PARTNERS

By Vicky Boyd

Beginning Jan. 1, agricultural employers with more than 25 workers will have to pay $12 per hour minimum wage, up from $11 per hour in 2018, and it will continue to rise every year until 2022.Photo by Vicky Boyd

With the start of the new year, the agricultural industry saw changes to farmworkers’ minimum wages and overtime thresholds, both of which could further squeeze growers’ margins. Unlike some industries that can pass along higher costs to customers, growers say they can’t raise prices and typically end up absorbing the increases.

To remain competitive, many have turned to mechanization or automation to address rising labor costs.

“On the vineyard side, we’ve converted over to mechanical harvesting in preparation that labor costs were going to go up or labor wasn’t around,” said Joe Valente, a Lodi-area vineyard manager.

During the winter, they mechanically preprune vines, cutting the long, unwieldly canes. Workers then have easier access to the vines and can make minor cuts, cleaning up the pruning without getting entangled or having to spend time pulling the long canes they’ve pruned.

“We do everything we can to make it easier and to be able to speed up the pruning with machines,” he said.

The operation for whom Valente works falls under the state’s definition of larger scale, with more than 25 workers. For them, the state minimum wage increased to $12 per hour in 2019 from $11 per hour in 2018. For smaller-scale employers with 25 or fewer workers, minimum wage went to $11 per hour from $10.50 per hour. 

Under the wage schedule, the minimum will reach $15 per hour in 2022 for larger-scale employers and 2023 for smaller-scale employers.

After the last scheduled increase, the legislation directs the state director of finance to adjust the minimum wage annually using the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers. 

Seeing labor costs and worker availability as challenges on the horizon, Valente said they began a few years ago tying mature vineyards only once every three years. This reduced labor expenses for tying by nearly two thirds compared to annual tying.

2018 marked the first full season the operation used chemical and mechanical suckering to remove undesirable shoots growing from the crown area of the trunk.

The operation also has about 20 acres of cherries but doesn’t plan to expand. “As far as considering planting more cherries, it’s a struggle because it’s got to be harvested by hand,” Valente said. “As the minimum wage goes up, your return per box has to be there. And a lot of the market with the cherries is out of our hands.”

A move to automate

With more than 50 workers, the Manteca-based almond grower and processer, Travaille & Phippen, also falls under the state’s larger-scale employer schedule. Any increase in minimum wage causes a ripple effect, something partner Dave Phippen refers to as compression.

“We have a bunch of people who are above the minimum wage, so you pretty much have to go through the whole labor pool,” he said. “If they were making $15, then they want to make $16.”

During the past few years, Phippen has installed eight robots that perform duties from sorting almonds to stacking boxes on pallets to reduce his reliance on labor. Each time the minimum wage goes up $1 per hour, he said the payback on purchasing a new machine becomes quicker.  

“It’s very expensive to have labor when you can automate,” Phippen said. “Any labor we can cut around here, we’re writing checks to put in automation.”

Although Phippen said he feels bad for workers’ positions that have been phased out, he said he has to mechanize where possible to remain competitive.

Travaille & Phippen processes both almonds it grows as well as nuts from outside producers. The family-owned operation absorbs the increased cost of processing its own nuts. But it has to pass along the higher costs to the outside growers.

SJFB Second Vice President Ken Vogel, who grows walnuts and cherries near Linden, only has a couple of part-time employees he shares with another farmer. Although he falls under the smaller-scale employer definition, Vogel nonetheless saw minimum wage increase to $11 from $10.50. He works through a labor contractor for the harvest crew needed to pick his cherries. 

And rising labor costs remain a concern to Vogel as he is squeezed from multiple fronts.

“The cherry crop last year was at most 20 percent,” Vogel said. “Then the walnuts had good volume, but the prices were down 50 percent. I’m not McDonald’s or Taco Bell. I can’t pass along those increases in costs to my customers.”

New ag overtime rules kick in

2019 also marks changes in overtime eligibility for California farmworkers. Signed into law by former Gov. Jerry Brown in September 2016, Assembly Bill 1066 – also known as the “Phase-In Overtime for Agricultural Workers Act of 2016” – annually ratchets down daily and weekly thresholds for overtime.

For the past several years, state law required overtime for farmworkers only after 10 hours per day or 60 hours per week. Beginning Jan. 1, employers with more than 25 workers have to pay overtime after 9.5 hours worked per day and 55 hours per week. 

In 2020, the thresholds decrease to 9 hours per day and 50 hours per week. For 2021, the requirements are 8.5 hours per day and 45 hours per week.

On Jan. 1, 2022, farmworkers will become eligible for time-and-a-half overtime after working more than eight hours in one day and after 40 hours in a work week – the same as for most other non-ag industries. They also will become eligible for double-time after working 12 hours in a day.

Employers with 25 or fewer workers will have three additional years, with the eight hours per day and 40 hours per week requirements taking effect on Jan. 1, 2025.

Phippen has a mix of field workers and employees in a commercial ag processor, so he follows the wage rules for the commercial side. Long ago, he began paying all workers overtime for anything over eight hours in a day or 40 hours in a week.

The almond processing plant runs 12-hour shifts nearly year-round, and field workers also put in long hours during harvest. “So we’re paying a lot of overtime, and it’s always after eight hours,” Phippen said. 

With the new overtime thresholds, Valente said they will closely monitor workers and halt them after 9.5 hours. 

“It’s really the workers who are being affected, and at the end of the week it’s going to be five less hours they’re going to have the opportunity to work,” he said. “We tried to explain that to the Legislature, but they didn’t listen.”

The exception will be during harvest, when workers may put in up to 12-hour days to get the crop in on time. And Valente said the operation will resign itself to paying the increased overtime.

The alternative would be to buy more equipment to complete harvest faster, but finding enough qualified people to run the equipment then becomes a challenge. 

With global customers, Phippen said he can’t pass along his increased labor costs because they have the option to buy almonds from Australia or Spain.

“I’m talking to a German almond buyer and tell him, ‘On Jan. 1, the minimum wage went up and we had compression, so I need another nickel a pound for my almonds.’ He would laugh at me.”