Farm Employment FAQ

Frequently Asked Questions on the rights and responsibilities for Iowa farm workers and farm employers.

Farm Commons logo

FAQ developed with Farm Commons

The information below does not replace legal advice of a qualified attorney, insurance coverage advice of an underwriter, or tax advice of an accountant. Contact information for the Federal Wage and Labor District office in Des Moines, IA, Iowa Workforce Development, Iowa Occupational Safety and Health (IOSH), and the State of Iowa Wage and Labor division is listed below. Please contact these regulatory agencies directly with specific questions about your situation.

The links to resources and the laws are provided as a convenience only. Please use caution if consulting the text of a law without the guidance of an attorney. Many laws contain terms with very specific legal definitions that may be quite different than an every day definition. Also, court interpretation of a law is just as important as the law itself. These links do not explain how courts have interpreted the law. Farm Commons developed this resource with Practical Farmers of Iowa. Farm Commons is a nonprofit law center dedicated to providing community-based farmers with the business legal resources they need. They are available to help answer legal questions at www.farmcommons.org or by phone at (608) 616-5319.

General wage questions

There a few situations in which farm workers may be paid less than minimum wage. First, Iowa farmers may pay workers who perform agricultural labor less than minimum wage if they meet the federal “small farm” exemption. A “small farm” is one that used fewer than 500 “man-days” of labor during a calendar quarter in the previous year. A man-day is any day on which a worker performs agricultural labor for at least one hour. For example, on June 1, three workers perform agricultural labor for two hours before going home. In that situation, the farm incurred three man-days on June 1. If the farm has more than 500 man-days of labor in last year’s calendar quarter, he or she must pay minimum wage this year. Calendar quarters are January through March, April through June, and so forth. Please refer to a helpful chart in Appendix B of the FLAG publication “Farmers’ Guide to Farm Employees” for assistance in determining if a farm exceeds this exception. Read the legal code, 29 USC Section 213 at: http://www.law.cornell.edu/uscode/text/29/213

The exemption above only applies to agricultural labor. If a farm has workers perform non-agricultural labor, the farmer owes the workers minimum wage for the entire week in which the non-agricultural labor was performed, regardless of the farm’s man-days last year. “Agricultural labor” has a very specific legal definition and may not include all functions a farm or farmer may perform; such as farmers’ market sales, packaging product grown by a different farmer, and some construction or logging activities. An attorney can provide the best answer, but where consulting an attorney isn’t feasible, a farmer can always play it safe by paying the minimum wage.

If an Iowa farm exceeds the 500 man-day exception, the farm must pay workers at least the minimum wage rate. As of March 2016, Iowa and federal minimum wage rates are the same- $7.25 per hour. If the state and/or federal minimum wage rises in the future, farmers exceeding the 500 man-day exception will need to provide the higher wage rate.

There are other situations where Iowa farmers are not required to pay at least the minimum wage. As one example, immediate family members are not owed minimum wage. Parents, spouses, and children are immediate family; siblings and grandparents are not. Many farmers are curious about paying a salary instead of an hourly wage. Paying wages on a weekly basis is allowed. But, if the farm is required to pay at least the minimum wage (because it exceeds the 500 man-day rule) then the hours worked and pay provided must equal at least the minimum wage on a weekly basis. Farmers may not use a salary to avoid the minimum wage where it is otherwise required. (Although there are situations where federal law allows sub-minimum wage rates for salaried employees, most farm-worker positions will not qualify.)

Iowa farmers do not have to pay workers who perform agricultural labor overtime regardless of the size of the farm. Read the code exempting agricultural laborers from overtime pay at 29 USC Section 213 at http://www.law.cornell.edu/uscode/text/29/213

However, the exception only applies to agricultural labor, which is carefully defined and may or may not include things such as packaging products grown by another farmer, selling products at a farmers’ market, or transporting vegetables across state lines. If a worker does non-agricultural work in a week, then overtime pay rules apply to all the work performed in that workweek: the employee earns one and a half times his or her regular pay for the hours over 40 worked in that week. See the FLAG publication “Farmers’ Guide to Farm Employees” for more information or consult an attorney. Farms with diverse or potentially non-agricultural tasks can play it safe by paying overtime to laborers.

An Iowa farm may pay wages to employees in the form of food, housing, or other facilities such as food or transportation. However, providing non-cash wages requires additional rules, calculations and paperwork.

First, the employee must agree, in writing, before employment begins, to the arrangement. The employee must not be required to accept noncash wages a condition of employment. Second, it must be the farmer’s practice or the regular practice of other similar farmers to provide the noncash wages.

If a farmer relies on food and lodging to help meet minimum wage obligations, the farmer must follow specific rules for calculating the value. A farmer may only charge so much rent as to cover the reasonable cost to him or her for providing the food or lodging, which is the cost of operation and maintenance of the facilities. However, if the fair market price of the food or fair rental value of the housing is less than the actual cost of maintenance and operation, only the lower amount may be deducted from wages. To summarize, providing food and housing cannot be a source of profit for a farmer. The farmer must keep records showing how he or she arrived at the reasonable cost of the food or housing. For more information on determining the cost of food and housing, see Iowa Administrative Code 875-217.3(91D) and 875-217.4(91D).

The farmer must track the value and deduction from cash wages on each pay stub provided to the employee. Also, he or she must account for the deductions by the week, even if the employee is paid every two weeks.  For more information on the recordkeeping requirements for in-kind wages, see Iowa Administrative Code 875-216.27(91D).

See IRS Publication 15b, pages 16 and 17 for more information on the tax implications of in-kind compensation.

Interns, trainees or youth workers

Whether an intern is a regular employee under regular employment laws is a complex legal question right now. This resource outlines the safest position for a farm to take. If the internship position offered by a farmer does not meet the six criteria outlined by the US Department of Labor in Fact Sheet #71, a farmer should treat the intern like a regular employee, which means providing at least the minimum wage if the farm is required to pay at least the minimum wage. Fact Sheet #71 states that a non-employee intern works primarily for his or her own benefit, does not benefit the employer through his or her labors, and may actually impede the employer in accomplishing the productive work of the business in addition to other criteria. Meeting the six criteria will be difficult for most farms. To see the six criteria, visit www.dol.gov/whd/regs/compliance/whdfs71.pdf. For a more thorough explanation of how the criteria may apply to a farm, watch Farm Commons’ tutorial on Building a Legally Sound Intern and Volunteer Program for a Farm: https://farmcommons.org/tutorial/building-a-legally-sound-intern-and-volunteer-program-for-farm-work.

If a farm is required to pay minimum wage to employees, then any stipend must equal at least the minimum wage for all the hours actually worked by the employee. If the farm is not required to pay minimum wage, then employer and employee may agree on a stipend that equals a lower rate of pay.

If a farm is obligated to pay minimum wage (because the farm exceeded the 500 man-day threshold or because workers perform non-agricultural labor) then the farm may pay beginning workers who are also under 20 years old the Iowa starting wage of $6.35 per hour for the first 90 days.

The regulations relating to child labor laws in agriculture are complex and are different than non-agriculture child labor laws. Different rules apply regarding the specific age of the young person, the amount and timing of hours worked, and whether the task is considered hazardous or not. Farms hiring youth workers and youth seeking farm employment should consult http://www.dol.gov/whd/regs/compliance/childlabor102.pdf for federal and http://www.dol.gov/whd/state/agriemp2.htm#Iowa for Iowa law.

Volunteers

If individuals perform a service for a farm in exchange for anything of value (like food or housing) those individuals may be considered employees for the purposes of minimum wage, workers’ compensation, and payroll taxes. Farmers wishing to manage risk conservatively should treat compensated volunteers the same as they treat employees. Further, if a compensated volunteer is injured, a farm or commercial general liability policy may not cover that injury if the volunteer may be considered an employee. Any farm that works with volunteers should discuss its program in detail with their insurance agent. For more information, watch Farm Commons’ tutorial on Building a Legally Sound Intern and Volunteer Program for a Farm: https://farmcommons.org/tutorial/building-a-legally-sound-intern-and-volunteer-program-for-farm-work.

Work crews, migrant workers or independent contractors

An independent contractor is a person who performs work for the farm but is not a farm employee. A person can only be considered an independent contractor if he/she has control over how he/she accomplishes his/her work, if the contractor supplies his/her own tools, and he/she generally provides the same service to other business owners. A farm labor contractor is an individual who supplies or recruits seasonal or migrant workers. Farm labor contractors must comply with federal laws, which are discussed below. See IRS Publication 15a, page 6 for more information on independent contractors and http://www.dol.gov/whd/mspa/index.htm#.ULZQ-9PjlEA for more on farm labor contractors.

Because independent contractors are not employees, the farmer does not owe payroll taxes or withhold wages on their behalf. Independent contractors also do not contribute to the 500 man-days that govern whether minimum wage is owed to workers. This can lead to cost savings. However, the penalties for misclassifying workers in order to avoid taxes are serious. A farm should only consider a worker an independent contractor if he/she meets the several requirements laid out by the IRS, including that the independent contractor must have control over how they accomplish their work, they should supply their own tools, and they should provide the same service to other business owners. See IRS Publication 15a, page 6 for more information.

If a farmer works with a farm labor contractor who supplies workers, (and the farm exceeds the 500 man-day threshold) the farmer must make sure the contractor is registered with the Wage and Hour Division of the Department of Labor. The contractor should have a certificate and you may call 1-866-4USWAGE (1-866-487-9243) to verify the validity of the certificate. Additionally, the farmer must comply with several regulations relating to keeping employment records, vehicle safety standards, and housing standards. For more information on these requirements, visit http://www.dol.gov/whd/mspa/index.htm#.ULZQ-9PjlEA

Insurance, injuries and workers’ compensation

Although Iowa state law requires all drivers to carry liability insurance on their vehicles, do not assume that car insurance will cover accidents that occur in the course of farm business. The farmer’s personal vehicle insurance likely does not cover employees using the vehicle for work, nor will the employee’s car insurance cover an accident that occurs while at work. Farmers should ask their agent about a policy often called “hired and non-owned” insurance. Farmers should ask their insurance agent about business vehicle coverage and look through their insurance policy (especially the section titled “exclusions”) for more information.

Workers’ compensation is insurance that compensates employees for injuries by paying doctor bills, lost wages, and other costs related to the injury along with death benefits to the family and money for lost appendages, for example. Workers’ compensation covers employees for all injuries they experience while working, no matter how the injuries occurred. Liability insurance is different. Liability insurance covers certain injuries, or injuries resulting from specific activities, and often requires a lawsuit or finding of employer negligence before compensation is awarded.

 

Although a farm will often also carry liability insurance, the two are not interchangeable. Most liability policies will specifically not cover any worker who should have been covered under a workers’ compensation policy. Last, workers’ compensation protects the employer from lawsuits. If a person who is not covered by workers’ compensation is injured on the farm, that person can sue the farmer for negligently causing the injury. If workers’ compensation is available, the individual must take the compensation provided by the insurance policy; he or she cannot also choose to sue the farmer for negligence.

If a farm’s total cash payroll in the year prior was $2,500 or more, then the farm must buy workers’ compensation insurance for workers. In calculating the $2,500 threshhold, the farm may exclude wages paid to family members who are employees of the farm. Any farm that exceeds the cash payroll threshold should include all workers who perform labor for the farm on their workers’ compensation policy. The penalties for not carrying workers’ compensation may include large fines and possible felony charges. You may find the best information on workers’ compensation insurance from your insurance agent. The state of Iowa provides more information here: http://www.iowaworkcomp.gov/

A farm is not excused from purchasing workers’ compensation for employees who have personal health insurance. If the farm meets the $2,500 payroll threshold it must purchase workers’ compensation. If a farm is not required to purchase workers’ compensation, the farm might still choose to buy workers’ compensation for any volunteers, interns and worker shares or for the farmer him or her self.

Workers’ compensation can be a good deal for a farm, primarily because it prevents the injured person from bringing a negligence claim. For example, if a farm gets all work done with three volunteers who each work in exchange for vegetables and receive no cash, the farm may believe it is under the $2,500 threshold and choose not to purchase workers’ compensation. However, if one of the volunteers is injured on the farm, that volunteer can sue the farmer for negligence. More likely, however, the volunteer’s personal health insurance company would choose to bring the lawsuit, even if the volunteer objects. If the farm’s liability insurance excludes coverage for negligence, the farm could be responsible for damages. Workers’ compensation prevents this.

Workers’ compensation may be a good deal for the farmer and his or her family as well. Workers’ compensation coverage is often better than what a personal health insurance policy provides because it can cover lost wages and provide a death benefit to the family.

The best way to find a good insurance agent and company is to ask farmers with an operation similar to yours. If they had a good experience, call their agent. Most insurance companies offer workers’ compensation, and if they do not, they know someone who does.

Your insurance agent will provide the necessary information on reporting a claim and the procedures to follow if an injury occurs. The agent will likely provide you with the posters you are required to put up for all employees to view. To learn more on your own, Iowa State University Extension provides a thorough list of employment procedures, including posters at http://www.extension.iastate.edu/agdm/wholefarm/html/c6-58.html.

Paperwork, taxes and wage withholding

Wages might be the biggest expense of hiring employees but there are other costs. When making the decision to hire, a farm should consider these extra costs.

An employer must contribute to Social Security and Medicare on behalf of the employee. The farm’s contribution to Social Security and Medicare are in addition to the withholding of some of the employee’s wages for his or her contribution to these funds. The farm may also have to pay Federal Unemployment Tax (FUTA). The state of Iowa has similar withholding rules with its State Unemployment Insurance Tax (SUI) administered through Iowa Workforce Development. Local municipalities may have additional taxes or fees for new workers. Although it is not technically a tax, the farm should also factor in the cost of workers’ compensation insurance. The precise tax rate that will apply to a specific employee will vary and may apply to cash and non-cash wages. Farmers should call their local Small Business Administration office or municipal economic development office for details on state and local tax obligations. Information on federal tax rates for agricultural employers is located in IRS Publication 51: Agricultural Employer’s Tax Guide.

The very first step is to apply for an Employer Identification Number (EIN) from the IRS. This is also referred to as a tax ID number. Businesses can apply for an EIN online at www.irs.gov or by calling 1-800-829-4933. You will also need to register with the state of Iowa at https://www.idr.iowa.gov/CBA/start.asp. These registration formalities enable your business to withhold taxes from employees. Then, the farm will collect one-time paperwork for each employee and setup a system to track hours so the farmer can quickly and easily prepare additional paperwork. If the farm anticipates needing workers’ compensation insurance, the farm should call their insurance agent for further information on how to prepare. These are the minimum preparatory steps. See http://www.extension.iastate.edu/agdm/wholefarm/html/c6-58.html for more information, as well as Farm Commons’ Tax and Paperwork Checklist for Hiring a Farm Employee in Iowa.

The following is an outline of the basic paperwork that should be completed for a new hire. This is only a basic outline. See Farm Commons’ Tax and Paperwork Checklist for Hiring a Farm Employee in Iowa, and http://www.extension.iastate.edu/agdm/wholefarm/html/c6-58.html for more information.

 

Name Agency Form Hyperlink Actions Required? More information
Federal Employee’s Withholding Allowance Certificate Internal Revenue Service W-4 https://www.irs.gov/pub/irs-pdf/fw4.pdf Provide to employee to complete and sign within 15 days of start date; employer keeps on file at least 3 years; use to compute employee’s withholding IRS Publication 51:

https://www.irs.gov/uac/About-Publication-51

State of Iowa Employee’s Withholding Allowance Certificate Iowa Department of Revenue Iowa W-4 http://www.iowa.gov/tax/ Provide to employee to complete and sign within 15 days of start date; employer keeps on file for at least 3 years https://tax.iowa.gov/form-types/withholding-tax/?combine=W-4
New Hire Reporting System Iowa Department of Human Services   www.iowachildsupport.gov Register online  
Employment Eligibility Verification U.S. Citizenship and Immigration Services I-9 https://www.uscis.gov/i-9-central Employee and employer complete form. Employer keeps on file for 10 years https://www.uscis.gov/i-9-central
Unemployment Insurance Tax Account Registration Iowa Workforce Development Register online at www.

MyIowaUI.org

http://www.iowaworkforce.org/ui/stawrs/60-0126.pdf Register online within 30 days of hiring a new employee. UI Handbook for Employers

https://www.iowaworkforcedevelopment.gov/sites/search.iowaworkforcedevelopment.gov/files/70-5007%20Handbook%20For%20Employers_1.pdf

 

The following is a general outline of the ongoing paperwork considerations for employees regarding tax filings. This list is NOT exhaustive and other laws may have other ongoing paperwork requirements. Consult your Small Business Development office for more information on maintaining accurate accounting practices and complying with the many other requirements expected of every employer.

Farmers will need to withhold taxes from each pay period. IRS Publication 51: Agricultural Employer’s Tax Guide for further information on how to calculate withholding. Withholdings are then deposited through an online system called the Electronic Federal Tax Payment System with the acronym EFTPS.

Farms will need to file periodic tax returns (monthly, quarterly, or annually depending on the size of the business), annual tax returns, and annual information on their employees’ wages. Both the federal government and the state of Iowa have tax and reporting requirements. The table below is a brief guide to the paperwork requirements. However, farmers should consult IRS Publication 51: Agricultural Employer’s Tax Guide for further information on federal taxes and the Farmer’s Guide to Iowa Taxes at http://www.iowa.gov/tax/educate/78507.html#wh

 

Form Filing Frequency Where to Pay or get the form? Notes
943 – Quarterly Tax Return Quarterly www.eftps.gov  
940 – Federal Unemployment Tax Return Annually www.eftps.gov  
944 – Annual Tax Return Annually www.eftps.gov  
W-2, Copies A & D – Employer’s copies Annually www.irs.gov/ Deliver Copy A to Social Security Administration by March 31st, File Copy D for your records
W-2, Copies B & C – Employee’s copies Annually www.irs.gov/ Deliver both Copies B and C to Employees by January 31st
State Income Tax Withholding Quarterly or Monthly www.iowa.gov/tax Farms must file each quarter even if they don’t have any money withheld to deposit. File quarterly with a total of $0.00 if no funds are withheld to deposit.
65-5300 (07-10) – Employer’s Contribution & Payroll Report Quarterly or Monthly www.myiowaui.org Only required if gross taxable wages paid in any calendar quarter during the current or preceding calendar year exceeds $20,000 or the farm employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year

More Information

Tax and Paperwork Checklist for Hiring an Ag Employee in Iowa:

Farm Commons

www.farmcommons.org

Checklist for Iowa Agricultural Employers:

Iowa State University Extension

http://www.extension.iastate.edu/agdm/wholefarm/html/c6-58.html

IRS Publication 225:

Farmers’ Tax Guide

https://www.irs.gov/pub/irs-pdf/p225.pdf

IRS Publication 51:

Agricultural Employer’s Tax Guide

www.irs.gov/pub/irs-pdf/p51.pdf

Iowa Withholding Tax Guide:

http://www.iowa.gov/tax/forms/44001.pdf

Iowa Division of Labor Services:

Administrative Rules

http://www.iowaworkforce.org/labor/laborecard/rules/index.htm

Iowa Division of Labor Services:

Statutes

http://www.iowaworkforce.org/labor/laborecard/laws/index.htm

Labor Standards Information Guide for New and Small Businesses:

U.S. Department of Labor

http://www.dol.gov/whd/regs/compliance/NewSmallBus.pdf

Drake Agricultural Law Center

Jennifer Zwagerman

Associate Director

(515) 271-2205

[email protected]

 

Farm Commons

Rachel Armstrong

Executive Director and Attorney

(608) 616-5319

www.farmcommons.org

 

Iowa Division of Labor

1000 East Grand Avenue

Des Moines, IA 50319-0209

(515) 281-3606 or (800) JOB-IOWA

www.iowaworkforce.org/labor

 

Iowa Occupational Safety and Health (IOSH)

Joe Mullen

[email protected]

Safety and Health Topics: Agricultural Operations

https://www.osha.gov/dsg/topics/agriculturaloperations/

 

Iowa State University Extension Beginning Farmer Center

John Baker

Attorney, Beginning Farmer Center Administrator

(515) 252-7815

[email protected]

 

Iowa Workforce Development

David Eklund

Regional Operations Manager

UI Benefits Services

Ph: (515) 281-5792

Cell:  (515) 229-4482

Fax:  (515) 281-9033

[email protected]

 

U.S. Department of Labor

Wage & Hour Division

210 Walnut Street

Des Moines, IA 50309

(515) 284-4625

www.dol.gov