LP.1 Understanding who is considered an employee and what that means
The default assumption is that anyone who works for you is considered an employee.
- Employees are those who work for the benefit of another.
- Employers are those who receive the benefits of the labor of another.
This is true even if the people involved do not believe they are in an employee/employer relationship.
Employers must pay employees according to California (or other state) law following rules for:
- Minimum wage, overtime pay, breaks
- Frequency and manner of payment
- Payroll tax withholding and employer’s share of payroll taxes
- Providing worker’s compensation insurance
- Providing appropriate sanitation, drinking water, and heat and illness protection
The best way to ensure that you are paying employees correctly and also paying all of the associated payroll taxes correctly and on time is to have payroll prepared by a payroll service provider.
One of the other ways that farmers make sure that they are in compliance with all of the requirements of California (or other state) labor law is by hiring workers through a labor contractor. The labor contractor becomes the employer and is responsible for having all of the workers on payroll, and protected by workers compensation insurance and other protections. However, if you hire a labor contractor and they do not follow all the rules to protect workers, you are responsible.
There two important exceptions to who must be considered an employee:
- Owners, their legally married spouses, their children, and their parents may work for the owner’s company without being considered employees. But note that minors have additional protections under the law
- People who are independently self-employed or running their own business do not need to be on payroll. These people are called “independent contractors.” Common examples include bookkeepers, food safety consultants, pest control advisors, crop advisors, and custom hire when they bring and operate their own equipment. California law is clear that people doing most farm work are never considered independent contractors. Workers who are planting, weeding, harvesting, washing or packing are never considered independent contractors, they must always be paid on payroll and protected with workers compensation insurance and other protections. This is not the same as people employed by a labor contractor (these people are on the contractor's payroll - not yours).
Who enforces this?
The State of California ensures that employers pay employees on payroll. One method is drive-by enforcement. The State employees drive to different farm fields and ask workers if they are paid with paychecks (taxed withheld) or as independent contractors (no taxes withheld). Another way that the State enforces is if a worker is injured, there is an automatic inquiry into their employment status. Also, if an employee applies for unemployment benefits it will trigger an inquiry into employment status.
What are the consequences of not having someone on payroll?
If you are paying someone as an independent contractor when they should be on payroll and it is discovered, the State of California will fine you for back payroll taxes owed and charge you interest on late payment of the fines. The State of California will also ask to see your records of hours worked and breaks given and may fine you for failing to have those records and may force you to pay back wages and back payroll taxes for breaks not given. In addition, they will contact the IRS about failure to pay federal payroll taxes. You will also be fined for failing to carry workers compensation insurance.
