Is a small family farm a business, a hobby, a living museum or something else?
It’s increasingly clear we can’t have it both ways – – business and quaint tradition. The recent New Mexico Supreme Court decision on workers’ comp coverage for farms and ranches puts that in sharp relief.
The court decided the special exemption for farmers and ranchers is unconstitutional. Agricultural employers are now required to buy insurance if they have three or more employees, just like other small businesses (construction is an exception, requiring all employers to have coverage).
One insurance professional commented to me that he is impatient at the way New Mexico has coddled family farmers. They are running businesses, he said. They should develop budgets like other businesses, make businesslike decisions about who is an employee and treat employees as the laws require.
That’s what this court decision will force them to do, but we also may be losing a valuable part of our traditional culture. The change will mean more formality and bureaucracy. Probably some family farms will be scared to hire anybody, even when they need help, and some farmers will decide farming is not worth the trouble.
The insurance premium will be high, because physical labor is inherently risky. According to one estimate, the cost to insure a ranch hand is $12 to $18 per hundred dollars of payroll.
Most small farms and ranches will have to buy their initial coverage in the Assigned Risk Pool, where the premium is automatically higher than in regular commercial insurance. The Pool is where businesses are forced to buy coverage if they are particularly high risk or have no risk history. The extra cost is an obstacle to success for any small business.
The Workers’ Compensation Administration has published a fact sheet which you can find at www.workerscomp.state.nm.us/pdf/faqs_agricultural.pdf. Most of the points are taken from the Supreme Court ruling or the statute.
Since the ruling makes farmers more like other employers, we can speculate that the decisions about who needs to be covered may apply to all small businesses. I said “speculate,” so don’t count on it, but if you run a very small business you might want to look at this fact sheet.
The fact sheet says, for example, that neighbors who trade labor are volunteers and do not have to be covered as long as they don’t pay each other. It also says unpaid family members do not have to be covered. Aha, but what does the word “pay”mean? “Pay” is not defined. In case you were wondering, “employee” is not defined, either.
As I say with annoying frequency, in workers’ comp there are many ways to count to three. Farmers will struggle with that, as other small businesses struggle. There are lots of uncertainties with no simple answers.
And there’s more to workers’ compensation than buying an insurance policy. You have to know what to do with the insurance.
The whole purpose of workers’ comp is providing coverage when a worker gets injured. In addition to taking the worker to medical care (which most employers would do anyway), employers are supposed to know what to file, how to instruct the worker and other administrative matters.
When my job was to talk to small businesses about workers’ comp, I used to ask them whether they knew where in the office their insurance policy was filed and whether they had ever opened the envelope to read the instructions. Many looked chagrined. I told them to go find it as soon as they left my seminar.
The mistakes employers make in the initial phase of a claim are a major reason too many workers’ compensation claims result in litigation. The 1990 workers’ compensation reform was supposed to minimize that, but the authors of the reform forgot to make the procedures simple enough for small businesses. Or small farmers.
Triple Spaced Again, © New Mexico News Services 2016