By Sarah Everhart
The article is not a substitute for legal advice.
Many farms across Maryland use interns or apprentices to lighten the overall farm workload and help young people gain practical farming knowledge. The compensation of farm interns varies but what is the legality of these arrangements? Can interns work for free or be provided a small stipend? Or must they be paid minimum wage? What about an unpaid internship if meals and housing are provided? When and how can interns be treated differently than other employees? There have been recent legal crackdowns on the compensation of interns and this is an area of the law which can be costly to ignore or misunderstand.
Interns and Apprentices
The U.S. Department of Labor (DOL) has specific definitions of both internships and apprenticeships. The Maryland Department of Labor and Licensing (DLLR) administers the Federal program of regulation and registration of apprenticeship programs, and the bar for having a registered apprenticeship is quite high. Therefore, a farmer cannot simply designate a position on a farm as an apprenticeship and pay or otherwise treat the person in the position differently than the average employee unless the apprenticeship is properly registered with the State and Federal government.
As for interns, DOL has established the primary beneficiary test to define an internship which can be compensated at less than minimum wage (see Fact Sheet #71). This test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. In Maryland, students in DLLR approved work-study programs may be paid less than the minimum wage.[1] Compensating an intern less than the minimum wage is the exception rather than the rule. Therefore, a farmer should consult DLLR before deciding to pay an intern anything less than minimum wage.
Minimum Wage
The amount of money which must be paid to those who work on your farm is set by the Federal Fair Labor Standards Act (FLSA), by a similar state law called the Maryland Wage and Hour Law, and in some cases, by county laws which set a higher minimum wage than state law. These laws set the minimum hourly pay rate which interns and other employees must be paid. The higher state or county minimum wage is the wage which must be paid to all employees. Importantly, workers cannot waive their right to be paid minimum wage. An agricultural employer claiming the intern knew and accepted an unpaid or under-paid internship does not have a viable defense.
There is an important Federal and State exemption for paying minimum wage to farm workers called the “500 Man-Day Exemption.”[3] This exemption allows smaller scale farm operations to pay interns and other employees less than minimum wage if, during each quarter of the preceding calendar, the farm employer used no more than 500 agricultural-worker days, defined as any day an employee performs agricultural work for at least one hour. To qualify for the exemption the work done by the farm employees must meet the definition of agriculture outlined in the law. The work included within the definition is broken down into primary and secondary agriculture. Primary agricultural work is related to planting, maintaining, and harvesting crops, and raising animals.[4] Secondary agricultural work includes practices, whether or not they are themselves farming practices, which are performed either by a farmer (includes farm employees) or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.[5] Work at a farmer’s market is a decidedly gray area of the law that should be considered carefully. If an employee in the same workweek performs work which is exempt (fits the definition of agricultural work described above) and work which is non-exempt, the employee is not exempt for the entire week and the minimum wage requirements of the law apply.[6]
Both Federal and State law also exclude the following types of agricultural employees from the requirement of minimum wage:
-Agricultural employees who are an immediate family member of their employer,[7]
-Those principally engaged on the range in the production of livestock,[8]
– Local hand harvest laborers who commute daily from their permanent residence, are paid on a piece rate basis in traditionally piece-rated occupations, and were engaged in agriculture fewer than 13 weeks during the preceding calendar year,[9]
-Minors, 17 years of age or under, who are hand harvesters, paid on a piece rate basis in traditionally piece-rated occupations, employed on the same farm as their parent, and paid the same piece rate as those over 17.[10]
Additionally, Maryland excludes employees engaged in canning, freezing, packing, or first processing of perishable or seasonal fresh fruits, vegetables or horticultural commodities, poultry, or seafood from the State minimum wage requirements.[11] Unless these types of employees are excluded for another reason, they would still need to be paid minimum wage under Federal law. Additionally, if the employee is under 20 years of age, the State of Maryland permits an employer to pay the employee, for the first six months, a wage equal to 85% of the State minimum wage.[12] As for overtime compensation, agricultural employers shall pay non-exempt farm employees overtime pay for all hours over 60 hours a week.[13]
Room and Board as Compensation
When can room and board be deducted from an intern’s compensation? The reasonable cost of board, lodging, or other facilities may be included as part of an employee’s wage if the facilities are regularly available to all similarly situated employees, the acceptance of the facilities is voluntary on the part of the employee, and the employee actually receives the benefits.[14] An employer may not calculate the reasonable cost of board, lodging, or other facilities to exceed the actual cost to the employer.[15] Agricultural employers should keep very careful records of the cost of providing board, lodging, and facilities provided to intern employees and consult with DLLR before making any income deductions. Before an agricultural employer decides to build or convert an existing building into intern housing, he or she should consult the local zoning ordinance to make sure that group housing is legally permitted in that location. An employer will also need to make sure that intern housing meets all local and State housing and/or health code standards prior to occupation.
Migrant and Seasonal Worker Agricultural Protection Act
Many farmers may be surprised to learn that interns performing seasonal agricultural work fall under the protections of the Migrant and Seasonal Worker Agricultural Protection Act (MSPA). If interns are required to be away from their permanent residence while performing the seasonal agricultural work, they will be considered migrant workers and if not, they will be considered seasonal workers. The MSPA has two main exemptions: the 500 Man Day Exemption described above and the family business exemption which exempts farm labor contractor workings for a farm owned and operated by themselves or an immediate family member.
If an employer is not exempt, the MSPA requires an agricultural employer provide migrant employees with written disclosures and seasonal employees with verbal disclosures prior to the initiation of employment regarding the place of employment, wages to be paid, types of work the interns will perform, period of employment, transportation, housing, and workers compensation benefits.[16] Agricultural employers must also provide employees with detailed pay stubs showing their earnings and deductions and retain copies of payroll records for a period of 3 years. Employers must also post worksites with a poster detailing the rights of workers pursuant to the MSPA.[17]
Worker’s Compensation and Unemployment Insurance
If a farmer has at least three full-time employees or an annual payroll of at least $15,000 for full-time employees, then the farmer is subject to Maryland’s Worker Compensation Insurance law.[18] Employers should check with their insurance agents and make sure that interns are covered either through worker compensation or through the farm’s liability policy. Depending on the nature of the work performed, interns can “fall through the cracks” of insurance and it may be worth it to purchase worker compensation even if not required by law. Further, if a farmer pays wages of at least $20,000 to employees for agricultural work or employs at least 10 individuals in a period of 20 weeks in the current or preceding calendar year, the employer must also participate in the Maryland Unemployment Insurance program.[19]
Conclusion
Although interns can be a welcome addition to a farm’s workforce, farmers need to be aware of how to properly compensate interns and the legal consequences of adding them to the payroll. Hiring and/or housing interns may trigger the need for farmers to make changes in order to comply with Federal and State laws meant to protect workers. Therefore, before an agricultural employer decides to hire interns, the decision should be carefully considered and then reviewed by the employer’s insurance agent and attorney to reduce the exposure to liability.
[1]Code of Maryland Regulations, 09.12.41.21
[2] Md. Code, Labor and Employment Art., §3-413(c)
[3] 29 U.S.C. § 213(a)(6)(A)
[4] 29 C.F.R. 780.105(b)
[5] 29 C.F.R. 780.105(c)
[6] 29 C.F.R. 780.11
[7] Md. Code, Labor and Employment Art., §3-403(6), 29 U.S.C. § 213(a)(6)(B)
[8] Md. Code, Labor and Employment Art., §3-403(13), 29 U.S.C. § 213(a)(6)(E)
[9] Md. Code, Labor and Employment Art., §3-403(14), 29 U.S.C. § 213(a)(6)(C)
[10] Md. Code, Labor and Employment Art., §3-403(14), 29 U.S.C. § 213(a)(6)(D)
[11] Md. Code, Labor and Employment Art., §3-403(9)
[12] Md. Code, Labor and Employment Art., §3-413(d)
[13] Md. Code, Labor and Employment Art., §3-420(c)
[14] Code of Maryland Regulations, 09.12.41.18(A)
[15] Code of Maryland Regulations, 09.12.41.18(B)
[16] 29 U.S.C §1821 (a)(1), 29 U.S.C. §1831(a)(1)
[17] 29 U.S.C §1821 (d), 29 U.S.C. §1831(c)
[18] Md. Code, Labor and Employment Art., §9-210
[19] Md. Code, Labor and Employment Art., §8-207(c)