employment law

Farms and other businesses can benefit by using independent contractors to fill labor needs while not having the same financial and legal responsibilities the business has for its employees.  But state and federal laws allow those advantages only if the worker is truly an independent contractor.  When a worker classified as “independent contractor” functions as an employee in the eyes of the law, a business can be liable for failing to meet its employer obligations for the worker.   That’s exactly what happened in a recent case before the Ohio Supreme Court.

The company.  The case involved Ugicom (the company), paid by Time Warner Cable under a subcontract to provide workers to install underground cable.  Workers used the company’s website to select and document installation jobs and the company paid the workers at rates it determined.  The installers were required to wear badges and vests identifying the company and to pass drug tests and background checks, all coordinated by Time Warner.  The company required installers to sign a one-year independent contractor agreement containing a “non-compete clause” that prohibited them from providing installation services for competitors.  The contract also required installers to respond to service requests within two hours.  Installers had to provide their own hand tools, transportation, cell phones, and laptops, but used cable obtained from Time Warner.  They could work any day or time consented to by customers.  The company paid the installers by the job and did not withhold taxes or provide any benefits.

The Bureau of Workers Compensation (BWC) audit.  The BWC audited the company to decide whether it had paid the correct amount of workers’ compensation premiums for all of its employees.  The BWC examined the company’s treatment of workers it had hired to install cable as independent contractors.  Concluding that the company exercised “too much control” over the installers, the BWC determined that the installers were actually employees for workers’ compensation purposes and the company owed $346,817 in unpaid premiums for the employees.  The company unsuccessfully appealed the decision to the agency and the Tenth District Court of Appeals and the case ended up before the Ohio Supreme Court.

The Ohio Supreme Court review.  For purposes of the workers’ compensation program, Ohio law provides that the controlling determination in whether a worker is an independent contractor or an employee is “who had the right to control the manner or means of doing the work.”  There is not a bright-line test for making such a determination, however.  Instead, the Ohio Supreme Court explained, the BWC must consider a set of factors related to who controls the manner or means of the work.  Those factors include:

1. Whether the work is part of the regular business of the employer
2. Whether the workers are engaged in an independent business
3. The method of payment
4. The length of employment
5. Agreements or contracts in place
6. Whether the parties believed they were creating an employment relationship
7. Who provides tools for the job
8. The skill required for the job
9. The details and quality of the work

The Ohio Supreme Court’s role was to determine whether the BWC relied upon “some evidence” when reviewing each of the factors to reach its conclusion that the company controlled the manner or means of the installers’ work.   The Court concluded that most, although not all, of the BWC’s conclusions were supported by at least some evidence and upheld the BWC’s decision.  The factors and evidence that received the most attention from the Court included:

• Independence from the company.  The installers’ public image when working identified them as being with the company; they all wore the same badges and vests, and some had signs on their vehicles with the company’s name. 
• Method of payment.  The company controlled the rate of payment, which was nonnegotiable and did not include a bid process as is typical for independent contractors. The “take-it-or-leave-it” approach indicated control over the installers.
• Length of employment.  The installers had an ongoing relationship with the company and did not advertise their services to the community at large.
• Agreements and contracts.  The company’s non-compete clause restricted the installers’ freedom to work and indicated a measure of control over the workers.
• Skill requirements.  The BWC concluded that the minimal skill required to install the cable was not high or unique, and the company offered no facts to show that the installers required specialized skills.

Disagreement on the court.  Two of the Supreme Court Justices, Kennedy and DeWine, dissented from the majority opinion. Their primary point of disagreement was that there was no evidence supporting the BWC decision.  The evidence instead suggested that the company controlled only how the installers were paid, and the installers controlled the manner and means of doing their work.  The dissent criticized the BWC for jumping to a quick conclusion that the company’s true motives were “to evade the obligations associated with having employees.”

What does this mean for farm employers?   Farms often rely on independent contractors for seasonal and intermittent help with work like baling hay, running equipment, and doing books. Are these workers true independent contractors or are they employees?  That is a fact dependent question, but we can imagine many scenarios where the farm has a majority of the control over the mode and manner of such work.  Farms are subject to Ohio’s workers’ compensation law, so a farm could be audited by the BWC just as the company in this case was and could see similar results for misclassifying employees as independent contractors. 

Implications for all businesses.  The case carries several implications that raise needs for businesses that use independent contractors: 

1. Recognize that state and federal tests can differ.  Many are familiar with the IRS test for independent contractors but note that the Ohio Supreme Court applied its unique Ohio test for determining independent contractors in regard to BWC premiums. State and federal laws differ.  It’s important to apply the appropriate test for the situation.
2. Review the manner and means factors for each independent contractor.  For each worker claimed as an independent contractor, review the nine factors listed above to ensure that the business isn’t exerting the most control over the manner and means of the work.  Where possible, adjust practices that give the business unnecessary control over how and when the work is performed.  Consider these:
   • • Use employees to do the regular work of the business and independent contractors for high-skill or unique tasks.
     • Ensure that the business isn’t controlling the public image of the workers.  The workers should not be branded or identifiable with the business through clothing, name badges, hats, vehicles, etc.
     • Require independent contractors to submit bids or proposals on the amount and method of payment for their work.
     • Avoid using the same independent contractor for an extended period of time and ensure that the worker’s services are available to other businesses.
     • Don’t restrict the worker’s freedom to work for others, especially via a contract or agreement.
3. Maintain records and evidence of the work situation.  The BWC need only have “some evidence” that the nine factors indicate a high level of control over the mode or manner of work, but the business may offer facts and evidence to the contrary.  Good recordkeeping is imperative.  A business that can’t provide stronger facts and evidence in favor of the business, like the company in this case, might be at risk of an employee classification by the BWC.

While there are benefits of using independent contractors to meet labor needs, farms must recognize the associated risk of misclassification.  For workers' compensation purposes, farms can avoid those risks by ensuring that it is the independent contractor, not the farm, who controls the "manner or means" of doing the work.  Read the Ohio Supreme Court’s opinion in State ex rel. Ugicom Enterprises v. Morrison here.

The final day of April is already here!  Spring feels like it has finally arrived and planting season is in motion across Ohio.  Just like farmers in the field, legislatures, government bodies, and courts across the country are hard at work addressing critical agricultural and resource law issues.  We've gathered a collection of those issues for this Ag Law Harvest. 

Debt relief for socially disadvantaged farmers is in the works.  The USDA has announced its plans for implementing debt relief to socially disadvantaged producers mandated by the American Rescue Plan Act of 2021 that Congress passed in March.  The payments will be 120% of any outstanding Farm Service Agency Direct and Guaranteed Farm Loans and Farm Storage Facility Loans held by a socially disadvantaged farmer on January 1, 2021.  The additional 20% on top of the loan balance is for tax liabilities associated with the payment, as it will be considered income.  For purposes of this debt relief program, a “socially disadvantaged producer” is one who is Black or African American, American Indian, Alaskan Native, Hispanic or Latino, Asian American or Pacific Islander.  A producer must indicate the identification on the Customer Data Worksheet, USDA Form AD-2047, filed with the FSA.   Producers who fit into the socially disadvantaged producer definition can update those forms now with the local FSA office.  No other action by a producer who is eligible for the debt relief is necessary, as the FSA will notify producers of the payoff process as it occurs.  For more information, visit this webpage for the USDA’s American Rescue Plan Debt Payments.

Missouri’s Truth in Labeling Law.  In 2018, Missouri enacted a law making it a criminal offense to “misrepresent a product as meat that is not derived from harvested production livestock or poultry.”  Violators could potentially face up to one year in prison and/or a fine up to $2,000.00.  Shortly after the law went into effect, Turtle Island Foods Inc., a business that makes Tofurky (an alternative meat product) and advocacy groups such as the Animal Legal Defense Fund (collectively the “Plaintiffs”), filed a lawsuit challenging Missouri’s law on the grounds that the law violated the U.S. Constitution including the Free Speech Clause of the First Amendment, the Due Process Clause of the Fourteenth Amendment, and the Dormant Commerce Clause.  The district court denied Plaintiffs’ request for an injunction determining that Missouri’s law only prohibits companies from misleading consumers.  Plaintiffs then appealed to the federal circuit court.  Last month the Eighth Circuit Court issued its opinion and agreed with the district court.  However, the Eighth Circuit noted that the facts of this specific case did not support overturning Missouri’s law, but that facts and circumstances of another case may provide otherwise.  As it stands, Missouri’s law remains in full force and effect. 

Renewable Fuel Standard deadlines extended.  The EPA issued its final rule extending deadlines for obligated parties to comply with Renewable Fuel Standard deadlines for 2019 and 2020.  Under the extension, small refineries must submit 2019 compliance forms by November 30, 2021, and their associated attest engagement forms by June 1, 2022.  For 2020, obligated parties must submit their compliance documents by January 31, 2022, and their associated attest engagement reports by June 1, 2022.  Lastly, the EPA extended the deadline for obligated parties to submit attest engagement reports for 2021 to September 1, 2022, the deadline for 2021 compliance documents remains unchanged. 

Ohio man sentenced for stealing grain.  How often do you hear of farmers being victims of theft and a criminal on the run?  Well, last month an Ohio man was sentenced to one year in prison and 5 years of probation after stealing over $94,000.00 in harvested grain.  The defendant took his employer’s gravity wagon full of grain and sold it to a local co-op in Ashland County under false pretenses.  After the theft was discovered, the defendant fled from Ohio, eventually having to be extradited from New Mexico.  This case demonstrates just how vulnerable farmers are to potential crimes.  For more information on intentional harm to farm property and your rights, check out our law bulletin.

Iowa passes agricultural trespass law.  Iowa lawmakers have recently passed a new law that will make certain types of trespass on Iowa farms a criminal offense in an effort to stop animal activists and others from secretly documenting activities.  House File 775 makes it illegal to take soil or water samples and samples of an animal’s bodily fluids or other byproducts.  Additionally, the law makes it a crime to place or use a camera on the farm property without the owner’s consent.  Proponents of the law argue that such laws are necessary to protect private property rights and prevent bioterrorism.  Opponents of the bill are expected to challenge the law on First Amendment grounds.  

USDA discussing current issues surrounding shipping U.S. agricultural exports.  USDA had a meeting with the U.S. Department of Transportation and agricultural stakeholders to discuss the challenges of exporting U.S. agricultural products.  Challenges arose in the fall of 2020 and have only continued to get worse.  With the resurgence of international trade, nearly every sector of the supply chain has been under stress, including warehousing, trucking, rail service, container availability, and vessel service.  Farmers have long struggled with finding a market for their products and getting a fair price for their work.  With worldwide markets opening back up, the USDA and the Department of Transportation are hard at work trying to ensure that U.S. farm products reach consumers across the globe. 

Farmers to Families Food Box program to end May 31, 2021.  As part of the Coronavirus Food Assistance Program announced in April 2020, the Farmers to Families Food Box program was designed and implemented as a temporary relief effort to purchase produce, dairy, and meat products from American farmers and distribute these products in family-sized boxes to Americans in need.  In a letter to stakeholders, the USDA announced that due to the improving economy and the access food insecure Americans have to expanded federal nutritional programs like SNAP, WIC, P-EBT, and more, the need for the Farmers to Families Food Box program no longer exists.  The USDA also stated that the lessons learned from the Farmers to Food Box program will continue to be implemented in current and future programs.  The USDA has already begun to offer a fresh produce box on a temporary basis through The Emergency Food Assistance Program (TEFAP) and is in the process of designing a Dairy Donation Program to facilitate the timely donation of dairy products to nonprofit organizations that distribute food to persons in need and to help prevent and minimize food waste. 

Grant program to enhance the waters of Lake Erie.  The Ohio Department of Agriculture (ODA) has announced that the USDA has awarded ODA’s Division of Soil and Water Conservation a five-year, $8-million grant to help improve the water quality in Lake Erie.  The program will reinforce Governor Mike Dewine’s H2Ohio initiative by assisting farmers in developing nutrient management plans and conservation practices.  The grant will be available to farmers in Crawford, Erie, Huron, Marion, Ottawa, Richland, Sandusky, Seneca, Shelby, and Wyandot counties.  Farmers can start applying for the program through their local soil & water district office later this summer.

Radio Frequency Identification (RFID) tags replacing the branding iron?  Last year the USDA’s Animal and Plant Health Inspection Service proposed to approve a rule that would require using  RFID eartags for use on cattle that move across state lines.  While the rule has not yet been finalized, the proposed rule, which is supposed to take effect January 2023, has not been free of controversy.  The USDA believes the use of a RFID tag will provide the cattle industry with the best protection against the rapid spread of animal diseases. Some farmers, on the other hand, feel they should be able to use currently approved methods to maintain their cattle.  To fight for their right, the Ranchers Cattlemen Action Legal Fund (R-CALF) has filed a lawsuit in a Wyoming Federal Court on behalf of some Wyoming cattle producers.  R-CALF argues that the USDA has improperly used advisory committees to create new rules in violation of the Administrative Procedure Act and the Federal Advisory Committee Act.  Essentially, R-CALF argues that neither the USDA nor its subcommittees followed correct procedure as required by federal law in order to create this proposed RFID rule.  R-CALF seeks to prevent the USDA from using the recommendations obtained from the subcommittees in violation of federal law and in its place ask the court to require the USDA to revisit the RFID eartag issue with subcommittees that are compliant with federal law.  

All farm employees are set to receive overtime pay in the state of Washington.  Last November the Washington Supreme Court ruled that Washington’s exclusion of dairy workers from overtime pay was in violation of the state’s constitution.  Since the Washington Supreme Court ruling, several class-action lawsuits were filed against Washington dairy farmers for unpaid overtime hours, threatening to wipe out the Washington dairy industry.  Fearing the worst, Washington legislators worked diligently to pass Senate Bill 5172 ending the overtime exemption for all of agriculture and to make the transition for agricultural employers as smooth as possible.  The prevents lawsuits for unpaid overtime from being filed after the Washington Supreme Court decision and to phase in overtime in the agriculture industry.  Beginning in 2022, agricultural employees will be paid overtime for time worked over 55 hours in any one workweek and by 2024, employees shall be paid overtime for any time worked over 40 hours in any one workweek. Senate Bill 5172 awaits the Washington Governor's signature.