September 1, 2016

California Crazy Spills Into Dairy Worker Pay Checks

 |  By: Dairy Talk

California dairy farmers thought they had dodged a bullet earlier this summer when a State Assembly bill to increase overtime pay was defeated.

Then, under rules that only seem to apply in the galaxy we call California, Assemblywoman Lorena Gonzalez (Dem., San Diego) revised the bill through the state’s “gut and amend” process. What that procedure allows legislators to do is take a bill that has passed, gut out existing language and strip in the verbiage of some totally unrelated measure. Last week, the over-time bill passed, and at this writing, it is awaiting Gov. Jerry Brown’s expected signature.

The irony, say dairy farmers, is that the measure likely will mean farm workers will actually make less money once the provision ratchets in and becomes fully implemented in 2022. Compounding the problem is that California’s minimum wage ratchets up from $10/hour to $15 over the same time period.

Currently, California workers must be paid over-time (1.5X their wage rate) after working 10 hours per day or 60 hours per week. Under the new legislation, farms which have more than 25 workers will have to be paid overtime if they work 9 ½ hours per day or 55 hours per week starting Jan. 1, 2019. It ratchets up to overtime after 8 hours per day or 40 hours per week in 2022. (Farms with 25 or fewer employees follow this schedule three years later, starting Jan. 1, 2022, and have to pay overtime above 8 hours per day or 40 per week by 2024.)

“The real losers in this are low-skilled employees,” argues Steve Maddox, who employs 67 workers on his 3,800-cow dairy near Riverdale, Calif. He employs another 73 workers in his farming operations.

He estimates employees working 60-hour weeks now make $2,550 per month. But as the overtime rules kick in, the hours worked will be reduced and the employee’s monthly pay will drop to $1,720. “With the longer week and a spouse working, these employees could actually buy a house,” he says. “Now, they’ll be on government assistance.”

Dino Giacomazzi, who milks about 950 cows near Hanford, Calif., agrees. (Listen to his comments here and here.)

Fourteen of his 19 employees have been with him 15 or more years. His feeder, who owns his home and has put two kids through college on the wages earned from Giocomazzi, has been with the dairy 37 years. “I won’t be able to continue to support my employees in the way we have in the past,” he says.

It’s not that he doesn’t want to, but the reality of the California dairy economy is that there is no margin for increases. “Over the last 10 years, we’ve been at breakeven; we have made no profit,” he says. 

Farmers in other regions of the country might smirk over the mess California farmers find themselves. But no one is immune from this. An activist legislature and one stroke of a Governor’s pen can put any state in a similar bind. Just ask New York dairy farmers about their battle against unionization of farm workers.

Even here in Minnesota, efforts are continually being made to ratchet back the 48-hour per week overtime rule for agricultural workers. Plus, the minimum wage here  just went up to $9.50 on hour August 1 for “large employers,” anyone grossing more than $500,000 per year (probably 150 cows in this economy). Most dairy farmers already pay more than that, but changing the overtime rules would put them at a competitive disadvantage to surrounding states.

Former Speaker of the U.S. House of Representatives Tip O'Neill was fond of saying “All politics is local.” Mandated minimum wages and over-time rules don’t get any more local or any more political.