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As schools let out for the summer, farm employers may be hiring more youth workers. Employers should be aware of the minimum wage rules that apply to minors in their state, and understand certain worker classifications when making hiring decisions.
Employee misclassification is a common employer mistake. One pitfall is treating a worker as an independent contractor when they are actually an employee. Employees are entitled to a minimum wage (discussed more below) and are issued a W-2 to report wages paid, while independent contractors are not entitled to a minimum wage and are issued a Form 1099-NEC (Non-Employee Compensation). Employers are also required to withhold income taxes along with Social Security and Medicare taxes from wages paid to employees.
According to the IRS, the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. Although no one factor is definitive, facts that provide evidence of the degree of control and independence of a worker fall into three categories:
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Before treating part-time youth workers as independent contractors, consult your accountant and/or lawyer about the potential tax and legal implications. Visit the IRS guidance page online for more information on how the test is applied: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee.
Interns & Apprentices
Interns and apprentices are also popular hiring options for reducing the farm workload while offering valuable learning experiences. Though similar, Intern and Apprentice are not interchangeable terms. Because the U.S. Department of Labor (DOL) has specific definitions for each, separate guidelines provided by DOL must be used to determine a worker’s legal status as either an intern (DOL Fact Sheet #71) or an apprentice (see apprenticeship.gov for more information).
Interns are often misidentified; youth workers who perform traditional farm labor and are not affiliated with a related educational program (college major or work-study) are unlikely to fit into the definition of “intern” and therefore will need to be paid the appropriate minimum wage. While true interns are commonly not entitled to the state or federal minimum wage rates, the farm employer should ensure that the student worker is still the primary beneficiary in the employment relationship. Apprenticeships, on the other hand, often ensure a wage rate at least the state required minimum wage that will increase as the worker becomes more skilled and knowledgeable. For more information, including insurance coverage, and you can review ALEI Fact Sheet: Maryland Farm Internships and Labor Laws (2019).
Youth Minimum Wage
The Fair Labor Standards Act (FLSA) is the law that establishes the nationwide federal minimum wage. Each state may also set its own minimum wage rate for employers to abide by (provided it is not lower that the federal rate). Even localities are allowed to set a higher minimum wage than the state (and a few in Maryland do, such as Montgomery, and Howard counties), so employers should also check the rules of the county or local jurisdiction in which the farm is located. Unless an exemption applies, the highest applicable wage, determined by the location of a business, is the wage that must be paid to all employees.
Workers cannot waive their right to be paid minimum wage. The DOL, following judicial guidance, has found employees may not serve as unpaid or underpaid volunteers in for-profit private sector businesses.
Maryland allows employers to pay workers under the age of 18 years old a minimum wage equal to 85% of the State minimum wage. For employers with 15 or more employees (including part-time, full-time, seasonal employees), the youth rate for 2022 is $10.63/hour (85%*$12.50). Small employers with 14 or fewer employees should pay youth employees in 2022 at least $10.37/hour (85%*$12.20). Once the employee turns 18, they are then entitled to receive at least the state minimum wage rate that applies to their employer.
The table below provides a quick glance at the current wage rates in Maryland, Delaware, Pennsylvania, West Virginia, and Virginia. However, most states have adopted laws for scheduled increases to the state minimum wages until it reaches $15.00/hour, which generally take effect January 1 of the new year.
Youth Minimum Wage
Under 18 years old - 85% of the required minimum wage.
None - youth workers are entitled to the same minimum wage as adult employees.
Under 16 years old - not entitled to state minimum wage.
None - youth workers are entitled to the same minimum wage as adult employees, unless permission granted by the PADOL.
Under 20 years old – $6.40/hr, for first 90 calendar days after initial employment only.
If you are employing workers who are under 16 years old for 20 hours a week or less, even if the worker is exempt from the state minimum wage, they are entitled to the federal minimum youth wage of $4.25/hour for the first 90 calendar days of initial employment (runs from the date hired). Thereafter they are entitled to at least the federal minimum wage of $7.25/hour. For more information, see DOL Fact Sheet #32 and DOL Fact Sheet #40). FLSA recordkeeping requirements for payroll still apply to the hours worked by youth employees.
There is a minimum wage and overtime exemption for workers who are immediate family members (parent, child, or spouse) and for small farm employers (see the 500-man hour exception; usually around 7 workers or less) for workers performing agricultural work and/or if the employee is under 17 years old engaged in hand harvesting on the same farm as a parent/guardian and paid the same piece-rate as all other piece-rate employees on the farm. Maryland, however, requires overtime for non-exempt agricultural workers after 60 hours/week. Note that each state may also have variations on exempt workers.
Whether intentional or accidental, failing to properly classify an employee can have steep financial consequences because it means the employer failed to pay the proper minimum wage and to withhold Medicare, Social Security, and income taxes from a worker’s pay. Farm workers who believe that they were underpaid can file a claim with the department of labor in the state where they worked. Courts may award damages of up to three times the amount of the unpaid wage plus attorney fees. Given the steep financial consequences, employers should seek legal advice before providing a youth worker with less wage and hour protections than other workers.
For more information about your state's wage laws, visit your state Department of Labor's website. Maryland employers can visit https://www.dllr.state.md.us/labor/wagepay/, and contact them via phone (410-767-2357) or e-mail: firstname.lastname@example.org.