An old farm rule rules out overtime

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: October 10, 2010 - 7:08 AM

Back when most farms were family operations, the government exempted them from overtime laws. Some large agricultural operations still take advantage of the provision.

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Todd Graham, mechanic at Golden Oval Eggs in Thompson, Iowa, says the new owners of the plant lied to employees about not being forced to work overtime hours without receiving overtime pay. Last year Golden Oval was purchased by Rembrandt Enterprises largely owned by Glen Taylor. The plant has the capacity for 5.7 million chickens.

Photo: Glen Stubbe, Star Tribune

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THOMPSON, IOWA - The sign outside the sprawling egg production plant here still says "Golden Oval," even though the place changed hands last year. Todd Graham, an employee at the egg operation, wishes the old owner would have never gone away.

When Renville, Minn.-based Golden Oval Eggs owned the plant, workers like Graham received overtime at one-and-a-half times the usual rate. But Graham and two other workers say new owner Rembrandt Enterprises, an egg company largely owned by Minnesota billionaire Glen Taylor, cut out time-and-a-half for overtime.

It's perfectly legal under a decades-old provision of federal labor laws that applies to farm workers, according to the U.S. Labor Department. And while it's not clear how often the overtime exemption is applied nationwide, potentially thousands of agriculture workers could be losing out on overtime pay for work beyond 40 hours.

The provision harkens back to a time when agricultural operations tended to be relatively small family affairs and farmers were struggling with the Great Depression. But times have changed in agriculture, with the business taking on more of the hue of McDonald's than Old MacDonald and his homespun farm.

Take Rembrandt Enterprises: The Golden Oval acquisition made it the nation's third-biggest shell egg company, and the 240-acre egg farm here has 1.7 million square feet of barn space that can house about 5.7 million hens. Eggs here are mechanically broken, liquefied, and then shipped out in bulk in stainless steel tanker trucks.

It's a factory, but also a farm; a vertically integrated operation. And under federal labor law, such an integrated farm business can for the most part deny workers overtime pay after 40 hours -- as long as it doesn't process goods that originate from another farm.

In other words, if an egg producer owns all of its birds and tends only to its own eggs -- a relatively common arrangement in the U.S. egg business -- it's likely to be exempt from paying overtime. Such ownership arrangements also exist in some facets of raising poultry and pork.

For instance, Hormel Foods, the publicly traded Austin, Minn.-based firm, said it uses the agriculture overtime exemption for about 3 percent of the 7,000 workers in its Jennie-O turkey operations. The exemption applies to only "select positions in the live production area," and would include such a job as a farm manager responsible for bird husbandry, Hormel spokeswoman Julie Craven said in a statement. She said live production workers can receive bonuses for the performance of their flocks.

Wright County Egg, a major Iowa egg producer at the heart of a huge salmonella-related egg recall this past summer, said it doesn't pay overtime, citing the agriculture exemption. Litchfield-based Sparboe Farms, the nation's fifth-largest egg producer, said it makes limited use of the exemption: Its workers get overtime after a 48-hour workweek.

Minnetonka-based Michael Foods, the seventh-largest U.S. egg producer, and Arden Hills-based Land O' Lakes, owner of the sixth-largest U.S. egg operation, declined to comment on their overtime pay policies. Three other top-10 U.S. egg companies, as ranked by number of hens, either declined to comment or didn't return calls.

Building the business

Glen Taylor, the Mankato printing magnate and owner of the Minnesota Timberwolves basketball team, got into the egg business about 10 years ago through Rembrandt Enterprises, which built a big operation in Rembrandt, Iowa. Taylor reportedly owns at least 90 percent of the company.

Rembrandt gained a foothold in the fast-growing liquid egg business, which counts the restaurant industry as its largest end user. In March 2009, Rembrandt forked over $123.75 million for a competitor, Golden Oval, making it the third-largest egg producer -- it's tied with another firm -- housing 14 million hens, according to the trade publication Egg Industry. The Thompson plant, which employs about 100, was Golden Oval's crown jewel.

Shortly after the deal was completed, Rembrandt held a meeting at the Branding Iron, a restaurant in Thompson, a small town about 5 miles from the former Golden Oval facility. Doughnuts and coffee were served, while a high-ranking Rembrandt executive told workers that overtime was being eliminated due to the agriculture exemption to federal overtime law, said Graham and two other workers who attended the meeting but asked not to be identified.

"He said, times are tough and you're lucky to have jobs and a hard decision had to be made," Graham said. "He said they had to do it in order to survive."

Rembrandt Enteprises did not respond to several inquiries from the Star Tribune. A Taylor Corp. official said Taylor was travelling last week and couldn't be reached.

Graham and two other Rembrandt workers said they took a financial hit from the cessation of overtime pay, since overtime work didn't go away.

Indeed, several paycheck stubs for Rembrandt workers show workweeks in recent months of more than 50 hours. Graham estimates that lost overtime pay -- time-and-half pay he didn't get for 40-plus hour weeks -- amounts to about $4,000.

Graham makes $15.70 an hour, which he says puts him on the high end of the Thompson plant's pay scale. Nationwide, the average wage for egg production workers is in the neighborhood of $10 to $12 an hour, said Don Bell, a poultry industry expert at the University of California Riverside.

It's not just the financial blow of no overtime pay that irks Graham and the two other workers. At Rembrandt's plant in Renville, workers are eligible for overtime after 48 hours under Minnesota law. Minnesota is one of a handful of states that has a tighter agriculture overtime exemption than the federal government.

And Graham and the two other workers are incredulous that they were suddenly being treated as farm workers when it comes to overtime. "I've never even seen a live chicken and I've worked here three years now," said Graham, a maintenance technician in the part of the plant where eggs are broken and liquefied.

In October 2009, the U.S. Department of Labor's Des Moines office investigated Rembrandt's operation in Thompson after a worker complained that overtime had been cut by the plant's new owners, according to a labor department document.

But the labor department found no violations of federal wage laws, concluding that Rembrandt was agriculturally exempt from paying overtime, the document shows.

Iowa is the nation's biggest producer of eggs, and the Department of Labor in Des Moines fields calls "on a regular basis" from egg workers who are denied overtime pay, said Mike Staebell, district director of the department's wage and hour division in Iowa. The Des Moines office also occasionally gets complaints from workers at hog and cattle feedlots over not getting overtime pay, he said.

If an egg producer processes eggs that weren't laid by its own chickens, or if a farmer's feedlot houses animals that are owned by anyone besides himself, a worker may have a solid claim. The overtime pay exemption doesn't apply if a farm processes goods that originated from outside its confines.

But if the farm owns all of the animals on site, or all the eggs come from just that single farm's hens, there's little the law allows the labor department to do, Staebell said. The size of the agricultural operation is irrelevant. And the overtime exemption for agriculture workers is "very broad," Staebell said.

The Fair Labor Standards Act, which governs overtime pay, defines agriculture not just as raising crops and livestock, but "secondary work" that is "performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market."

Larry Norton, a lawyer with Pennsylvania Legal Aid Network, who's pursued overtime cases for agriculture workers, said he recently turned down a potential client because of the exemption's breadth. He got a call from a sod installer who was being denied overtime pay. But he was working for the farmer who's sod he was installing, so the overtime exemption would most likely apply, Norton said. "These are tough cases."

Changing times

The agriculture overtime exemption is rooted in everything from "the romantic notion of the small farm," as Hamline University employment law Prof. David Larson put it, to the politics and economics of the Deep South.

When the Fair Labor Standards Act was being created in the late 1930s, legislators worried that overtime rules would be too burdensome for small farmers, particularly due to the seasonal nature of agriculture. The attitude was partly "small farms are run by families and we just don't want to intrude on a family operation," Larson said.

Political clout also played a role. The agricultural lobby had considerable power, and Southern congressmen had a lot of sway over farm legislation. Much of the nation's agricultural labor force at the time was in the South, and Southern legislators didn't want any legislation that could mess with their cheap labor setup.

While politics have changed, agriculture workers still have little power. Some are undocumented immigrants or working here on temporary visas, said Hamline's Nelson. They're not the type to rock the boat and question an employer's practice, he said.

In Thompson, Graham said he had a question for his new employer at the Branding Iron meeting -- the one where workers were told overtime pay was being eliminated. Since they weren't being paid for overtime, could workers leave after they put in 40 hours? The company executive's answer was "yes," Graham said, a response two other workers also attested to.

But that isn't how things worked out, they said. Graham said he asked his supervisor the same question later and was told "if you leave after 40 hours we will terminate you for job abandonment." Another worker said he got the same answer from his supervisor, and a third said he was told "good luck with that" by his boss.

Mike Hughlett • 612-673-7003

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