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Successfully Navigating Farm Labor Contractor Agreements

Columnist: Scott Gerien
September, 2012 Issue
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Scott Gerien
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The summer holidays are upon us (even though this column is being published in the September issue), and my deadline for this column fell in the middle of my family’s family vacation. However, the beauty of being part of a law firm with several attorneys is that I can always find back-up. So for this column, I called in my colleague Caroline Boller as a pinch hitter. Being a clever attorney, Caroline has elected to write a topical article given the September publication date of this column. Caroline, take it away!

In light of the impending grape harvest, it seems timely to discuss some little-known truths about the nature of the relationship between farm labor contractors (FLCs) and the landowners or growers who engage them. For their part, established FLCs have long known to keep a close eye on the slew of regulations that affect their business or face some serious consequences. Yet I’m always surprised at the number of landowners and growers who have a simple handshake relationship or (at best) a one-page agreement with their FLCs, likely because they fail to appreciate the potential liabilities that hiring an FLC can expose them to.

With respect to the benefits of an informal relationship, I can, to some extent, sympathize. While attending the Unified Wine and Grape Symposium in Sacramento this January, I listened to panelists discuss wistfully the days of handshake agreements in the context of grape purchase contracts. Audience members were nodding along. Sure, these agreements have become more and more complex over time—some might say too complex. It’s also true that a contract can’t solve every problem that may arise, whereas a strong, cooperative relationship between grower and winery just might. But a well-drafted grape purchase agreement should solve more problems than it creates.

Gone are the days when the likes of Cesare and Robert Mondavi would buy grapes in a surplus year, when they could ill afford to do so, simply because they said they would. Nowadays—well, at least up until the current grape shortage started gaining traction—if you didn’t have a contract, you might have been forced to let your crop hang for lack of a buyer for the fruit (especially Merlot). Grape purchase agreements can serve the interests of vineyardists and wineries alike. They’re here to stay, and rightfully so.

So what, you may ask, does this have to do with FLC agreements? In short, if you’re a grower or landowner hiring an FLC, you need one. When we ask a client to see his or her grape purchase agreement, we don’t hear so much anymore that there isn’t one. Well-drafted or not, there’s usually something. Yet some growers think that simply the act of hiring an FLC establishes a layer of “protection” between them and the FLC’s acts in relation to its agricultural employees. Growers don’t want to get bogged down with immigration, payroll or health and safety issues. Leave that to the FLC, right? Yet as Fact Sheet #35, illuminatingly titled “Joint Employment and Independent Contractors Under the Migrant and Seasonal Agricultural Worker Protection Act” (otherwise known as the MSPA), issued by the US Department of Labor, explains:

“Simply being licensed as a farm labor contractor does not in itself make the FLC an independent contractor. He/She may be an employee of the person utilizing his/her services. If the farm labor contractor is an employee of the person utilizing his/her services, then the workers in the crew are also employees of that person.” [emphasis added]

Uh-oh. Yep, this means a grower could be held responsible for all of those potentially messy agricultural worker matters he or she thought the FLC was on the hook for. It’s true that there are some exceptions under the MSPA, including for family and small businesses, but these are narrow.

Moreover, a slew of state regulations apply to FLCs in addition to the federal laws. California’s Labor Code includes sections such as the field sanitation standard, the wage theft protection act, and the illness and injury prevention program. Also, California law changed on January 1 of this year, imposing further requirements on the employers of agricultural workers and increasing the penalties for noncompliance. Additionally, each grower utilizing FLC services is required to periodically verify the validity of the FLC’s license via the California Department of Industrial Relations. Then there are local rules and registration requirements, which vary by county.

Despite all of these heart-palpitating requirements and responsibilities, there are ways to minimize grower and landowner exposure to the FLC. In certain situations, this may be achieved by establishing a true independent contractor relationship. There are a number of factors that a regulatory body will consider when making such a determination. A well-drafted FLC agreement can lay the groundwork and is a key component of ascertaining the type of relationship that will be imputed. The agreement should be used as a reference for the parties and they should be sure to closely follow its terms, since it’s the actions of the parties that are viewed with the most scrutiny by regulators.

As with grape purchase agreements, no contract is perfect and not every possible scenario can be addressed. Nonetheless, grape purchase agreements, FLC agreements and, for that matter, any solid contractual document will clarify the responsibilities of the parties and can provide a level of protection from the more common pitfalls inherent in that type of relationship. In other words, if you’re using the services of an FLC, you need to be clear about your legal obligations, and a high-quality FLC agreement can help to spell them out.


 

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