Fair Labor Standards

January 22, 2004 - 12:51

Find out if you should be paying your employees overtime.

Most likely, you do not pay your greenhouse employees a
premium for overtime. Based on your company's status as an
"agricultural" business, you probably believe that you are not
required to pay them at a premium rate for working over 40 hours per week.
While it is true that most greenhouse employees generally are not entitled to
overtime, this is not always the case. If, for instance, one of your employee
drivers picks up plants from an outside vendor and those plants undergo no
further cultivation before they are sold, you may be required to compensate
that employee for overtime. Additionally, if your business is primarily engaged
in selling plants and flowers grown by outside parties, you may be required to
compensate your employees for overtime. Even if only a small portion of an
employee's overtime work consists of performing non-exempted duties, you will
need to compensate this employee for all of the hours worked over 40 at a rate
of one and a half times his or her regular rate. Thus, it is important for you,
as a greenhouse employer, to be aware of how federal overtime laws apply to
your individual business.

The Fair Labor Standards Act (FLSA) was enacted in 1938 to
help combat unemployment, improve working conditions and protect the standard
of living for low-paid workers. One of the FLSA's provisions obligates
employers who require or permit their employees to work more than 40 hours per
workweek to pay a premium for additional hours. However, because of fears that these
requirements would drive industries that could not afford higher labor costs
out of business, Congress provided for certain exemptions to FLSA coverage.

One industry that was exempted is the agricultural industry.
This means that operators of greenhouses may be exempt from the obligation to
pay their employees overtime. However, whether you actually are exempt from
paying overtime to particular employees depends on a variety of factors. The
following is a brief discussion of the FLSA's overtime provisions, the
agricultural exemption and what the agricultural exemption means for employers
of greenhouse workers.

Provisions Overview

The FLSA requires employers to pay overtime compensation at
a rate of one and a half times the employee's regular hourly rate to any
employee who works an excess of 40 hours per workweek. This requirement applies
regardless of whether the employee is required to work overtime or does so
voluntarily. Of note is that even if an employer wants to avoid paying
overtime, a prohibition on working overtime or a rule that overtime work will
not be paid unless authorized in advance will not necessarily relieve the
employer of all overtime obligations. For instance, if the employer knows or
should know that an employee is continuing to work overtime, even though
unauthorized, the FLSA still requires overtime to be paid.

The FLSA does not require employers to pay overtime for
daily hours worked in excess of a certain number or for hours worked on
weekends or holidays. Instead, all of the overtime provisions revolve around
the 40-hour workweek. The workweek does not have to begin on a particular day
or time, but it must be fixed and consist of seven consecutive 24-hour periods.
For example, one business's workweek may be set from 8 a.m. on Wednesday to the
following Wednesday at 8 a.m., while another business may set the workweek from
Friday at 6 p.m. to the next Friday at 6 p.m. Additionally, employers cannot
offset one week's overtime hours against non-overtime hours worked another
week. Because each workweek stands alone, it is advisable for employers to
ensure that employees are fully aware of when the workweek begins and ends and
the effect that the workweek has on overtime calculations, preferably by means
of a written policy.

Failure to comply with the FLSA can be quite costly for a
business. The FLSA allows an employee or the Secretary of Labor to bring a
civil action against employers who have failed to pay overtime in accordance
with the FLSA's provisions. Employers found to have violated the FLSA may be
enjoined from further violations and are also liable for back pay, liquidated
damages equal to the amount of back pay, and attorneys' fees and costs.
Additionally, the FLSA provides for civil penalties of up to $1,000 per
violation. In extreme cases, where the employer has willfully, knowingly and
intentionally violated the FLSA, the employer can be assessed criminal
penalties of up to $10,000 and/or imprisonment for up to six months.

Agricultural Exemption

As previously mentioned, Congress exempted certain
industries from FLSA coverage for fear that its requirements would put many
industries out of business. With respect to agricultural businesses, not only
was Congress concerned that many agricultural employers would not be able to sustain
a workforce if they were required to pay overtime premiums, but it also
believed that the higher labor costs would result in higher produce prices.
Consequently, the agricultural industry is one of the industries exempt from
the FLSA's overtime requirements.

Under the FLSA, there are two categories of practices that
constitute agriculture: 1) primary activities, which consist of general farming
practices such as cultivating and tilling soil and growing and harvesting
crops; and 2) secondary activities, which are practices other than farming that
are performed by a farmer or on a farm and are incidental to primary
activities. Thus, to the extent that greenhouse workers are engaged in either
primary or secondary agricultural activities, they are not entitled to
overtime.

Greenhouse Workers and the Exemption

The FLSA expressly provides that farming includes
horticulture, so a majority of the work performed in a greenhouse is
agricultural and exempt from overtime. Clearly within the exemption, for example,
are sowing seeds and growing plants, trees, shrubs, vines and flowers; handling
these plants from the propagating frames to the field; and cultivating,
watering, fertilizing, pruning and bracing the plants as they grow. However,
because the activities performed in a greenhouse are determinative of whether
the agricultural exemption applies to a particular employee, it is important to
evaluate each specific activity and its purpose to know whether an employer is
required to pay overtime to its greenhouse employees. The following are other
aspects of greenhouse operations to consider when determining whether a
greenhouse is required to compensate its employees for overtime:

Selling stock.
Businesses involved primarily in retail or wholesale distributions of stock
grown by third parties are not within the exemption and thus must pay their
employees overtime. However, a greenhouse may maintain a shop for selling its
own stock as an incidental part of its business and still fall within the
exemption. For instance, work connected with the sale of flower pots and garden
tools is secondary agricultural work and within the exemption where the
greenhouse is primarily engaged in selling its own stock.

Packing, storing and warehousing style='font-weight:normal'>. Greenhouse employees who work in packing or
storage sheds performing such duties as sorting, grading and trimming the stock
grown by their employer and packing it for shipment are engaged in work that
falls within the agricultural exemption. Therefore, these employees need not
receive overtime pay.

Ancillary employees, such as maintenance and clerical
workers
. A greenhouse may employ people to
perform tasks other than the actual growing of plants but that are necessary to
enable the greenhouse to engage in its agricultural activities, such as
clerical help and maintenance. So long as the work is incidental to the
agricultural production and is performed at the greenhouse, it is considered
secondary agriculture and within the exemption. Thus, clerical and maintenance
workers are not entitled to be paid overtime.

Working with stock not grown by the greenhouse style='font-weight:normal'>. As previously stated, businesses dealing in stock
obtained from independent sources are not engaged in agricultural work. There
are gray areas, however, that can present problems for some greenhouses. For
example, greenhouses occasionally obtain plants growing in the wild and
subsequently sell them. So long as the plants are further cultivated in the
greenhouse before sale, the work associated with the plants is considered
incidental to the greenhouse's farming operations and is still within the
exemption.

However, there are other instances when a greenhouse obtains
plants grown by independent contractors that pose more of a risk of falling outside
the exemption. If a greenhouse buys stock, such as seeds and plugs, from third
parties and continues to cultivate and otherwise perform agricultural work with
respect to those plants, the work is considered to be within the exemption. On
the other hand, when a greenhouse buys full-grown plants from an independent
contractor and resells them without performing additional agricultural work on
the plants, it is seen as a wholesaler, rather than a grower, and these
activities are not exempt from the FLSA.

For example, suppose there is a business located in Georgia
-- let's call it GA Greenhouse -- that employs a delivery person, Mike Johnson,
who delivers plants to Florida. While in Florida, Johnson picks up plants to
bring back to GA Greenhouse. Johnson works a total of 60 hours that week
(including his trip to Florida), while only one of those hours was spent
packing the Florida plants in his truck. If additional agricultural work, such
as those activities identified above, is performed on the Florida plants, then
GA Greenhouse would not need to pay Johnson for overtime. More importantly, if
those plants are not further cultivated and are sold in the same condition as
when they arrived from Florida, then GA Greenhouse would be obligated to pay
Johnson overtime under the FLSA. In this scenario, GA Greenhouse would have to
pay Johnson at a rate of one and a half times his regular rate, not only for
the one hour he spent packing the plants into his truck but for all 20 hours of
overtime worked that week.

There is an exception where buying stock from a third party
and selling it without further agricultural work is seen as incidental to the
greenhouse's agricultural activities and is therefore still exempted work.
However, this exception essentially applies only where the stock is bought from
independent sources for emergency purposes, such as when a greenhouse's crop
fails and there is a production shortfall. In this case, if Johnson picked up
those plants in Florida merely because the GA Greenhouse crop had failed, and
the additional plants were necessary to satisfy GA Greenhouse's customer
requests and cover production shortfall, then Johnson would not be entitled to
overtime pay.

Employees engaged in both exempt and non-exempt work. It is
not uncommon for a greenhouse employee to cultivate and perform agricultural
work on plants grown on-site and also work in a retail area selling items such
as flower pots and plants received from a third party during the same workweek,
thus engaging in both exempt and non-exempt work. The FLSA does not allow
employers to prorate overtime pay for an employee who performs both exempt and
non-exempt work in the same workweek. As a general rule, such an employee will
not be exempt, and the FLSA will require the employer to pay overtime based on
all of his or her hours, whether exempt or non-exempt. Thus, in order to avoid
paying overtime, employers of greenhouse workers should make an effort to
ensure that workers who primarily perform exempt work are in fact limited to
only exempt work. Otherwise, you may find yourself paying overtime to an
employee where only a small portion of the employee's over 40-hour workweek was
non-exempt.

What the FLSA Requires of You

Unfamiliarity with the FLSA's overtime requirements can
become quite costly for a business. On one hand, if a greenhouse operation
turns out not to be non-exempt and fails to comply with the FLSA's overtime
requirements, that business could become the target of a civil lawsuit or even
criminal sanctions. On the other hand, if a greenhouse operation simply assumes
that it is required to pay its employees overtime, but in actuality, is not
covered by the FLSA, then that business is unnecessarily paying out hard-earned
revenue. Thus, it is advisable for employers of greenhouse workers to take the
time to determine what the FLSA requires of them and whether they, in
particular, are covered. In most cases, employers of greenhouse workers will
discover that they are not obligated to pay overtime. However, as illustrated
above, there are always exceptions that should be considered, and it is
important for employers to be aware of their obligations under the FLSA or risk
the consequences.

Author's Note: The author would like to thank Lindsay S.
Marks and Ashley C. Adams for their invaluable assistance in preparing this
article.

About The Author

Wesley B. Tailor is attorney for Troutman Sanders LLP, Atlanta, Ga. He can be reached by phone at (404) 885-3487 or E-mail at wesley.tailor@troutmansanders.com.

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