presentation with two great pieces of general advice:
- Have a plan and be prepared for any ruling (or delay) that may happen. Make sure to start enacting a plan well before your season starts.
- Keep up with your record-keeping and your document-retention requirements.
“These statutes and regulations are extremely complicated and you will not comply with them by accident,” he said.
For years and years, we have been championing the idea in the horticulture industry to make sure the industry understands employment regulations and how they could affect your business. With the legislation changes over the past few years, it’s becoming more and more important for your company to make sure it’s in compliance.
As Schulte said, managing your records and documentation is one of the biggest keys to it all. Even in our own customer base, we’ve had growers go from, “they’re too small to need a powerful HRMS system,” to that same customer doing a full Sage HRMS install to track I-9 requirements and OSHA incidents two years later.
We’ve heard the same thing over the past few years from our friends at Avalara, who focus on tax laws and regulations. They’ve said the same thing: The IRS is hiring more auditors to track down people who aren’t in compliance with their taxes.
In both instances, the answer is the same: Manage your records and documents and be prepared for when the auditor comes
“Having the paperwork makes your life easier,” Schulte said. “If you don’t it’ll make your life worse. It’s one thing to pay your workers correctly, but it’s another thing to prove that you did. So if you have it in black and white in your file drawer, you can go right to it or go to your computer and hit print, you’re going to make your life a while lot easier.”