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Labor

Ag Council and Others Oppose Employment Regulation Measure

August 9, 2017

Re:
AB 450 (CHIU) EMPLOYMENT REGULATION
OPPOSE – AS AMENDED JULY 18, 2017
SET FOR HEARING AUGUST 21, 2017

Dear Members of the Senate Appropriations Committee:

The California Chamber of Commerce and the listed organizations OPPOSE AB 450 (Chiu) because it places employers in a no-win situation between federal immigration enforcement and state enforcement by punishing employers – rather than providing tools and resources for employees when federal immigration enforcement appears at their workplace regardless of whether a violation of law has been committed by the employer.

We recognize and value the important role immigrants play in our state’s economy and in our workforce and, therefore, strongly support comprehensive federal immigration reform that includes temporary foreign worker programs, border security and a path to legal status. The author and these organizations share the objective of protecting our employees upon whom we depend.

While the intent of the bill is to protect the rights of workers, AB 450 offers no meaningful protection from deportation or helpful information to employees. Instead, the bill places employers who are not violating worker rights in serious legal jeopardy. The bill does not differentiate between good and bad employers; instead, it assumes the employer has committed violations by requiring the employer to report to the Labor Commissioner any federal immigration enforcement action at their workplace.

An employer that is in full compliance with federal immigration laws and chooses to minimize disruption of business operations by federal officials by exercising their right to cooperate with federal enforcement officials will be penalized by the provisions of AB 450 with the imposition of steep penalties – not less than $2,000 and up to $10,000 for each violation.

AB 450 has several provisions that could adversely affect an employer when an immigration enforcement action occurs at its place of employment. Significantly, it penalizes an employer for choosing to cooperate with federal immigration enforcement authorities, thereby denying the employer the right to determine the best course of action for its business under these difficult circumstances. Believing its employment eligibility verification and recordkeeping practices are in full compliance with federal law, an employer may determine that cooperation with federal enforcement officials is its best course of action.Unfortunately, AB 450 forbids an employer from cooperating with federal authorities and instead requires the employer to demand “a judicial warrant.” An employer that cooperates with the enforcement authorities, and under any circumstances provides consent for them to enter the workplace, instead of demanding a warrant would be subject to significant penalties under AB 450.

Employers who follow federal law by properly verifying documentation of newly-hired employees’ eligibility to work (by properly completing and executing a Form I-9) should not be punished by state law for providing jobs to properly documented individuals. All employers are required by federal law to examine documentation offered by an employee demonstrating the employee’s identity and eligibility to work in the U. S. The employer must then document on the form that it examined that documentation and certify under penalty of perjury that those documents appear to be genuine and relate to the person offering them. Under current state and federal law, the employer is neither required nor permitted to verify the authenticity of the documents. In good faith, the employer accepts the documentation on its face, notes the documentation on the form, and then places the form in a file to maintain. In compliance with the I-9 form, employers do not employ undocumented employees. Federal authorities have the right to inspect the I-9 forms of an employer with a notice of inspection, no subpoena is required but may be presented if the notice of inspection was not issued prior to the visit by authorities.

AB 450 Overview. The following summarizes the primary provisions of the bill:

  •  Applies to public and private employers.
  • Each violation outlined below imposes a penalty on the employer of not less than $2,000 and up to $5,000; $10,000 for subsequent violations.
  •  Prohibits employers from allowing federal immigration agents to access the workplace without a “judicial warrant.” The bill does not consider the complexities employers are faced with when immigration enforcement officials arrive at the workplace. Cooperation with law enforcement is often a prudent response to minimize disruption to the workplace. For example, officials may not enter the workplace through the traditional “entrance,” or immigration officials have been known to accompany other officials (such as Federal Marshal) that possess the warrant, rather than the immigration officials.
  •  Prohibits employers from providing access to records by federal authorities without a subpoena. Under federal law, I-9 audits by federal authorities are conducted with a notice of inspection not a subpoena. An employer that refuses to provide the documents pursuant to a notice of inspection is in violation of the document retention requirements set forth in 8 U.S.C. section 1324a(b)(3). The subpoena requirement clearly puts employers at risk of federal penalties for noncompliance with federal law. Would the bill allow the employer to provide access to federal authorities without a warrant when the employer has been properly served with a notice of inspection?
  •  Imposes complex written notice requirements on the employer to be provided to each affected employee and the employee’s representative regarding I-9 audits by federal authorities. The notice of an upcoming I-9 audit must be provided 72 hours after the employer is notified, and following the audit, the results must be provided within 72 hours of receipt. The written results of an inspection with the deficiencies must be provide to each affected employee – would this compromise privacy of all individuals noted on the deficiency results to employers? Is a violation counted as any clerical error or notice element omitted? What if an employee is unavailable to be provided the notice? Each violation of these complex notice requirements is subject to a penalty of not less than $2,000 and up to $10,000.
  •  All employers must notify the state Labor Commissioner of any federal immigration enforcement action within 24 hours of receiving notice from the federal authority, or immediately upon learning of the enforcement action the Labor Commissioner and the employees’ representative must be notified. Certainly the Labor Commissioner could obtain reports from the federal authorities of enforcement actions taken in our state, instead of making employers responsible for reporting, and subject to serious penalties for noncompliance with reporting requirements. Each violation of these notice requirements is subject to a penalty of not less than $2,000 and up to $10,000.
  •  Section 7 of the bill imposes a penalty on employers that re-verify employment eligibility where not required by federal law. Labor Code section 1019.1 currently imposes such a penalty. Clearly, this creates a situation where employers could be subject to two penalties resulting from two separate code violations for one act.

Fiscal Concerns. We are concerned that the cost of implementing the provisions of this bill will be significant, and given that the Labor Commissioner’s office is funded by assessments on employers, this bill is especially punitive to employers as they will also pay the cost of enforcement of the program. The Department of Labor Standards Enforcement will be subject to a number of costs, as well as the Attorney General, such as:

  •  Legal analysis and determination of the applicability of federal provisions that would supersede, conflict or make invalid provisions of the bill.
  •  Record keeping and review of reports made to the Labor Commissioner regarding worksite enforcement actions.
  •  Enforcement actions taken against public and private employers for non-compliance with the provisions of the bill.
  •  Staff time to respond to calls from employers when reporting enforcement actions, and tracking and compiling reports.
  •   Attorney General defense of state agencies cited.
  •   Penalties paid by state agencies found in violation of the requirements; public agency costs to implement the provisions of the bill including training.
  •  Drafting and adoption of new regulations to implement the provisions of this bill.

These provisions of AB 450 are overly punitive to the employer and assume the employer is somehow violating the law if immigration enforcement officials visit the workplace. An employer would be prohibited from exercising its discretion in how to best handle an enforcement action by federal immigration officials. The notification requirements are overly burdensome and potentially impossible to comply with, subjecting employers to potentially enormous penalties. Furthermore, such an approach is likely to encourage the federal government to mandate the use of e-verify, which has historically been resisted in California.

Instead of this overly punitive approach that leaves the employer nowhere to turn, and does not provide assistance to employees. An approach of outreach to and education of employers and employees of what to expect and how best to proceed in the event of an enforcement action would be more helpful.

For these and other reasons, we are OPPOSED to AB 450.

Sincerely,

California Chamber of Commerce
Agricultural Council of California
Associated General Contractors of California
Association of California Egg Farmers
California Association for Health Services at Home
California Association of Wheat Growers
California Association of Winegrape Growers
California Bankers Association
California Bean Shippers Association
California Building Industry Association
California Business Properties Association
California Citrus Mutual
California Cotton Ginners and Growers Association, Inc.
California Employment Law Council
California Farm Bureau Federation
California Framing Contractors Association
California Fresh Fruit Association
California Grain and Feed Association
California Landscape Contractors Association
California League of Food Processors
California Pear Growers Association
California Pool & Spa Association
California Professional Association of Specialty Contractors
California Restaurant Association
California Retailers Association
California Seed Association
California Trucking Association
California Warehouse Association
Camarillo Chamber of Commerce
Chambers of Commerce Alliance of Ventura and Santa Barbara Counties
El Centro Chamber of Commerce and Tourist Bureau
Family Business Association of California
Family Winemakers of California
Greater San Fernando Valley Chamber of Commerce
Greater Riverside Chambers of Commerce
Grower-Shipper Association of Central California
Long Beach Area Chamber of Commerce
Murrieta Chamber of Commerce
National Federation of Independent Businesses
North Orange County Chamber of Commerce
Oceanside Chamber of Commerce
Official Police Garages of Los Angeles
Oxnard Chamber of Commerce
Redondo Beach Chamber of Commerce and Tourist Bureau
Santa Maria Chamber of Commerce
South Bay Association of Chambers of Commerce
Southwest California Legislative Council
The Chamber of Commerce of the Santa Barbara Region
Tulare Chamber of Commerce
Vacaville Chamber of Commerce
Ventura County Agricultural Association
Western Agricultural Processors Association
Western Carwash Association
Western Growers Association
Wine Institute
Yuba-Sutter Chamber of Commerce

cc:
The Honorable David Chiu
Camille Wagner, Office of the Governor
Cory Botts, Senate Republican Caucus
Robert Ingenito, Senate Appropriations Committee
District Offices, Members Senate Appropriations Committee
Ralph Lightstone, Labor and Workforce Development Agency

Concerns Expressed Over Proposed Indoor Heat Illness Regulation

July 7, 2017

Re:
Heat Illness Prevention in Indoor Places of Employment
Comments on Discussion Draft #2 Dated May 25, 2017

Dear Amalia Neidhardt, Steve Smith, Eric Berg, Juliann Sum, and Christine Baker:

The below-signed organizations (the Coalition) submit these comments regarding the subject discussion draft and in response to the discussion during the Advisory Committee meeting on May 25, 2017. The Coalition represents employers large and small across many diverse industries. While we appreciate the revisions incorporated into this new draft, the proposal continues to be too complex and ambiguous, and therefore will lead to a lack of compliance and the inability to enforce.

We take the safety and health of our employees very seriously. Many members of the Coalition were involved with the development and implementation of the outdoor heat illness regulation, section 3395, and have significant experience with how to effectively prevent heat illness. Respectfully, we continue to disagree with the proposed approach in this discussion draft to address heat illness prevention for indoor employees.

While this rulemaking is mandated by legislation and therefore the necessity of a resulting regulation need not be demonstrated, the Coalition urges the agency to review its own enforcement data and any available information concerning instances of heat illness among indoor workers. While the legislative mandate requires the agency to move forward with this regulation, actual data reflecting how, why and in what kinds of indoor workplaces workers suffer heat illness will provide meaningful context to the agency’s proposed regulation, and this data should be shared with the regulated community so employers’ experience and expertise can be meaningfully applied to crafting an indoor heat illness regulation that can protect workers without imposing unnecessary and ineffective mandates on covered employers.

In summary, this discussion draft, which despite extensive comments from the employer community is incrementally better from the first draft of February 22, 2017 and still creates a program to prevent heat illness for indoor employees that is unnecessarily burdensome, expensive, overly complex and confusing. Very few small and medium employers will be able to comply with this complex proposal without being forced to seek the assistance of an expert consultant, which will be a substantial burden for these employers. It is also unnecessarily prescriptive, much more so than the outdoor heat illness prevention regulation, section 3395. The following discussion outlines our primary concerns.

Statutory Timing Requirement. We continue to assert that the rulemaking timeline consistent with legislative intent requires the agency to submit a proposed regulation to the California Occupational Safety and Health Standards Board by January 1, 2019. This is readily apparent from the legislative language directing the agency to propose the regulation, Labor Code §6720:

“By January 1, 2019, the division shall propose to the standards board for the board’s review and adoption a standard that minimizes heat-related illness and injury among workers working in indoor places of employment.”

A plain-English reading of this language clearly mandates that the agency “propose” a standard to the Standards Board, and does not require adoption of a standard by the Board by January 1, 2019. After the board’s receipt of the proposed rule, the process of review and stakeholder interaction with the division should begin. The final regulation should be a rule with which employers can comply, that protects employees and results from a measured, thoughtful process that is not needlessly rushed by a misinterpretation of the agency’s statutory mandate.

Proposal is too complex. Employers must understand and comply with numerous regulations enforced by various agencies, in addition to Cal/OSHA regulations. The Coalition strongly supports the provision of safe and healthful workplaces for our employees. However, if the rule is too complex for employers to understand and implement, the benefit of the regulation’s intended protection will be difficult to achieve.

Furthermore, regulations that are ambiguous and difficult to implement create a “gotcha” situation for employers, where complex regulatory compliance requirements can result in inadvertent non- compliance (and high monetary penalties) with no safety or health benefit for the employees. There is no reason why this regulation needs to be so much more complex than the heat illness prevention regulation for outdoor employers.

This proposal for protection from heat illness in indoor workplaces is more complex than that regulating outdoor workplaces. The fact that indoor workplaces can under many circumstances be partially or wholly temperature controlled does not typically pose a greater risk of heat illness than working outdoors. Therefore, a more complex program is unwarranted because indoor many spaces are more easily controlled than outdoor workplaces.

The Coalition recommends a performance-based approach to the regulation such as that of the Illness and Injury Prevention Program and the outdoor heat illness prevention program. The first step that employers should take is to assess their indoor workplaces for employee exposure to the risk of heat illness. If the employer identifies that a risk is present, then the employer must develop a program. If the risk was evaluated and determined not to be present, then the employer should not be subject to the requirements of heat illness prevention program for indoor employees, other than a contingency plan in the event of the failure of climate controls.

A simpler approach is likely to result in more, not less, employee protection. An approach that is too complex is likely to result in lower compliance, which in turn is less protective of employees. Greater simplicity will lead to greater protection because greater simplicity will improve employer understanding and compliance. We urge the division to simplify the rule.

Proposal too costly. As written, the implementation costs would be significant for most if not all employers subject to the rule. Many employers will not have the expertise to interpret the complex requirements and would have to hire costly staff or consultants. Compliance with the current draft would require many employers to purchase expensive monitoring and engineering control equipment and to unnecessarily conduct temperature assessments at needlessly frequent intervals. There could be consequences to the economy as some employers may not have the requisite resources and could be forced out of business or to cut back.

The Coalition asserts that the economic impact of this rule would exceed the $50 million economic impact threshold and would therefore be determined a major regulation thus requiring an economic impact analysis. An alternative approach that is the most cost effective manner to achieve protection for workers is advised and achievable. The complexity of this proposed draft is unnecessary; worker protection can be achieved with less complexity and less cost. A more cost effective approach would also relieve the obligation to conduct the required analysis as a major regulation.

Draft Regulation Proposed by the Coalition. Attached is an effort to draft a regulation that is general enough in nature to be adopted by varied workplaces without being overly burdensome and complex (coalition draft). It is consistent with our oral remarks provided during the two advisory committees, as well as the remarks in our prior comment letter. The remainder of our comments will address the rationale of the provisions that benefit from explanation.

Scope and application of the regulation. The proposed scope of the discussion draft leaves unresolved the question of compliance in an air-conditioned office environment when the air-conditioning is inoperative.

Secondly, many workers regularly go in and out of a building, rotating between indoor and outdoor work. At times, employers may use rotation of indoor and outdoor work as administrative control for prevention of outdoor heat illness. The scope exception does not properly account for the work patterns of real-world workplaces and workers. The proposed language making workers who work more than one hour per day indoors subject to the indoor standard would subject many employers to the outdoor regulation in ways that will frequently be unworkable, for example:

  •  If the employee works for more than an hour per day indoors but works indoors less than an entire day, then the employee would be subject to both standards.
  •  Many workplaces have a variety of workers that work indoors and outdoors, and the amount of time indoors and outdoors varies each day. A requirement to track employees’ indoor and outdoor work time to determine whether the employer must comply with the indoor or the outdoor standard for each employee will impose yet another severe monitoring and recordkeeping burden on employers.
  •  Outdoor workers often move indoors to cool off. For the purpose of the outdoor standard, this is considered shade. Would the indoor space where an outdoor worker seeks shade be covered by the indoor standard?

The indoor and outdoor heat illness prevention rules must be harmonized for the many employees that function in both environments. Simple, practical rules of prevention should apply: water, cool down, and training requirements that are compatible and can be complied with for all employees.

Definitions

Cool-down area. In order to harmonize with the outdoor standard, the cool-down area should include any area that allows the body to cool. Otherwise, the confusion between an outdoor cooling area and an indoor cooling area will be unworkable.

Globe Temperature. Limit the complexity of compliance by following the outdoor standard and using one method of measurement – the dry bulb temperature.

Heat index. Using the heat index should not be mandatory. Employers should not be required to make or keep precise measurements of heat and humidity. Section 3395 considers humidity only as an environmental risk factor; therefore, this approach should be consistent with that under section 3395. A general assessment of the heat and the risk should be conducted as part of the initial risk assessment; then the appendix can be consulted at the employer’s discretion. Temperature and humidity vary throughout the course of the day. A general assessment of whether the rule is triggered should be sufficient.

Furthermore, the three different levels add unnecessary complexity to not only compliance, but also enforcement. When combined, the requirements of using a dry bulb, a globe temperature and three levels of heat index create an overly burdensome set of measurement and implementation.

High radiant heat work area and Radiant heat. These definitions should be simplified and include clarity so that the employer can easily determine if the area is one of radiant or high radiant heat, or neither. Furthermore, we question the necessity of this term in the standard. A clearer requirement could be established around high heat, whether radiant or not – which is what the coalition recommends.

Indoor. Include examples and clarify grey area environments such as a greenhouse, packing shed or partially constructed building or partially enclosed building.

(c) Heat Illness Prevention Plan

This section of the rule should track more closely with the outdoor heat illness prevention plan. Therefore, subsection (1) should be deleted to harmonize with section 3395. It would be overly complex for employers to develop two plans with two different requirements for development.

(f) First aid and emergency response and Coalition added (g) high heat procedures

The Coalition proposes that this section would be most appropriately broken up into two sections, to be more consistent with the outdoor regulation.

(h) Control Measures

The control measures in the draft proposal are yet another example of needless complexity and overly burdensome requirements that will ensure employers will be unable to fully comply with the standard.

Pre-shift meetings. This requirement is most appropriate in the areas or periods of high heat. Daily pre- shift meetings repeating the same message may be of limited value rather than the message being delivered at appropriate intervals, when applicable.

Heat index levels. The use of the various levels for varying requirements is too complex. The levels should be identified at temperature levels– high heat that triggers requirements at 95 degrees with and at 105 and regular heat (85 to 95 degrees) that triggers lower controls. These provisions should be in harmony with the outdoor regulation.

Requirements for engineering control should be eliminated from this rule and left to the employer’s assessment of the hazard and determination of their necessity or feasibility, and in the overall approach to employee protection from high heat indoors.

k) Recordkeeping.

(4) Employee use of temperature recording or measuring devices must be approved on a case-by-case basis. The device must not interfere with personal protective equipment and must be accurate and dependable. It is unadvisable for an employee to rely on a device that delivers inaccurate results or interferes with PPE or work processes.

Conclusion. The Coalition is very concerned that because of its complexity and overly burdensome approach as written, the discussion draft will not result in increased employee protection. Employers need to be able to understand the requirements to comply with the regulation and continue to keep employees safe and healthy. Furthermore, it is unnecessarily burdensome. There is no justification for this regulation to be more stringent than section 3395 for outdoor work environments.

The Coalition has drafted the proposed approach to prevent heat illness in indoor workers. We appreciate the opportunity to provide this input and for your thoughtful and serious consideration. To discuss further, please contact Marti Fisher, California Chamber of Commerce, (916) 444-6670.

Sincerely,

California Chamber of Commerce Agricultural Council of California
American Pistachio Growers
Associated Builders and Contractors – San Diego Chapter Associated General Contractors of California
California Agricultural Aircraft Association
California Citrus Mutual
California Cotton Ginners and Growers Association
California Attractions and Parks Association
California Building Industry Association
California Construction and Industrial Materials Associations California Farm Bureau Federation
California Fresh Fruit Association
California Framing Contractors Association
California Hotel & Lodging Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Professional Association of Specialty Contractors California Restaurant Association
California Retailers Association
California Solar Energy Industries Association
California Tomato Growers Association
Cerritos Chamber of Commerce
Chemical Industry Council of California
El Centro Chamber of Commerce
Family Business Association of California
Far West Equipment Dealers Association
Food and Beverage Association of San Diego
Lodi Chamber of Commerce
National Elevator Industry, Inc.
National Federation of Independent Business
Nisei Farmers League
Nor Cal Beverage Co., Inc.
Plumbing-Heating-Cooling Contractors Association of California
Residential Contractors Association
Robert Fried, Senior Partner, Atkinson, Andelson, Loya, Rudd & Romo
San Fernando Valley Chamber of Commerce
San Gabriel Valley Economic Partnership
Santa Maria Chamber of Commerce
Tulare Chamber of Commerce
Walter & Prince LLP
Western Agricultural Processors Association Western Electrical Contractors Association Western Growers Association
Western Plant Health Association
Western Steel Council
Wine Institute

 

 

                                                                           Gov. Brown Signs New Ag Overtime Requirements into Law

Gov. Brown Signs New Ag Overtime Requirements into Law

Ag Council is exceedingly disappointed Governor Jerry Brown signed into law AB 1066, the “Phase-In Overtime for Agricultural Workers Act of 2016,” on September 12. The governor did not release a statement when he signed the bill. Although AB 1066 is now law, we appreciate the active engagement of our members in the opposition and veto effort.

Understanding the Details of AB 1066

Going forward, the new law repeals current provisions regarding overtime for agricultural employees and establishes a schedule to phase-in revised overtime requirements over the course of four years starting in 2019 and culminating in the requirement to pay overtime after eight hours in a day or over 40 hours in a week by 2022.  Employers with 25 or fewer employees have an additional three years to comply with the overtime requirements. The phase-in for those employers begins in 2022 and compliance is mandated by 2025.

Currently, agricultural employees in California are paid overtime after 10 hours in a day and 60 hours in a week, and our state is only one of a handful in the nation to pay agricultural employees any overtime. The new law repeals those provisions and implements the following phase-in timeline requiring that overtime (one and one-half times the employee’s regular rate of pay) be paid after:

  • Nine and a half hours in a work day or in excess of 55 hours in a work week beginning January 1, 2019

– Begins in 2022 for small businesses (25 or fewer employees)

  • Nine hours in a work day or in excess of 50 hours in a work week beginning January 1, 2020

– Begins in 2023 for small businesses

  • Eight and a half hours in a work day or in excess of 45 hours in a work week beginning January 1, 2021

– Begins in 2024 for small businesses

  • Eight hours in a work day or in excess of 40 hours in a work week beginning January 1, 2022

– Begins in 2025 for small businesses

Starting January 1, 2022, AB 1066 mandates that any work performed by an agricultural employee after 12 hours in one day be compensated at the rate of no less than twice the employee’s regular rate of pay. This provision applies to employers with 25 or fewer employees beginning on January 1, 2025. Double the rate of pay after 12 hours is not presently required in agriculture.

Among other provisions, the recently signed bill authorizes the governor to delay implementation of the overtime pay provisions if the governor also suspends a scheduled increase to the state minimum wage. Further, the California Department of Industrial Relations is required to update Wage Order 14, which applies to wages, hours and working conditions in agricultural occupations, for consistency with AB 1066.

The signing of AB 1066 is discouraging and does not take into account the fact that California’s farmers and producers already comply with the strictest labor, water, air, and other regulatory compliance rules in the nation. And now, the agricultural community is the only sector to face both a new overtime rule for employees and the economic pressure and uncertainty of the minimum wage hike to $15.

Ag Council will continue to keep our members updated throughout the regulatory process and provide information to help understand the new law, We encourage you to contact us with any questions at ph. (916) 443-4887.

AB 1066 Will Reduce Farmworkers’ Incomes, Reduce California’s Farm Production and Harm California’s Economy

A coalition of agricultural organizations opposing AB 1066 (Gonzalez) released an economic report by Highland Economics, LLC (“Economic Analysis of California Proposed Agricultural Overtime Wages”) to assess the potential impact of the proposed changes to overtime requirements on California agriculture, primarily on farm labor jobs and earnings; secondarily, the authors evaluated the impact of agricultural acreage and production value; agricultural product costs; California’s agricultural competitiveness; statewide job and income impacts, including impacts on related sectors; and other effects.

The Highland Economics study outlines three possible scenarios under which farm employers might respond if AB 1066 should become law: reducing agricultural production, expansion of the labor force, and payment of overtime wages. While some farmers may choose only one method to cope with the economic impacts of a change in overtime requirements, many will choose a mix of these scenarios, as well as other actions that were beyond the scope of this study, such as mechanization. The results of the Highland Economics report indicate significant negative effects on farmworkers’ incomes, California’s farm production and California’s economy as a whole.

AB 1066 will Reduce Farmworkers’ Incomes

  • Labor costs represent a large part of operating costs for growers of major California crops,
  • The pending increases in the minimum wage combined with proposed overtime rule changes in AB 1066 will dramatically increase ag production labor costs.

Labor Costs as a % of Operating Costs

Crop Current Labor Costs Labor Cost Increase w/Minimum Wage Increase & Proposed O/T Rule Change
Vegetables              46%                  55%
Fruit Crops              58%                  73%
Nuts              47%                  52%
Field Crops              27%                  30%
Dairy              12%                  13%

 

  • Some crops within these major crop groupings will face huge increases in labor costs with the combination of the upcoming minimum wage increase and the proposed change in the overtime rule: for strawberries, labor costs will skyrocket from 57% of operating costs to 81%; broccoli producers will see labor costs increase from 49% to 62% of operating costs; wine grape producers will see labor costs increase from 63% of operating costs to 78%; and table grape producers will see increased labor costs from 54% of operating costs to 70%.
  • Facing ag overtime rule changes in AB 1066 along with the escalating cost of the increasing minimum wage, farm employers may seek to maintain profitability by controlling labor costs.
    • If they control labor cost by reducing production (and avoid paying overtime premium wages), farm workers’ incomes will suffer:
      • $1.538 billion in reduced aggregate farmworker income;
      • $4,500 reduced income per farmworker;
      • 16% reduction in farmworker income.
    • If the available labor supply allows them to control costs by expanding their labor force farm workers will experience an estimated reduction of $4,500 per worker (a 16% reduction) as farm employers expand the labor force (if workers are available) or split jobs to avoid overtime costs.
  • This anticipated response by farm employers (to avoid payment of overtime premium pay by reducing hours) is not merely speculative; in 1980 when overtime was extended to male farm employees (prior to 1976, the overtime requirements of Industrial Welfare Commission Wage Order 14 had applied only to women and minors performing agricultural work) farm employers reduced the number of overtime hours worked by employees by between 17% and 20% (Hammermesh & Trejo, “The Demand for hours of Labor: Direct Evidence from California,” The Review of Economics and Statistics, 82 (1), p. 38-47).

AB 1066 Will Reduce California’s Farm Production & Harm California’s economy

  • Farm employers may choose to control labor costs and maintain profitability by reducing workers’ hours and avoid paying overtime; this will result in lower overall farm production in California:
    • Removal of 1.25 million acres of farm land from production,
    • $5.4 billion loss in crop production,
    • $2.5 billion loss in dairy production.
  • The reduction in agricultural production will result in statewide economic impacts:
    • Up to 78,000 lost farm, processing, transportation, and support industry jobs,
    • $4.9 billion to $7.8 billion in lost income statewide.
  • If farmers choose to maintain production and pay their existing workers overtime as required by proposed changes in ag overtime rules, other economic dislocation will result:
    • $587 million in lost farm investment,
    • Reduced farm investment resulting in 2,100 lost farm jobs,
    • $474 million reduction in farm income.

 

Ag Coalition Opposes Bill to Change Ag Overtime

July 21, 2016

The Honorable Ricardo Lara
Chair, Senate Committee on Appropriations
California State Capitol, Room 5050
Sacramento, CA 95814

RE:       AB 1066 (Gonzalez) Oppose

California agricultural producers oppose AB 1066 (Gonzalez), which would repeal the longstanding 10-hour daily overtime requirement for agricultural employees. The author’s previous bill (AB 2757) was defeated in the Assembly.

These are the facts:

– This bill will reduce the annual take home pay for most agricultural employees.

  • The average annual pay for a milker on a California dairy will be reduced by 33% or $11,000-$14,000. These are full time year round jobs.
  • Other agricultural employees working in seasonal commodities could see earnings decline by as much as 28%.

– Farmers in California must compete with farmers in other states and countries that already have far lower wage costs. The buyers of our products – big box and traditional grocery chains, restaurant chains – set the price they will pay our farmers. If California farmers cannot meet the stated price, the buyers can and do purchase from farmers in other states and countries.

– California is already at a competitive disadvantage with other major agriculture production states. We are one of only a few states that require any overtime pay for agricultural workers, and our requirement for daily overtime is already the most expensive. This legislation will only exacerbate that competitive disadvantage.

– We cannot view this bill in isolation. California saddles its farmers with the highest regulatory costs and compliance burdens in the nation. Below is a painfully partial list:

  • Electricity costs for industrial users that are 63.4% higher than the national average.
  • Gasoline costs nearly one-third higher than the national average.
  • Diesel costs 14% higher than the national average.
  • The highest workers’ compensation premium rates in the nation.
  • California-only restrictions on use of approved crop protection tools that increase the risk of crop loss due to pests and disease.
  • Water quality requirements that require farmers to prevent nitrogen (i.e., fertilizer) from reaching below the plant root zone.
  • Water supply costs driven by regulatory loss of surface water supplies, forcing farmers to drill new and deeper wells, pay more for energy to pump, and scramble to purchase expensive water (if it can be found and conveyed) from others.

Unfortunately, this legislation will end up hitting many agricultural workers in the wallet. Farmers may be forced to pay higher overtime costs during peak harvest, but for the tens of thousands of workers who are employed year round (thinning trees, preparing ground for planting, etc.) the pressures of cost avoidance will translate to fewer hours worked as farmers add additional employees to avoid overtime costs.

For all of these reasons, we are OPPOSED to AB 1066.

Respectfully submitted,

Agricultural Council of California
Alhambra Chamber of Commerce
Almond Hullers & Processors Association
Association of California Egg Farmers
California Agricultural Aircraft Association
California Association of Nurseries & Garden Centers
California Association of Wheat Growers
California Association of Winegrape Growers
California Blueberry Association
California Cattlemen’s Association
California Chamber of Commerce
California Citrus Mutual
California Cotton Ginners Association
California Cotton Growers Association
California Dairies, Inc.
California Farm Bureau Federation
California Fresh Fruit Association
California League of Food Processors
California Manufacturers and Technology Association
California Pear Growers Association
California Seed Association
California State Floral Association
California Tomato Growers Association
California Trucking Association
Family Winemakers of California
Far West Equipment Dealers Association
Gilroy Chamber of Commerce
Lodi Chamber of Commerce
Milk Producers Council
National Federation of Independent Business
Nisei Farmers League
Western Agricultural Processors Association
Western Growers Association
Western Plant Health Association
Western United Dairymen
Wine Institute

cc: Camille Wagner, Office of the Governor
Committee Consultants