Farm Legal Issues Webinar

1. Farm Legal Issues Webinar Wisconsin Department of Agriculture, Trade and Consumer Protection, Buy Local Buy Wisconsin Rachel Armstrong, Farm Commons rachel@farmcommons.org www.farmcommons.org

2. Introduction • Using this software • Disclaimer • Note-taking

3. Introduction • Who is attending today’s webinar? • What will we learn? • Brief tour of legal issues on a farm’s life cycle. • Resources to go forward

4. Creating the Business • Goal: A business that’s easy to run and that protects personal assets from business liabilities • You have four general options: • Sole proprietorship/general partnership • LLC • Corporation: S or C election • Nonprofit

5. Creating the Business • Sole proprietorship/general partnership: NO personal protection • LLC, Corporation, Nonprofit: YES • You know that, and you’re thinking of changing. • Or, you have one and you’re wondering if everything is on track.

6. Creating the Business • How to start and run an LLC or Corporation: • File a form with Wisconsin DFI (or your Secretary of State), titled Articles of Organization/Incorporation • Lay out the rules for how your business will act • LLC: operating agreement • Corp: bylaws

7. Creating and managing business • You get personal protection only if you are different than the business, regardless of filing • Must keep separate accounts • Document decisions and transfers • There are other benefits to keeping a distinction between farm and personal

8. Next Steps • Are you happy with your entity? • Are you managing it effectively? • See Farm Commons’ resources on starting an LLC; email me for a sample operating agreement.

9. Wait a minute… • Doesn’t my house have bankruptcy protection? Don’t I have insurance for injuries?

10. Insurance • Goal: Before bad things happen, make sure someone else will pay the bill. • What if… • Someone is injured at your farmers’ market stand? • At your CSA drop site? A U-pick operation? • Because of a pathogen?

11. Insurance • Someone comes to your farm and is injured. • You charge $10 for admission to a barn dance and someone falls into a hole. • A worker share cuts herself while harvesting broccoli. • Farm Liability policy is designed to cover injuries. • But there are big exceptions!

12. Insurance • Common Farm Liability Policy Exceptions • “Business” activities (as opposed to “farm” activities) • Off-farm sales, educational events, corn mazes, salsa or jam production, prepared food sales, etc. • “Employees.” • Who is an employee? People who work for compensation may be employees

13. Insurance • Specific questions from the pre-event survey: • Farmers markets? Often specifically included • U-pick? Specific endorsement available • CSA Drop Site? Probably NOT included. • “People like me and won’t sue me.”

14. There are solutions! • Commercial Liability (“CGL”): Covers non-farm business activities such as value-added or off-farm injuries • This may also cover seasonal/temporary workers (ONLY if workers comp is not required) • May cover CSA drop sites (homeowner’s insurance likely will NOT) • Or, an incidental business endorsement

15. Insurance • Someone gets sick from your product • This is tricky. • Exposed to liability for: • Making someone sick, even if you weren’t negligent • Legal/regulatory violations involved in selling contaminated food • Expenses of a recall • A CGL or products liability policy may cover some of these expenses

16. Insurance: Next Steps • Are you engaging in non-farm business, and is it covered? • Are you covered for food safety liability? • Getting answers about your coverage: • Ask/Request coverage from your insurance agent in writing • Document the agent’s response • Send a confirmation email after an in-person visit

17. Selling Products • The Goal: Long-lasting relationships with good customers who pay you for your product. • The Solution: Communication! Set expectations, then fulfill them.

18. Selling Products • Story Time: • The convention center with a new chef • The farmer that backs out on a grocery store order • Who is legally liable? It depends. • Let’s prevent this problem.

19. Selling Products Some contracts need to be in writing if you want to recover your damages • But it’s always a good idea What should you put in writing? • Product • Quantity • Price • Timeframe • When and how you want to be paid

20. Selling Products • What’s a “writing”? • Do I really need a “sign here” formal agreement? • Combination of statements made on order form, order confirmation, and invoice. • Need flexibility? Put it in the agreement.

21. Specific Situations • Organic (larger sale) contracts, or any time you are handed a contract to sign: See FLAG’s “Farmers’ Guide to Organic Contracts.” • CSA Sales: • What “shared risk” really means on your farm: • Do you buy in other farm’s products? • Might customers receive nothing? • Do you actually deliver surplus or send it to the farmers market? • All pick-up responsibilities and the consequences of failing to pick up a share • What, where, when, and how to pay • See our model online!

22. Selling Products: Next Steps • Review your product order, confirmation, and invoice forms. Do you have your basic terms included? • For CSA sales (and comparable direct to consumer sales) see Farm Commons’ Model CSA Agreement online • For larger contracts and contracts handed to you, see FLAG’s guide to contracts online.

23. Employees • Small Business Development Centers. • Many small and direct to consumer farms are looking for alternatives to traditional employment, so we’re discussing that.

24. Intern and Apprentice Programs • Who? People who work on a farm for educational benefit. • NOT interns for school credit or at a nonprofit farm. • Ifminimum wage and workers compensation are required for regular employees, likely required for apprentices and interns too. • Why? Because worker shares and interns are probably employees.

25. Worker Share Programs • Who? People who work a set number of hours in return for pre-defined compensation, such as a weekly CSA share. • Ifminimum wage and workers compensation are required for regular employees, may be required for worker shares too. • Why? Because worker shares may be employees.

26. Employees • When is minimum wage required? • Wisconsin: always • Illinois and Iowa: If you have workers for more than 500 man days • Workers’ Comp? • Wisconsin: 6 or more “employees” for 20 days • Iowa: total cash payroll of $2500 or more • Illinois: workers for 400 man days or more • Even if workers’ comp is not required, it may be your only option to insure intern/worker share injuries.

27. In-Kind Wages • Providing meals or lodging as part of wages may make hiring more affordable for a farm. But, these individuals ARE STILL EMPLOYEES and many regulations apply. Here is a sampler: • Limits on deductions from cash wages: • Wisconsin: Lodging deduction cannot exceed $8.30 per day. That’s $255 per 30-day month. And, deduction cannot bring cash wages to below minimum wage • Federal: Basically charges have to be in line with farm’s expenses in providing lodging. • Federal reporting rules: • If deductions drop below required minimum wage, must keep detailed records. • Have a signed agreement!

28. Independent Contractors? • If you control or direct the individual’s work, they’re not an independent contractor. • See IRS Publication 15a for more information

29. Employees: Next Steps • Look closely at your intern and apprentice programs: • FLAG’s Internship and Employment publications for federal and MN laws • Farm Commons’ guide to investigating your own state laws online • Worker Shares: See Farm Commons’ model worker share agreement online • In-kind wages: Talk with a qualified attorney • Independent Contractors: Start with IRS Publication 15a

30. Review Quiz • Workers who receive only food and lodging are exempt from employment laws that apply to other farm employees. True or False?

31. Review Quiz • If someone sues a farmer with a sole proprietorship, they might be able to take the farmers personal assets if they win. True or False?

32. Review Quiz • Insurance Matching: Which concern is generally best addressed by which policy? • Injuries to visitors: Farm Liability • Covers accidents on the farm • Injuries to compensated volunteers: Workers’ Comp • Covers injuries and prevents a tort lawsuit • Food safety incidents, off-farm injuries, or value-added risks: Commercial General Liability • CGL covers risks generally excluded from farm liability

33. Specific Questions • When you set up sites for deliveries of CSA boxes do you have to obtain permission if it is store parking lot, park? Yes, the property owner can charge you with trespass if you don’t have permission. Public parks are owned by the municipality. • If it is a person's garage in a town-do you have to obtain any insurance? Yes, if you want coverage for accidents that happen there. Neither the homeowner’s nor a farm liability policy will likely cover this. A farm CGL policy is probably needed.

34. Specific Questions • Our farm business, an LLC, rents land and equipment from our personal farm. Does this set-up protect our personal assets, or because we are the same people, will we still be personally liable should the LLC encounter a lawsuit? Even though you are the same people, if you’ve properly established and maintain your LLC as distinct from your personal matters, you should be protected. • What are the legal tax deductions that most owners are likely to not know of? Also what is the best way to write off or depreciate your investments? I recommend “Tax Guide to Small and Mid-Sized Farms” by Philip Harris and Linda Curry, available online.

35. THANK YOU!