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Harvest was just around the corner at the Nunamaker Ranch near Washtucna when this photo was taken.
Photo by Grady Gfeller

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FARMER'S TOOLBOX

Managing the time, costs of farm labor

May 217
By Trista Crossley


Editor’s note: This topic was presented in both Airway Heights and Walla Walla, Wash. This article covers the workshop in Airway Heights.

The Agricultural Marketing and Management Organization wrapped up its 2017 winter series in February with a workshop on labor management, including wages, overtime laws and worker protection standards.

Paul Neiffer, a principal with CliftonLarsonAllen, kicked off the day by discussing changes in minimum wages and sick leave rules that could affect Washington farmers. In 2017, the Washington minimum wage was set at $11 per hour. By 2020, the minimum wage will have increased to $13.50 per hour. Employees under 16 years of age are to be paid at $9.35 per hour in 2017, increasing to $11.48 per hour in 2020. While there are certain ag positions that are not required to be paid minimum wage, such as temporary harvesters, Neiffer said that due to a shortage of laborers, employers are finding that they have to pay more to attract enough workers.

Another rule change says employers must allow a paid rest period of 10 minutes every four hours, and it must happen no later than the end of the third hour of a worker’s shift. Even workers that are paid a piece rate have the right to paid rest periods. Employees must be allowed at least a 30 minute lunch break if they work more than five hours.

Under federal rules, Washington farm workers are not subject to normal overtime, meaning being paid time and a half. However, all hourly farm workers must be paid for all the hours worked. In situations where employees are salaried, they must be paid at least $455 per week or $23,660 per year. With the new 2017 minimum wage, if they work 40 hours a week, 52 weeks a year, that equals a yearly wage of $22,880. In order to qualify as a salaried worker, employees must be considered an executive, an administrator or a professional.

“If they are a typical farm worker and they are working 50 hours a week and they don’t meet the definition of being a salaried farm worker, then you have to pay them for every hour they work,” Neiffer explained, adding that a farm manager who manages other workers could be considered a salaried employee.

There was a proposed regulation that would increase the minimum weekly salaried wage to $921 per week or $47,892 a year. Neiffer said that increase would likely end up changing many farm salaried employees to an hourly wage. However, a Texas judge postponed the rule, which was supposed to go into effect at the end of 2016, and there are indications that the current administration will let the rule die.

Neiffer also discussed commodity wages, which is the practice of paying an employee in a commodity, such as grain, instead of dollars.

“The primary reason we do this is because there is no payroll tax on paying a commodity wage. That was put in the internal revenue code back in the 1920s,” he said. “You have to remember that back in the early 1900s, a lot of farm hands were paid in grain, vegetables, chickens, eggs and so on. There was no cash changing hands, so it was a little hard to withhold 7.65 percent out of the egg to pass on to Uncle Sam.”

There are some things to keep in mind when paying commodity wages:

• Wages are entered in Box 1 of a W-2 form, but not in Box 3 or 5 (FICA or Medicare wages);

• The employee is subject to market changes and must incur costs to hold the grain. In other words, if an employee sells the grain shortly after acquiring it, the IRS could consider the commodity the same as a cash wage and assess payroll taxes; and

• There is a gain or loss on the difference when the commodity is sold. If the commodity is held for at least a year, the gain is considered a long-term gain;

According to Neiffer, the practice of paying commodity wages works best as a way for owners to pay themselves, but he recommended that they also pay themselves at least $10,000 of cash wages to build up social security credits, especially to qualify for disability benefits.

Children’s wages was another topic Neiffer addressed. He said that for children who are younger than 18 years old, there are some advantages to paying them a wage (as long as the parents are operating as a sole proprietor or spousal partnership):

• Wages are exempt from payroll taxes;

• Up to $6,350 is exempt from the child’s income taxes in 2017; and

• Those wages can be put into a Roth IRA (up to $5,500 in 2017).

Grandparents can pay wages to grandchildren, but they will be subject to payroll taxes. In addition, wages need to be reflective of the amount of work performed.

Moving on from discussing children’s wages, Neiffer tackled tax reform, referring to the U.S. House’s 2016 GOP tax plan. The new tax plan would replace the current seven income brackets with three (see slide). Interest income would be taxed the same as dividends and long-term capital gains.

“Going to one or even three rates does not simplify the tax code at all,” he said. “What they are trying to do is remove a lot of tax payers from itemizing their deductions, because that’s where a lot of work goes to.”

The tax proposal would also:

• Increase the standard deduction to $12,000 for singles, $24,000 for married couples and $18,000 for the head of household;

• Eliminate the personal exemption;

• Increase the child credit to $1,500 and add $500 credit for dependents that are not children;

• Eliminate all itemized deductions other than mortgage interest and charitable deductions; and

• Eliminate the Alternative Minimum Tax.

Estate taxes are also addressed in the GOP’s tax plan, something Neiffer said is a case of being careful what you wish for, as one of the options for eliminating the estate tax is to replace it with a capital gains tax on assets.

The House has also proposed a new “destination-based cash-flow tax” of 20 percent for corporations and 25 percent for unincorporated businesses—essentially a value added tax with a deduction for wages paid. It would abolish the current corporate income tax and eliminate the ability to deduct business interest such as operating line interest, interest on buying machinery, etc. Costs paid for imported goods would not be deductible. The good news is that all sales from exported goods would be nontaxable. Other business entities would see a top tax rate of 25 percent, but self-employment taxes would likely go up.

Pesticide compliance

Scott Nielsen from the Washington State Department of Agriculture (WSDA) went through updates to the worker protection standards (WPS). The WPS first went into effect in 1993 and is basically label language that protects agricultural workers and pesticide handlers from pesticide exposure. The newest revisions were signed into law in November 2015, with some revisions taking effect in January 2017 and the balance going into effect in January 2018.

WPS applies to farms, forests, plant nurseries and greenhouses that hire employees and use pesticides. Commercial applicators could also fall under the rules. WPS does not apply to pesticides applied on:

• Pastures or rangelands;

• The portions of agricultural plants that have been harvested;

• Livestock or other animals or in or around animal premises;

• Vegetation along rights-of-ways, industrial sites and other noncrop areas;

• Ornamental gardens, parks, golf courses and public or private lawns; or

• Structural pest control.

Nielsen said WPS boils down to five primary areas: pesticide training; notification; emergency assistance; protection from pesticides with personal protection equipment (PPE) and decontamination supplies; and protection from retaliation by an employer. The new rules expanded the immediate family members who are exempt from about 80 percent of the rules to include aunts, uncles, nieces, nephews and first cousins. Immediate family members still must be provided with appropriate PPE, must be kept out of treated areas until the re-entry interval (REI) has expired, ensure pesticides are applied so they do not contact anyone and follow all other pesticide label instructions. Some of the new rule changes are listed below.

Training. Training for workers and handlers has to happen every year, and the list of what needs to be trained has been expanded. The training should also be documented, and that documentation saved for two years. “Some of it is pretty commonsense, such as being careful to wash hands before a meal, and part of it is understanding the signs and symptoms of poisoning. They’ve added some items like do not take pesticide or pesticide containers used at work to your home or remove workboots or shoes before entering the home,” Nielsen said. “A lot of it is good information for a person to have to protect themselves.”

Notification. Under the new rules, information needs to be posted in a central location and needs to include general pesticide safety information, where to seek nearby medical treatment and a regulatory contact number. Application-specific information must be posted within 24 hours of application and must remain posted for 30 days after the REI has expired. Those application records must be saved for two years. Field posting, based on product labels and length of re-entry intervals, is still required. On products with a 48 hour REI or less, an employer can notify workers either by posting or by providing them with oral notifications. Field postings must go up before application starts and come down within three days after the REI is over.

Protection from pesticides. The revised rules call for employers to provide emergency body wash and water for routine washing in the amount of one gallon of water for each worker and three gallons for each handler and each early entry worker. (In Washington state it will remain at 10 gallons of water for one handler and 20 gallons of water for two or more handlers). The amount of water should be measured at the beginning of the work period. Handlers must have a clean change of clothing available, and eyewash and an emergency eyewash station is required if the pesticide requires eye protection.

For more information, farmers should contact their region’s WSDA Pesticide Management Division or visit WSDA’s website at agr.wa.gov/PestFert/.

Plows to bytes

Chad Dinkins from H.A. Ag Solutions reviewed some of the systems available to farmers that will take information gathered by precision ag equipment and make it more useful.

“There is a lot of technology coming down the pipeline that is going to hopefully seamlessly transfer (information) from your tractors into your office,” he said, adding that currently there are about 10 different programs that are either good for the office or good for equipment, but the farmer has to tie it all together.

Dinkins briefly touched on some of the field-to-office software that is being developed, including:

• Trimble Ag Software;

• Granular;

• Climate Field View;

• Raven Slingshot; and

• JD Link

“Each one of these programs have the ability to go from your tractor or the operation that is happening remotely to your office or your iPad. They can send you information almost in real time,” he explained.

However, two things Dinkins said farmers need to consider is where the precision ag information is stored and who has access to it. Many companies upload and store data on company servers and claim ownership of it.