Legislature considers employer tax credit for ag overtime law

The California Farm Bureau and the California Association of Winegrape Growers are co-sponsoring a new bill to ease the state’s agricultural overtime law.

Introduced by Senator Shannon Grove, R-Bakersfield, Senate Bill 628 would allow employers to claim payroll tax credits equivalent to their quarterly overtime wages. Taking the lead from California on ag overtime, Oregon and New York approved tax credits as a part of their individual legislation in 2023 and 2022, respectively. 

Sen. Shannon Grover, R-Bakersfield

“Senator Grove’s agricultural overtime tax credit bill is a sensible solution that will enable farmers to continue producing food while providing a real and richly deserved boost in take-home pay for farm employees,” CAFB President Shannon Douglass said in a statement. “It is an investment in our food security and rural communities and in the long-term sustainability of production agriculture in California.”

California began phasing in the overtime law in 2019. By 2022 companies with more than 25 employees had to pay farmworkers time and a half for any work after eight hours a day or 40 hours a week. Smaller employers had until this year to comply.

CAWG President Natalie Collins noted that the industry has long warned state legislators that the law — under Assembly Bill 1066 by former-Assemblymember and current California Labor Federation AFL-CIO President Lorena Gonzalez — would have major impacts on operations. The bill’s phase-in left growers with another reason to call California’s regulatory landscape unmanageable.

Last month researchers at California Polytechnic State University, San Luis Obispo, issued a paper showing Central Coast farmers have faced a nearly 1,400% increase in regulatory costs since 2006. Crop values rose just 44% in that time.

“Today, with the smallest winegrape harvest in 20 years, growers are struggling to stay in business,” according to Collins. “If legislators genuinely want to increase take-home pay for farmworkers, growers are going to need support from Sacramento to make it possible.”

A 2023 study from UC Berkeley assistant professor of cooperative extension Alexandra Hill backed up those complaints. Based on data from the U.S. Department of Labor National Agricultural Workers Survey, Hill found that the law shrank farmworker pay and hours overall, resulting in a decrease of roughly 45,000 hours and $9 million annually.

But SB 628 faces an uphill battle. Assembly Speaker Robert Rivas, D-Hollister, tried similar legislation in 2020. Despite CAFB support, it never received a hearing in committee. 

The state had a significant state budget surplus at the time, a portion of which CAFB hoped would support the tax credit. Asm. Speaker Robert Rivas, D-Hollister

Following his 2020 appointment to chair the Agriculture Committee, Rivas toured farms across the state and noted cost concerns and a labor shortage. He cited the tax credit as a policy option for farmers concerned the added cost would result in some crops not being harvested and reduced hours for employees. 

An attempt to increase the number of hours required to trigger the overtime rule by Assembly Minority Leader James Gallagher also failed in committee last year, after Democratic lawmakers heard United Farm Workers testimony based on a conflicting white paper from UC Merced.

Looking at data from 2017 to 2022, the labor center found that farmworker earnings increased year-over-year while staying consistent with decreased hours worked.

During the Senate Labor and Employment Committee hearing that voted down Gallagher’s bill, Asm. Liz Ortega, D-Hayward, said she could not see how the two years of overtime data cited in the UC Berkeley paper could be comparable to the many decades farmworkers went without overtime pay.

“It's just not an equal comparison, which is why I cannot support your bill today,” Ortega said.

“This is a frustration common among California farmers,” Gallagher said at the hearing. “We meet all the health and safety standards and yet we'll import stuff from Chile or other parts of the world that don't do any of those things.”

Asm. Heath Flora, R-Ripon, voted in support of Gallagher’s bill.

“It's not that we don't want to pay them as much as we possibly can,” said Flora, who owns an agricultural equipment business. “But if the growers, the farmers aren't surviving, then everybody's out.”

A Senate committee will consider SB 628 later this month.

For more news, go to Agri-Pulse.com.