Love, Labor, and Wage and Hour Laws
/Wine production is a labor of love, and as one California winery learned this past summer, the labor is just as important as the love. Westover Winery in Castro Valley was fined $115,000 for using volunteer workers, a practice that is said to be common throughout the region. The state Department of Industrial Relations (DIR) cited Westover’s failure to pay minimum wage, provide wage statements, and pay workers' compensation insurance as grounds for the fines. For an industry that is often driven as much by passion as by profit, this is a sobering reminder that wage and hour laws still apply.
Bill Smyth, who owns Westover, couldn’t be a more sympathetic vintner. He is a retired schoolteacher who is battling cancer while caring for his ailing parents. He and his wife, a former Westover volunteer, are passionate about wine and wine education. Smyth has been producing boutique wines and ports at Westover for nearly thirty years. In addition, the Smyths have offered formal and informal hands-on training to eager volunteers, whose compensation is a deeper understanding of the winemaking process and the skills necessary to continue the region’s winemaking tradition. Mr. Smyth has never taken a salary as a vintner and insists that for him, winemaking is not about money. Westover nets about $11,000 a year, so the $115,000 in penalties (initially $130,000 due to an error on DIR’s part) is likely to put it out of business. The winery has already begun liquidating its stock. What was DIR thinking when it went after Westover?
Westovergate seems like a vicious attack or a serious PR blunder on DIR's part, and the agency has been vilified in the press. Assessing a business-destroying fine against a small winery owned by a cancer victim is not going to make the agency any friends, especially when other wineries have been using volunteers. Yet another case of heavy-handed government intervention trampling a small business, right? For many, the amount of the penalty in relation to the size and revenue of the business is particularly perplexing in light of the fact that no warning was given. It also seems that someone has an axe to grind with the Smyths. As unsavory as this episode may seem, however, it highlights a couple of overlooked realities: (1) the applicability of state wage and hour laws to the wine industry and (2) the importance of the legal structure of an organization. Vintners and others in the industry can learn from this unfortunate tale.
Westover is subject to California wage and hour laws because it is a for-profit business. This means that people who are “employed” by Westover must be compensated, and Westover must provide wage statements and pay for workers’ compensation insurance. (Ignore, for a moment, the fact that Westover’s “volunteers” seem a lot more like students than employees.) Similar requirements exist in my state, New York. Here, virtually every “employer” must pay its “employees” at least the minimum wage for their work [N.Y. Lab. Law § 652]; provide an annual notice in writing of the rate and frequency of pay, allowances, and other information [N.Y. Lab. Law § 195(1)(a)]; provide a written wage statement with each payment [N.Y. Lab. Law § 195(3)]; and provide worker's compensation coverage for their employees [N.Y. W.C.L. §§ 2-3]. [1] Whether we agree with this law or not, it is important that we understand and comply with it in order to avoid penalties that could range from an inconvenience to financial ruin.
As mentioned above, the Smyths provided formal training to small groups of devoted oenophiles, preparing them to start their own wineries. Their much-lauded educational program was featured in the San Jose Mercury News last October. Is there a way to offer such a program without running afoul of labor laws? Yes, but it’s not as simple as most people would like. In some cases, it is possible to form a separate nonprofit entity or educational institution that provides this type of experiential learning opportunity. Another option is partnering with an existing educational institution to offer formal internships to interested students. Vintners who are considering providing the type of education offered by Westover should consult their attorneys before making any arrangements to ensure compliance with state and federal laws and regulations.
The Westover case could be the catalyst for a change in California law. Smyth has already contacted his state representative to advocate for legislation that would authorize the use of volunteer workers in wineries and provide for warnings prior to assessment of fines by DIR. So far, there has been no mention of reducing the fines for violation or of making them proportionate to the size and/or revenue of the business. California is a legislative pioneer when it comes to viticulture, and there are several circumstances in which it distinguishes the wine industry from other industries; therefore, we could see a bill introduced during the next legislative session. In the meantime, even the labor of love must comply with current wage and hour laws. Best wishes to Mr. Smyth and his family.
To hear the Westover story in Bill Smyth’s own words, download this Ronn Owens radio show podcast.
[1] An "employer" is “any individual, partnership, association, corporation, limited liability company, business trust, legal representative, or any organized group of persons acting as employer.” [N.Y. Lab. Law § 651(6).] With a few exceptions, an “employee” is an “individual employed or permitted to work by an employer in any occupation.” [N.Y. Lab. Law § 651(5).] Although farm workers are excluded from this definition, they, too, must be paid at least minimum wage in most cases. [N.Y. Lab. Law § 673(1).] Furthermore, they must be notified in writing of the conditions of their employment via a “farm work agreement” prescribed by the Commissioner of Labor. [N.Y. Lab. Law § 673-a.]
