Will You Need to Pay Overtime for Your Farm Employees?

• June 6, 2016
• Paul Neiffer

Most farmers assume that they are not required to pay overtime for any farm work performed by their employees.  Although this is correct, we need to make sure that farmers understand what work is exempt under the Agricultural Work exemption and what work might be exempt under other provisions.  This blog post is not designed to be too technical, but rather, let you get a broad understanding of the exemptions and if you think they may not apply in your situation, make sure to discuss with a good labor law attorney.

First, Agricultural Work is exempt from overtime.  However, this work needs to be “directly” related to farming.  Work performed on the farm for management or administrative purposes usually does not count.  For example, someone who drives a tractor full-time is exempt.  Someone who does the farm bookkeeping is not exempt.  If someone does a combination of both exempt farm labor and non-exempt work, then usually the worker will be subject to overtime rules.  Here is a link to the Department of Labor Fact Sheet on this subject.

Non-farm work done by farm employees may still be exempt under other standards.  Usually, most management and administrative functions will be exempt, however, they are only exempt if the annual salary falls over a certain level.  The old salary level was $23,600 or $455 per week.  The Department of Labor has proposed new rules that increase this salary level from $23,600 to $47,892 or $921 per week (this could get bumped to $50,440).  Here is a Frequently Asked Question Section from the Department of Labor on the new rules.  These new rules will be effective December 1, 2016.  Therefore to not pay overtime, the employee must perform an exempt function AND have a salary over the required level.

Let’s look at a couple of examples:

Farmer Johnson has two managers and one bookkeeper.  The two managers each receive a salary of $40,000 per year and the bookkeeper gets a salary of $30,000 per year.  Under the old rules, all three employees met both requirements (salary over $23,600 and exempt functions).  Under the new rules, all three employees would be subject to overtime since they only meet one of the two requirements.  They still meet the exempt function requirement, however, their annual salary is under the minimum requirement of $47,892 or $50,440 if that is the final number. 

Let’s assume that one of the managers also drives a combine during harvest and  tractor during spring planting.  Since he performs a combination of both exempt and non-exempt functions, it is likely that he will be subject to overtime for all work performed during the year.

Again, these are simply a couple of examples and if you think this might apply in your situation, make sure to discuss this with a good labor law attorney.  If you get it wrong, this can cost you a lot of money in the future.

Paul Neiffer, CPA

CliftonLarsonAllen, LLP

 

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