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The Rhode Island minimum wage is currently set at $10.50 per hour, which is higher than the current $7.25 per hour federal minimum wage. Rhode Island farms generally need to pay their employees at least the higher Rhode Island minimum wage for all work performed.
While federal law provides a broader minimum wage exemption for agricultural labor, Rhode Island law does not. Farms in Rhode Island must follow the stricter state minimum wage laws.
Farms are exempt from paying overtime to farm employees under Rhode Island and federal laws. The state and federal exemption to paying overtime only applies to workers performing agricultural labor.
Whether work is “agricultural labor” under the law is not always intuitive. That’s because it’s based on legal definitions. It is also because the definition of “agricultural labor” has not been litigated very much. Litigation helps clarify legal definitions. For now, we’re left with a broad definition that does not account for the realities of modern and direct-to-consumer farms.
Diversified farms are sprouting up in Rhode Island and throughout the country. These farms typically engage in activities—such as selling at farmers’ markets, making value-added products, organizing on-farm events, and so on—that fall outside the traditional scope of farming activities. Unfortunately, the legal definition of agricultural labor has not yet evolved to meet this new type of diversified farm. Without any statutes or case law for guidance, it can be challenging to draw the line between agricultural and non-agricultural labor.
Agricultural labor certainly includes growing and harvesting crops, raising livestock or poultry, and preparing unmanufactured farm products for market and delivery to market. Generally, agricultural labor includes work done on a farm in connection to farming operations. Conversely, most if not all work done off farm is likely not farm labor.
For example, because sales at a farmers’ market are conducted off the farm they are most likely not agricultural labor. Similarly, marketing activities such as pitching products to restaurants and grocery stores are likely not agricultural labor. In addition, some work done on a diversified farm is tangential to agricultural production, for example, making value-added products, planning and hosting agri-tourism, or on-farm events such as dinners, weddings, and potlucks. These activities most likely do not fall within the agricultural labor definition.
If the employee performs non-agricultural labor tasks, the farm must pay at least the overtime rate for all hours worked over 40 in that week (i.e., 1.5 times the Rhode Island minimum wage per hour worked over 40). In Rhode Island, the overtime rate applies to retail businesses that are open on Sundays and holidays. Farms with retail or agribusiness operations that are open on Sundays or holidays must pay employees performing non-agricultural tasks the overtime rate on these days. If the employee performs exclusively farm labor in a week no overtime is owed for hours worked over 40 or for hours worked on Sundays or holidays.
Rhode Island’s laws related to payment of wages and employment conditions apply regardless of whether a farm is exempt from minimum wage or overtime requirements. Farms must pay workers on a regular pay day at least on a weekly basis. Farms may petition the Department of Labor for a less frequent pay schedule, but they must follow a specific protocol.
Each payment must include all wages earned to within nine days of the pay day. Farms must provide a pay envelope or statement with each payment that includes the gross wages, net wages paid, total hours worked, and all itemized deductions within an explanation of the reason for each deduction.
All employers must also display a poster notifying employees of the minimum wage rules. This poster and other required posters can be found on the Rhode Island Department of Labor and Training website: http://www.dlt.ri.gov/lmi/ business/post.htm. The posters can also be found by searching for the agency name with the phrase “mandatory posters.”
Rhode Island labor laws require employers to give employees at least a twenty- minute meal break during a six-hour shift and a thirty-minute meal break during an eight-hour shift. Businesses that employ less than three employees at one site during a shift are not required to provide breaks.
Rhode Island farms with fewer than twenty-five employees or who employ their agricultural workers for fewer than thirteen consecutive weeks are exempt from carrying workers’ compensation. Even farms that meet these numbers are exempt so long as they maintain health and disability insurance for all their employees at premiums that exceed the Workers’ Compensation insurance.
The above exemptions only apply to agricultural employers, which the Rhode Island Workers’ Compensation Act defines as agricultural enterprises that produce greenhouse crops, fruit and vegetable crops, herbaceous crops, sod crops, viticulture, viniculture, floriculture, feed for livestock, forestry, dairy farming, aquaculture, the raising of livestock, fur-bearing animals, poultry and eggs, bees and honey, mushrooms, and nursery stock. Diversified farms that employ workers for agri-tourism, value-added, or other non-agricultural operations will need to secure workers’ compensation for these employees.
Sole proprietors and partners are also exempt from workers’ compensation requirements and cannot even elect coverage. However, most corporate officers must be covered with workers’ compensation.
Farms can purchase workers’ compensation through any licensed insurance agent, broker or insurance company in Rhode Island offering this type of coverage. Cost and services vary considerably from company to company.
Alternatively, farms can obtain approval to self-insure individually or as a group. However, this requires that the farm set aside significant amounts of money to cover potential injuries. To begin the self-insurance process, the farm would need to file an application with the Rhode Island Department of Labor and Training. Detailed information is provided on their website.
In addition, farms may be able to apply for insurance through an authorized group self-insurance fund with the Department of Business Regulation. For more information, contact the Department at (401) 462-9500.
Overall, the cost of workers’ compensation is determined by several factors including the classification of the labor performed, the frequency of injuries by workers performing that labor, and the total dollar value of the business’ payroll, among other factors. For farm businesses that use only traditional employees and pay cash (not in-kind) wages, a quote is easy to come by. Farm businesses that pay wages in the form of food and lodging may have a harder time determining the value of their payroll and will need to work more closely with their insurance providers. Likewise, a farm seeking coverage for interns, volunteers, and other non-traditional employees may need to work closely with their insurance provider to ensure coverage is secured for all individuals performing work for the farm. Insurance rates may vary, so farms may want to contact several different authorized carriers to compare rates.
Farms may only hire individuals who are eligible to work in the United States. The employer satisfies the duty to verify eligibility by properly completing Form I-9 (for employees not hired through a worker program). This form is available from the U.S. Citizenship and Immigration Services agency. It is available online and instructions are included. The form is not submitted to the agency. Rather, the employer copies the necessary documentation and keeps the form on file. The completed forms should be kept for the longer of the following: (1) three years after the worker began employment, or (2) one year after the worker leaves the position. The forms and documentation must be available if an enforcement agency inspects the farm.
Farms are required to withhold a percentage of an employee’s wages and remit the withheld portion to both the IRS and the Rhode Island Division of Taxation.
A farm must begin withholding state and federal income taxes when either of the following happens: the farm pays a total of $2,500 or more in wages to all employees performing agricultural labor, or any individual employee performing farm labor receives cash wages of $150 or more per year. Most farms with an employee will have to withhold income taxes. Note too that this rule applies only for farm labor. Farms employing workers performing non-agriculture tasks must withhold state and federal income taxes once any wages are paid.
To begin the federal income tax withholding process, the farm needs a completed IRS Form W-4 from the employee. This form allows employees to choose the number of withholding exemptions. Form W-4 is not sent into an agency; it remains in the farm’s files. The farm then uses the tax tables in IRS Publication 15 (Employer’s Tax Guide) to determine the withholding amount per paycheck based on the individual’s pay, exemptions, and payment frequency.
Form W-4 and the Employer’s Tax Guide can be downloaded from the IRS website: https://www.irs.gov/. The farm must record the amount withheld and remit it to the IRS. The due date is dependent on the total tax owed. For most farms, the tax must be deposited monthly. The IRS uses an online system, the Electronic Federal Tax Payment System (EFTPS), and deposits must be made electronically. Farms must register with the EFTPS system ahead of time as it can take a few days to receive the passwords. Registration can be completed at https://www.eftps.gov/eftps/.
To begin the withholding process in Rhode Island, farms must register with the RI Division of Taxation (RI DOT) to establish an income tax withholding account. Registration can be completed online at https://www.ri.gov/taxation/ BAR/.
There is no fee to register. All new employees must also complete form RI-W4, which can be downloaded on the RI DOT website. The amount of income withheld each pay period is determined by the RI income tax withholding tables, which are updated periodically. The most recent tables are available on the RI DOT website (search “RI income tax withholding tables”).
Farms withholding state income tax must file a Withholding Return (Form RI- 941A/D/M/Q/QM) with the RI DOT either annually, daily, monthly, quarterly, or quarter-monthly (respectively) to report the state income withholdings for each employee. Remittance of wage withholding is required at the time of filing. The farm’s filing schedule will depend on the total amount that is withheld from all employees’ wages in a calendar month.
In addition, all farms withholding state income tax must file the state copy of each employee’s Form W-2 along with a reconciliation return (RI-W-3) with the RI DOT on or before February 28 of each year. The reconciliation form shows the total income tax withheld for all employees the previous calendar year.
Most farms are required to withhold Social Security and Medicare taxes from the worker’s paycheck. The same rules apply as for withholding federal income tax: The obligation begins when the farm’s total payroll for employees exceeds $2,500 or an individual’s wages exceed $150 per year.
Where the amount of income tax to withhold is determined by using the IRS’s tables, Social Security and Medicare taxes are calculated as percentages of the employee’s wages for that pay period. The most recent percentages will be listed in IRS Publication 51 (Agricultural Employer’s Tax Guide). Currently, 6.2% of wages are withheld for Social Security and 1.45% for Medicare. Each time the employee receives a paycheck, a portion of the Social Security and Medicare taxes are withheld. This is then remitted to the IRS through the same EFTPS process used for remitting withheld income taxes.
In the checklist item above, we explained that a portion of Social Security and Medicare taxes owed by the employee must be withheld from the employee’s paycheck. In this checklist item, we are discussing the Social Security and Medicare taxes owed by the employer. These are two different taxes—the employee is taxed and the employer is taxed. The employee’s tax is deducted from wages. The employer’s tax is paid by the employer, and may not be deducted from wages. The taxes go to the same agency for the same ultimate purpose, but are separate.
The farm is taxed at the same threshold where the employee must be taxed. (See the $2,500 or $150 rule above.) Currently, the farm is taxed at the same rate as the employee, although this may change: 6.2% of wages are withheld for Social Security and 1.45% for Medicare. The most recent percentages will be listed in IRS Publication 51 (Agricultural Employer’s Tax Guide).
Although the employee’s and employer’s shares of Social Security and Medicare taxes are technically separate, they are deposited at the same time through the IRS’s EFTPS process.
Farms that work with a payroll service provider can escape the details of withholding and remitting taxes. Payroll service providers help employers determine which taxes are owed and assist in coordinating payment of the taxes. Farmers who can afford a payroll service may find it well worth the money.
Unemployment tax is paid by the farm and is not deducted from an employee’s wages. This tax contributes to a compensation fund available to individuals who have become unemployed. Most employers are required to pay unemployment tax immediately; however, farms are exempt until the operation reaches a certain size.
The farm must begin paying federal unemployment taxes when either of the following happens: (1) the farm pays wages of $20,000 or more to workers during any calendar quarter of the current or previous year; or (2) the farm employed 10 or more workers for any part of a day (even if not at the same time during the day) during any 20 or more weeks in the current or previous year. After a farm crosses either threshold, the farm must begin paying into federal and state funds.
The farm will pay federal unemployment tax on up to $7,000 of each employee’s wages. The tax is determined by percentage; the latest percentage is listed in IRS Publication 51. Federal unemployment tax is paid through the same EFTPS procedures as income withholding and Social Security/Medicare taxes.
For non-farm businesses, federal unemployment tax is owed when either of the following happens: (1) the business has one or more employees during some portion of a day in 20 different calendar weeks in either the current or previous year (whether consecutive weeks or not); or (2) the business paid out $1,500 or more in gross wages during any calendar quarter of the current or previous year
Nearly all employees in Rhode Island are covered by state Unemployment Insurance, which is funded by their employers paying an Employment Security Tax. However, farms that paid less than $1,000 in total cash wages in any calendar quarter are exempt from paying the Employment Security Tax. Sole proprietors, partners, and parents working for their child who is the sole proprietor of a business are also exempt.
In addition to the Unemployment Insurance Tax, all employers in Rhode Island are required to pay the Job Development Fund tax to support the Rhode Island Human Resource Investment Council (HRIC). Rhode Island also has a mandatory state Temporary Disability Insurance (TDI) program. This program is funded by employees themselves. However, employers are responsible for paying the premiums by withholding the TDI taxes from their employee wages.
To begin paying and withholding these state taxes, a farm must register with the RI Department of Labor and Training (RI DOLT) and Division of Taxation (RI DOT). This can be done by paper or online. To register by paper, the farm will need to fill the application for Determination of Tax Liability (Form BAR) and mail it to the RI DOT. Blank forms can be downloaded from the withholding tax forms section on the RI DOT’s website. Online registration can be completed through the RI DOT’s Combined Online Registration Service: https://www. ri.gov/taxation/BAR/.
If RI DOT determines that the farm is required to pay the Employment Security Tax or Job Development Fund Tax, and/or withhold TDI taxes, it will assign a Registration Account Number and will issue a Registration Certificate and a Notice to all Employees (Form TX-6) to be displayed on the farm’s premises.
The tax amount is based on each employee’s wages up to the annually computed taxable wage base and percentage tax rate for each tax program. While the wage base and tax rate for the TDI withholding is the same for all employees, the Employment Security and Job Development Fund wage base and tax rate depends on the experience of the employer. Farms can obtain their tax rate and wage base information by calling the RI DOT at (401) 574-8700.
Farms must pay these taxes quarterly. The RI DOT will mail Quarterly Tax and Wage Reports (Form TX-17) to the farm in advance of the due date. Farms must enter the employment and wage data and calculate the amount of taxes due using the taxable wages bases and rates provided. Forms must be completed and sent back to RI DOT by the quarterly due dates: April 30, July 31, October 31, and January 31.
Farms can also file their Quarterly Tax and Wage information online at www. uitax.ri.gov. Select the online Tax Reporting menu and follow instructions to submit the required information.
Note that all employers in Rhode Island must file Form TX-17, including employers who paid no wages in a quarter. If there was no employment in the payroll period, enter zero.
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