When is a Farmer not Just a Farmer?
For Washington farmers, the distinction between managing a farm and managing a labor force just got fuzzier.
While machines have greatly reduced the need for human labor, some farmers still need lots of workers to provide hands-on labor. On many farms, the need for help (as dictated by the crops themselves) is irregular, varying not only seasonally but even week to week and day to day.
For generations, farmers have relied on farm labor contractors (FLCs) to supply workers when needed. By focusing solely on labor, FLCs can assemble a mobile, flexible, and reliable work-force. FLCs provide workers to farmers where and when they are needed and can provide a complete labor solution, managing HR, payroll, and compliance with often complex labor regulations, freeing the farmer to worry about the weather, crop rotation, commodity prices, and the like. And by the same token, FLCs can offer workers steadier employment than a single farmer ever could.
Since at least the early 1960s, federal and state legislation has regulated agricultural employment practices and FLCs. But not all FLCs are reputable or well-capitalized, and increasingly the law has held the farmer liable for the conduct of the FLC. In response, agriculturalists have devised creative arrangements to try to separate the ownership of farm property from the risks attendant in managing a large labor force. But as illustrated by one recent case from the Washington Supreme Court, these arrangements will not necessarily protect a land owner from joint liability.
In Saucedo v. John Hancock Life & Health, Ins.,[1] the “Hancock companies” leased apple orchards to Farmland Management Services (“FMS”), which in turn subleased to NW Management (“NW”). Each lessee was paid a management fee and was reimbursed for costs; the lessor collected all profits. FMS contracted with NW to manage the orchards and to “hire, employ, discharge and supervise the work of all employees.” NW had discretion to manage the orchards, and was required to submit an annual operating plan and budget to FMS who ultimately sent it to the Hancock companies for approval.[2]
The plaintiffs claimed that NW should have had an FLC license. Moreover, they alleged that the Hancock companies and FMS were jointly and severally liable for NW’s failure to register as an FLC and to provide workers with written disclosures because they had knowingly used an unlicensed FLC. (Generally, a farmer is liable for the acts of the FLC only when the farmer acted as a “joint employer” with the FLC, but Washington and some other states have enacted statutes holding the farmer jointly liable for the FLC’s practices if the farmer uses an unlicensed FLC.)
There was no dispute that NW did not have an FLC license; the question was whether NW was required to have one under Washington’s Farm Labor Contractor Act (“FLCA”). The defendants argued that NW was not an FLC, and didn’t need a license, because it managed all aspects of farming, as opposed to simply providing a labor force.[3] Essentially, the defendants took the position that NW was more properly considered an “Agricultural employer,” or a farmer, than an FLC.
The Washington Supreme Court disagreed, employing what it described as a “plain language” construction of the FLCA and concluding, in effect, that NW could be both an Agricultural employer and an FLC (broker) under the statute—and thus should have been licensed as an FLC. The court rejected the defendants’ arguments about the structure and intent of the statute and instead held that the key question was whether NW was being compensated (even if the compensation was not based on FLC work alone) for the provision of labor. The court also found that the defendants were jointly and severally liable for NW’s violations of the FLCA—even if they lacked actual knowledge that NW was unlicensed—if they had neither inspected the license issued to the FLC nor obtained a representation from the licensing authority that NW was in fact licensed.[4]
After Saucedo, owners of agricultural property in Washington will have to structure their arrangements very carefully indeed if they wish to insulate themselves from potential employment-related liability. The court pierced a multi-tiered management arrangement in order to impose FLCA liability on the farm owners. In doing so, the court arguably ignored the intent of the FLCA by holding that a farm manager was also an FLC, thus allowing the plaintiffs to hold the farm owners jointly liable for the practices of their manager without ever establishing a joint-employer relationship.
–David N. Bruce
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