Ahead of the National Watermelon Association’s Annual Meeting and Convention in St. Pete Beach, Fla., Feb. 18-21, The Packer spoke with attorney Shawn Packer, a panelist on the keynote session, “Agriculture Labor — Policy, Compliance and Innovation.” Packer is set to share how regulatory changes are affecting ag labor, compliance requirements and operational risks.
With the H-2A Adverse Effect Wage Rate interim final rule published in October this past year and USDA’s suspension of the Farm Labor Survey, from which the AEWR was previously calculated, Packer says there’s a lot in flux, but there’s also reason for optimism.
“At the end of September, USDA published a final notice that they are no longer conducting the Farm Labor Survey, which, for decades, has been the primary mechanism to determine wages,” he says. “And that left a bit of a black hole situation.”
Then a court case in Louisiana resulted in AEWR reverting to a 2010 rule that defined the AEWR as field and livestock workers’ combined gross hourly wage, the prevailing wage or a collective bargaining wage; if none of those things are available, then it goes to the federal, state or local minimum wage, Packer explains.
“Our new AEWRs would have been whatever the applicable federal, local or state minimum wage was, but DOL [Department of Labor] wanted to make sure that there was some kind of wage there other than the federal minimum,” he says. “So, DOL scrambled and took what was, in my opinion, going to be an NPRM [Notice of Proposed Rulemaking], and they published it as an IFR, an interim final rule, which allows it to go into immediate effect and replace the regulatory void.”
With the FLS survey out of commission, the administration moved to the Occupational Employment Wage Statistics survey conducted by the Bureau of Labor Statistics, which uses state-level data to set wages for Entry-level 1 and Skill Level 2 Standard Occupational Classification employees.
“What’s interesting about this OEWS survey is that it doesn’t actually survey farms; it surveys farm servicers, so farm labor contractors, manure shredders, crop dusters — those are the people surveyed,” Packer says. “In this rule, they have made a commitment that they’re going to work with USDA to actually survey farms as well to update farm wages.”
Packer says the OEWS survey is massive and is conducted at millions of employers across the country, in all industries.
“It’s reported by BLS traditionally in four levels,” he says. “Level 1 is basically entry-level experience. Level 2 is more experience. Level 3 is even more experienced. Level 4 is highly experienced.
“A general farmworker is considered Level 1 when the amount of experience required is less than three months,” he continues. “So, zero to three months of experience. But if we’re talking about a computer science engineer or something on that level, Level 1 could require two or three years of experience or specific degrees.”
And here’s where classifying H-2A workers and their rate of pay gets tricky.
Packer says, in general, if a grower needs a general farmworker that requires less than three months of experience to do the job, the grower needs to fill out the paperwork indicating that is the case.
“You can still fill that position with a worker that has 10 years of experience, but what you’re ... saying is, ‘This is the minimum amount of experience that I need for this job. Send me workers with that amount of experience that want to do the job at this time and place.’”
Packer says Level 2 workers are those who are a fit for roles requiring more than three months of experience, have additional certifications or have certain skill sets, such as supervisory experience.
“A Level 2 worker is basically going to come in at what we call the mean, which is the 50% level of the wage stratification,” Packer says. “The mean or middle wage will differ from state to state. That means that some farmworkers are making almost double that and some are making about half of that.”
Wages Based on Primary Duties
Under the previous rule, if an employee did anything that pulled them into a different Standard Occupational Classification code, it could put them and others at a much higher wage rate, Packer says. For example, he explains, if the job description says something about driving an 18-wheeler, the employee would be classified as a heavy tractor trailer driver entitled to receive that position’s wage for the entire job order.
“What you would end up with is a situation where you have 100 farmworkers and 99 of them are in the field all day long picking, and one of them is driving the truck back and forth from the storage facility or market, and everybody would get that higher wage, which on average, is about $27 an hour for that higher truck-driver wage,” he says.
The new rule is weighted under the Fair Labor Standards Act, which is an employee’s primary duties, Packer says.
“If your primary job duty is driving that truck back and forth all day long, well then, yes, you are a truck driver. But if that person’s primary duties are to be in the field with the workers, and occasionally they are going to be driving that truck, then the primary duties are the farmworker duties, and you keep that farmworker wage,” he says. “It’s a complete reversal of the old way, where if any one duty in your job order pulled you into another category, you were getting a higher wage no matter what, even if you only did it 10% of the time.”
Reaching a Market Wage
What the changes to AEWR really mean, says Packer, is a move to a market wage.
“And if you have ever talked with Michael Marsh, the former NCAE [National Council of Agricultural Employers] president and CEO, you’ve probably heard him say 100,000 times: ‘We need to get to a market wage.’
“All of this helps create that market wage in the sense that you can have that Level 1 wage,” Packer continues. “You can pay that wage to your entry-level guys, the guys that are just coming in for the first time, but if you have people that have been there for five, 10 or however many years, you can pay your tenured people a higher wage because there’s no longer a wage ceiling.”
Packer says growers now have the flexibility to create wage structures in their businesses that are more understanding and meaningful for the business to be successful.
State Minimum Wage
Another consideration, Packer says, is your state’s minimum wage. Florida, where the National Watermelon Association is holding its conference, recently changed its minimum wage to $14 an hour.
“The state minimum wage rule is interesting, because we’ve never really had to deal with ‘What is the state minimum wage?’ because the AEWR has always been so much higher than state minimum wage,” he says.
Packer says the other interesting component built into the system is a recognition of all of the additional costs that H-2A employers deal with.
“They have to provide housing and daily transportation to and from work for the workers,” Packer says. “If there’s not convenient cooking facilities, three meals a day, seven days a week must be provided. These are all additional costs they have to provide for.
“So, there was a need to recognize that H-2A employees are getting this elevated compensation, while workers in corresponding employment are driving themselves to work. They have rent. They have to pay for meals and insurance and all of these other things themselves,” he continues. “Effectively, they’re making a significant amount less than the H-2A workers are who are getting all these benefits.”
To recognize the added benefits to H-2A workers, the adverse compensation adjustment was created.
“It’s not a credit. It’s not a deduction. It’s an adjustment to the wage,” Packer says. “Based on Housing and Development’s rental surveys that they do, it’s set for each state at the 50th percentile as to what additional benefits (housing, food, etc.) cost for each hour of work.”
Packer uses California as an example. In California the H-2A wage can be lowered by $3.01. So, if California’s wages are currently $20 an hour, the H-2A worker on their pay stub is going to get a $16.99 per-hour wage instead of the $20 an hour, to account for additional costs, he says.
“The key is you can’t go below the state minimum wage,” he says.
What’s Next?
“These are largely positive changes that we’re excited about,” Packer says. “We’re still in the first couple of contracts since the rule came out at the beginning of October, right after the government shut down, so we’re still learning what all of it’s going to be. But I think most people are genuinely pretty happy about the rule.”
But Packer says there’s also concern, as the interim rule is now being challenged by United Farm Workers in the U.S. Court of Appeals for the Ninth Circuit in California.
“If the Ninth Circuit strikes this rule down, we’re back to a situation where we don’t have the FLS survey, and we’re in a quagmire as to what we’re going to be operating under, if anything at all,” Packer says. “And then, are there going to be back wages that are going to be owed to employers? So, we’re all watching it very closely to see what’s going to happen.
“Outside of the regulatory scope, there’s the legislative scope,” Packer continues. “Chairman GT Thompson of the [House] Ag Committee is committed to putting out a comprehensive ag-related immigration reform bill. We’re not 100% sure what’s going to be in it yet, but from what we’ve been told, they plan on codifying a lot of the changes in the IFR, so that another administration can’t come in and just undo everything. They’re trying to actually codify it in legislative text so it’s fixed in place.”
Packer anticipates that bill will be introduced “very shortly” and is hopeful that it will have some streamlining effects for growers.
“Hopefully it will provide some pathway forward for our current workforce that may or may not be undocumented,” he says.
One significant change will be the inclusion of farmworkers in the new survey, says Packer, who adds that farm labor contractors now make up about 49% of the program.
“So, half the program was never actually being surveyed by the OEW or the FLS survey at USDA, because farm leader contractors weren’t surveyed by the FLS survey, and so this is going to be a better survey when they do incorporate beyond farm servicers,” he explains.
Packer says the change to the survey is expected to be implemented in the 2027 survey.
