Are you my Mother (Common Law Employer)?

With the summer upon us the agriculture industry is quickly approaching one of the busier times of year. For the first time employers have to comply with the Play or Pay Mandate or risk paying a financial penalty. This risk can be completely avoided by offering full-time employees coverage that provides minimum value at an affordable price. This sounds simple enough, but in the agriculture industry determining who should offer the coverage to the employee is not so simple.

An employee is defined under the common law standard for the purposes of the Play or Pay Mandate. Under the common law standard an individual is an employee of the employer if the employer can control what will be done and how it will be done. This simple definition is complicated to apply in the agriculture industry because of the employment structure prevalent in the industry. The typical employment structure in the agriculture industry involves an employer who owns the field where the crops are grown and harvested (the “grower”) and a separate employer who provides the labor for the “grower” (the “field labor contractor”). The question is whether the individuals hired to work the field are in fact common law employees of the “field labor contractor” (the presumption of most agriculture employers) or, alternatively, are common law employees of the “grower.” The question is pertinent for the Play or Pay Mandate as the common law employer must offer its full-time employees coverage or risk being assessed a penalty. Each situation between a “grower” and a “field labor contractor” will present a unique set of facts that will yield a different answer as to whom is the common law employer.

Fortunately, the government provided a safe harbor for an employer to protect against incorrectly applying the common law standard. In a scenario where the “grower” is in fact the common law employer, a “field labor contractor’s” offer of coverage to an employee (who is in fact a common law employee of the “grower”) will count as an offer of coverage for the “grower” so long as the “grower” pays the “field labor contractor” an extra fee for each employee enrolled in coverage under the plan compared to the same employee if the employee did not enroll in coverage. Currently, there is no guidance on how much of an extra fee the “grower” must pay to the “field labor contractor” to satisfy the safe harbor. Employers will need to pay attention to the standards and best practices that evolve as the law matures.

In the agriculture industry if coverage is being offered to employees, it is typically being offered by the “field labor contractor.” Therefore, a “grower” is the party usually bearing the risk of the common law employer being misclassified and potentially having a huge penalty being assessed against it. Consequently, the common law standard inquiry is critical for a “grower” who is not offering coverage. Regardless of the situation, the specific facts of the “grower” and the “field labor contractor” should be reviewed and, if necessary, contract language should be added to utilize the safe harbor provided by the government.

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