Employee & Contractor Definitions #
Many farm employers inappropriately treat their workers as independent contractors (1099) when they actually qualify as statutory employees (W-2). The motivation frequently stems from a farmer’s desire to simplify their bookkeeping and payroll systems and avoid paying their share of payroll taxes. In addition to being illegal, this practice shifts the burden of payroll taxes entirely onto the employee. In such a case, an employee may accept a farm job with an offer of making $15/hour, only to find out later that they owe 15.3% self-employment taxes on their entire season’s earnings, plus FICA, possibly with penalties for not making quarterly pre-payments.
In our experience, most 1099 arrangements for seasonal farm labor are inappropriate. Here is the IRS’s guidance on deciding whether someone you hire qualifies as an employee or an independent contractor:
It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.
Common Law Rules
Facts that provide evidence of the degree of control and independence fall into three categories:
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker…
General Definition of Interns/Apprentices/Trainee #
Internships are not a way for employers to acquire cheap labor. Taking on interns (apprentices, trainees) is a commitment to providing a real learning experience and means that the farmer will be acting as teacher as well as employer. AJP standards require farms to provide a clear labor agreement to interns, spelling out wages, hours and expectations, and a learning contract in which the intern spells out what he/she hopes to learn. Farmer and intern should review this learning contract mid-season to make sure the learning is taking place, and again at the end of the season. It is as much a review of the farmer as teacher as of the intern as learner. Standard 3.6.1. and 2. See Part 3 of this Toolkit for more information about Interns.
Note that laws covering internships where interns are paid less than minimum wage typically require 1) that interns access significant educational opportunities, and 2) that interns not do work that would otherwise be done by a regular employee. Consult legal guidance for your state to make sure you are complying with the law.
For more information and resources on internships, see the Apprentices & Youth section of the toolkit.
Who Is Considered Hired Labor by AJP #
In our consultations with farmers, we have often been asked about whether different kinds of help they receive on the farm count as hired labor, so we offer this definition of hired farm labor.
For the purposes of Food Justice Certification, hired labor does NOT include:
- Immediate family members (parents, children, siblings and their children) unless they are on the official farm payroll
- Volunteers – crop mobs, school, club or church groups who work for a few hours or a day, CSA members who do work in exchange for food or a reduction in share price
- Educational programs and tours including short term work stays
- Work trades or barter relationships with neighbors, relatives, or friends
Hired labor does include:
- Full time employees
- Seasonal employees
- Part time employees, even very part time employees, if they work mainly to earn money rather than to learn
- Interns and apprentices (refer to intern standards 3.6 for specific expectations on compensation and requirement for a learning contract)
- See Standard 3.2 on Child Labor
- Contracted labor – through Farm Labor Contractor or Crew Leaders (refer to special contracted labor and labor contractor standards)
- Independent Contractors (standards 3.1.13.c and d and 4.1.12.c and d cover independent contractors)