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Labor

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