Ag Today September 26

North Coast wine business notes ‘unintended negative consequences of well-intended legislation’

JEFF QUACKENBUSH

NORTH BAY BUSINESS JOURNAL | September 26, 2016, 6:59AM
When California recently overturned eight decades of U.S. agricultural labor policy by becoming the first state in the nation to approve overtime for farmworkers, it may have set the stage for more challenges for the hard-working crews who bring the North Coast’s world-prized winegrapes to wineries where the magic happens, according to those in the business.

Gov. Jerry Brown on Sept. 12 signed the nation’s first law dropping the federal agricultural exemption for paying overtime basically beyond eight hours worked a day or 40 hours a week. The number of hours before earning time-and-a-half pay will start shortening from the current federal ag standard of 10 hours a day or 60 hours a week, beginning in 2019. Ag overtime would kick in for most businesses in 2022 and for operations with 25 or fewer employees in 2025.

Compensation, working and living conditions for agricultural workers has been an incendiary topic in the North Coast and elsewhere in California for decades, heating up recently with language from promoters of the law, Assembly Bill 1066, such as United Farm Workers calling the agricultural exemption racist and unfair.

“That’s an unfair characterization,” said Duff Bevill of Bevill Vineyard Management in Sonoma County. “It may have been an issue in the 1960s, but this is not the 1960s anymore. A lot of them have figured out ways to buy homes in Sonoma County.”

The sensitivity of this subject made more than a few North Coast vintners and growers hesitant to speak with the Business Journal on the record. Common among the responses was acknowledgement that the North Coast wine business is high-value agriculture, so there’s more room for businesses to adjust to the changes than for growers in lower-value areas such as the Central Valley or with lower-price crops like lettuce or strawberries.

That said, a number noted that the ag overtime law is just the latest of a string of costly environmental and labor regulations enacted and taking effect in the past few years that are changing the economics of even North Coast agriculture. While overtime is targeted at agriculture, other changes have hit a number of industries. There has been federal health care coverage requirements and state provisions for sick leave, which kicked in as of July, retroactive state changes to piece-rate pay going back to 2012 and the new $10-an-hour state minimum wage.

“It’s a combination of all these things — the higher minimum wage, sick leave, piece rate and overtime — that is going to be driving up the cost of doing business,” said Dawn Ross, a partner of Santa Rosa-based law firm Carle Mackie Power & Ross. Among her specialties is employment and labor law. “There are many changes that are, sort of, adding up a lot of expense and a lot of record-keeping.”

Those added expenses could end North Coast small-scale family farming as we know it, according to Zac Robinson, president of Husch Vineyards in Mendocino County’s Anderson Valley. He sits on the board of trade group Mendocino WineGrowers, whose annual census found the average vineyard size in the county is 14 acres. The local wine business has been driven by multigenerational family businesses and their personal property, but that era is ending at an ever-faster rate by a growing weight of environmental and now labor compliance costs, he said.

“They’re doomed, and I don’t think they can continue,” Robinson said. “The economics on small vineyards is already impacted by the availability of workers. All these rules definitely add to the challenge of running a small family-owned vineyard. Regardless of the intent of legislators, they’re going to end up with a lot of corporate-owned vineyards that have a compliance department and a whole slough of people in payroll, overtime and implementing these new rules correctly. That’s not something someone with 14 acres can afford.”

Napa-based Nord Vineyard Services has 20 full-time workers and 80 working seasonally. Some of the latter are working up to nine months out of the year on various field tasks. Vineyard manager and consultant Julie Nord said the goal of protecting farm employees from working longer hours without extra compensation might be frustrated by how hours-hungry workers in another industry respond to limited hours in an industry with surge-and-ebb demand for labor.

“When overtime comes into play, I imagine it will become like the restaurant business, where there is a 40-hour maximum. A lot of workers will work the lunch shift at one location then move to dinner at the next location,” Nord said. “So likely [farmworkers] will have two jobs instead of one and probably still be working more than 60 hours a week.”

The 10/60 farmworker overtime exemption is cheating farmworkers, Bevill said. Working that schedule all year would rack up 3,000 hours, but his company’s field workers average 2,200 hours a year, or 42 hours a week. During the rain season, some year-round workers may put in only five to 15 hours, or none during exceptionally wet periods. But come the typically active crop season of June–September, the average weekly hours spike to nine a day and 55 a week.

He estimates the new 8/40 standard likely will drop his company’s fieldworker average to 30–35 hours a week. Tasks needing, say, 2,000 labor hours by 50 people may be done by 75 people to avoid excessive overtime, so each worker would end up getting paid less. Mechanization of the business may become even more important than it has been, as the availability of ag workers in the state has changed with U.S. border policy.

“The ones who will be harmed the most are the ones who were marketed as the losers,” Bevill said. “We’re going to try to figure out how to do the work in 40 hours a week.”

Mechanization has come to vineyard operations such as leaf removal to expose fruit to sunlight and more recently with harvesting. Machines and vineyard design is being adapted to allow for other tasks, such as pruning before the growing season starts.

Another strategy for controlling labor costs could be to shift the compliance costs to another company, such as a vineyard management company or a multicrop labor contractor.

“So if we were to have more farm labor contractors coming from out of our area to supply workers for these long weeks because we have growers controlling their costs, we’re bringing in labor that’s really harder to vouch for and harder to control in terms of compliance and sustainability and social equity,” said Jon Ruel, CEO of Trefethen Vineyards in Napa Valley. “It’s potentially the unintended negative consequences of well -intended legislation.”