Workers’ Compensation for NM Farms and Ranches an Unsettled Issue
Al Berryman and Tim Query
Whether or not to mandate workers’ compensation coverage for farm and ranch workers has been an issue that has been brought to the attention of the New Mexico state legislature by various stakeholders. Recently, the issue made its way into the legal system in New Mexico, as two injured farm workers, along with two worker organizations, are suing to make the farm and ranch workers exclusion declared unconstitutional under the equal protection clause of the state constitution. The plaintiffs decided to sue the Workers Compensation administrator and its director. These agricultural workers are demanding farm and ranch workers be included in workers compensation coverage. Currently, farm and ranch employers can voluntarily cover their laborers under workers’ compensation. Some producers choose to pay out-of-pocket for worker’s medical bill if injured, or cover them under liability insurance, which will only pay if the producer is legally liable.
Workers’ Compensation is a “no fault system” in which the negligence of neither employee nor employer is considered. An employer gives up his due process rights and is subject to liability for injuries to his employees even if he was not in any way responsible for the injury. Employees are entitled to benefits even if they were responsible for the accident. In return, employees give up their right to sue the employer for injuries sustained in the course of employment.
From a public policy viewpoint, this system makes a great deal of sense for both the worker and the employer. Consider what happens when an employee is injured on the job. There are basically four ways in which society could address the problem. First, the worker could be at the mercy of his friends, family and own resources. Second, the worker could sue his employer and hope for a favorable outcome despite the delay and expense of using the courts. Third, the worker could be assisted through government assistance or welfare. Fourth, the worker could be entitled to prompt benefits for medical expenses and lost income using workers’ compensation.
The state Workers’ Compensation Act requires employers with three or more workers to provide workers’ compensation benefits – except for farm and ranch laborers, private domestic servants and real estate agents. All employers in the construction industry, regardless of size, must provide workers’ compensation coverage. Workers’ compensation in New Mexico includes comprehensive medical benefits (unlimited with no deductibles or copayments), disability benefits, lifetime benefits for those who qualify, and limited death benefits for survivors (2/3 of the deceased employee’s wages for 700 weeks).
Workers Compensation Coverage in Other States
Various states, including New Mexico, have grappled with the complexities of workers’ compensation coverage for the Farm and Ranch industry, and approaches to these complexities have varied. Agricultural and livestock operations range from the family farm to large corporate-owned businesses. Commodity-related payments, conversation payments, and other farm bills face a multifaceted group of agricultural stakeholders. A similar challenge faces workers’ compensation statutes for these industries, as states wrestle with the most equitable process for regulating farms and ranches.
Currently, 33 states require workers’ compensation for farm workers, although some state exempt small farms and part-time employees. In the southwest, California, Colorado and Arizona require mandatory coverage for all farm workers. Utah requires coverage for workers on farms with more than $50,000 in payroll. Texas doesn’t require mandatory workers’ compensation for any industry, including farms and ranches. However, employers who are not required to carry workers’ compensation may elect to provide coverage on a voluntary basis.
Farm and ranch owners claim that agriculture is unique because the industry is comprised of mostly small, family-owned businesses that have little control over prices for the commodities that they produce. They claim that requiring them to carry workers compensation will hurt the state economy. Proponents of including agriculture workers believe that they should be treated the same as other employees and that other states with large agricultural segments, such as California and Arizona, have proven that it is not detrimental to a state’s economy. They claim that employers who do not provide care for injured workers pass these costs onto the rest of society. They also point to the state constitution and claim that the current law deprives them of equal rights.
No person shall be deprived of life, liberty or property without due process of law; nor shall any person be denied equal protection of the laws. Equality of rights under law shall not be denied on account of the sex of any person. (As amended November 7, 1972, effective July 1, 1973.)
Factors Driving the Issue
Some of the factors that differentiate farms and ranches from other types of production are now discussed.
The Diversity of the Farm. One characteristic that differentiates American farming from other industries is their wide range of sizes, ownership structures, and business types. Ninety-eight percent of farms are family farms, and they account for 85 percent of farm production. However, the recent trend has been a consolidation of farms and ranches into larger operations, including large corporations. There are various reasons for this trend, such as some younger family members choosing not to follow into the family business, increasingly larger amounts of capital required to be competitive, and economies of scale.
Most farms in New Mexico are small. According to the 2007 Census of Agriculture, there are 20,930 farms in New Mexico. Only 1,973 of these farms have three or more hired workers, and therefore would be required to carry workers compensation. These larger operations had 19,142 employees.
Agriculture Safety. Agriculture is among the most dangerous industries. Agricultural workers comprise 3 percent of the nation’s workforce, but incur 14 percent of work-related deaths. Farming is one of the few industries in which the families (who often share the work and live on site) are at risk for fatal and nonfatal injuries. Fatal injuries constitute a significant burden on the agricultural sector, as indicated by the annual average of 806 fatal occupational injuries from 1992 to 2002. During this period, fatal occupational injury rates in the agricultural sector, though decreasing, averaged more than four times the rate for the private sector (U.S. Department of Labor). There is also a dichotomy in the age of agricultural workers, which appears to affect safety rates; compared to all industries, agriculture employed proportionately more workers aged 16–19 (7.2% versus 5.1%) and workers aged 55 and older (22.9% versus 13.6%).
Migrant Workers. Migrant workers are also an important component of farm employment. There are numerous categories that encompass these workers as well. During 1999, 84 percent of farm workers were foreign born, 53 percent lacked legal documentation. and 49 percent were “settled” or residing within 75 miles of their farm work job. The rest were migrant workers to varying degrees: 22 percent were newcomers who had entered the United States to work on farms and ranches during the past year; 21 percent were shuttle migrants, in that they have a residence in the United States but commute to work at a distance; and 8 percent were follow-the-crop migrants who perform farm work in more than one location and must relocate for employment.
Foreign-born workers also have an impact on accident and fatality rates. Latino workers generally experience the highest rate of fatal injuries on the job: 25 percent more than whites, 61 percent more than blacks, and more than double the rate for Asians. Latino workers experience the highest rate of non-fatal injuries on the job as well: 46% more than whites, 34% more than blacks, and 150% the rate for Asians. There are many factors behind these figures, including a higher proportion of Latino workers in more dangerous occupations—such as construction, food processing, landscaping, and agriculture—as well as communication difficulties where English is not the native language.
Other factors that affect the implementation of mandatory workers compensation for farms and ranches in New Mexico are addressed below.
Additional Enforcement Resources. The Workers Compensation Administration (WCA) is responsible for enforcing the requirements of Workers Compensation law in New Mexico. The addition of roughly 15,700 employers would require new enforcement resources.
Family Members. It is very common for family members to work on their family’s farm and ranch. If Workers Compensation coverage were required, then it might be necessary to clarify that family members do not require coverage. In addition family members should not be counted as employees for purposes of determining the number of employees.
Mutual Assistance. It is a common practice for ranch owners to assist their friends and neighbors; for example, through group roundups. It should be clarified that these are not employees unless they are being paid.
Contracted Labor. Farm owners sometimes use farm contractors the same way that other businesses use temporary help services. If workers’ compensation coverage were required, then it would apply to labor contractors.
Cost of Workers’ Compensation
Workers’ Compensation in New Mexico is provided by the private sector and there is no state compensation company. The number of insurance companies writing workers’ compensation coverage in New Mexico in 2007 was 199. The market place is competitive.
Rates for workers’ compensation are subject to approval by the Department of Insurance. Premiums vary according to the safety record of the employer and the underwriting rules of a particular insurance company. Businesses that are unable to obtain coverage in the normal marketplace are able to purchase coverage through the New Mexico Assigned Risk Plan. All employers are eligible for coverage through this facility.
A sample of assigned risk workers’ compensation rates per $100 of payroll is included in the table. These rates range from a low of $4.95 for animal raising to a high of $18.53 for livestock raising. The table also includes rates for one insurance company. Actual rates will vary by employer experience. The assigned risk rates are the highest that an employer could pay. These rates are comparable to those in the construction industry.
As an example, a dairy with a payroll of $1,000,000 would pay roughly $74,900 in the assigned risk plan and $48,300 with New Mexico Mutual Company. A cattle ranch with a payroll of $50,000 would pay roughly $9,265 in the assigned risk plan and $6,390 with New Mexico Mutual Company. The pricing of workers’ compensation in New Mexico provides strong incentives for safety by giving lower premiums for companies with fewer claims.
The costs of requiring farms and ranches with three or more employees to carry workers’ compensation would affect roughly 2,000 farms and ranches in New Mexico. The costs for workers compensation, although significant, are similar to other industries. Most states currently require coverage. As the legislature has not acted on this concern, it will be up to the courts to decide the issue.