CALIFORNIA EMPLOYMENT COMMISSION v. BUTTE COUNTY RICE GROWERS ASS (1943)

The plaintiff, California Employment Commission, brought this suit under the provisions of section 45.3 of the Unemployment Insurance Act of California, Stats. 1935, p. 1226, and amendments, Deering's Supp. to Gen.Laws of 1935, p. 2039, and Supp.1939, p. 1714, Act 8780d, to recover alleged delinquent contributions and penalties from the defendant, Butte County Rice Growers Association, a farmers' cooperative marketing company, organized under the provisions of title XXIII of the Civil Code, now sections 1191–1221 of the Agricultural Code, St.1933, p. 60 et seq. The Unemployment Act, by the terms of section 7, is specifically made inapplicable to “Agricultural labor.” The trial court adopted findings and rendered judgment in favor of the defendants. From that judgment this appeal was perfected.

The only question to be determined is whether the employees of a farmers' cooperative association, composed of members who are actually engaged in farming, organized by law to aid the members only, in growing, handling and marketing their farm products, are deemed to constitute “agricultural labor.”

The plaintiff commission exists as an administrative agency of the State of California under the provisions of the Unemployment Insurance Act previously mentioned, and has power to maintain this action. October 26, 1914, the defendant, Butte County Rice Growers Association, was duly organized pursuant to law and filed its Articles of Incorporation, authorizing it to purchase seeds, plants and supplies and to perform services, in behalf of the members only, to aid them in growing, handling and marketing rice, vegetables, grains and horticultural products. For that purpose the defendant Association constructed and maintained a warehouse at Richvale in Butte County where the rice of its members was stored, cleaned and prepared for market. Several men were employed as laborers to work in that warehouse. Seeds and supplies for use of the members in planting, growing and marketing their crops were stored in the warehouse and furnished to the members at cost in accordance with the rules and by–laws of the association. That enterprise was operated without profit to the association. Such supplies as chicken feed were occasionally furnished to the employees at cost and charged to their wage accounts. But these items were so inconsequential they are not worthy of consideration in determining whether the association was operated as a commercial enterprise as distinguished from a mere cooperative marketing organization conducted as an incident to the farming projects of its members. The officers and employees were selected and hired by the directors of the Association as the by–laws direct. We assume all parties to this action desire a determination on its merits of the chief issue regarding the liability of the Association as employer of agricultural labor.

It may be fairly assumed the Association had no power to, and it did not, engage in any commercial enterprise as distinguished from a nonprofit cooperative organization maintained solely to aid each of its members in cultivating, farming, handling and marketing his own agricultural products.

The articles of incorporation provide in part that the purposes for which the association was formed are:

“To associate together persons engaged in the cultivation, growing and marketing of rice, vegetables, grains and horticultural products, * * *; to purchase seeds, plants and all kinds of supplies needed in growing and marketing crops, * * *.

“To appoint such agents and officers as its business may require from members of the Association or otherwise. * * *”

The By–Laws include the following provisions:

[Art. XV] “No person shall be a member who is not a bona fide grower of rice, grain or other horticultural product to the extent of five (5) acres of land.

[Art. XIII] “Membership * * * shall cease at any time when the person holding a Certificate of Membership shall cease to be an actual owner or lessee, * * *.

[Art. XI] “Certificates of membership shall be * * * nonassignable, * * *.

[Art. IV] “The Directors shall have power: * * * To appoint and remove at pleasure all officers, agents and employees of the corporation, prescribe their duties, fix their compensation and require from them security for faithful service.”

Under the provisions of section 90 of the Unemployment Insurance Act St.1935, p. 1242, to the effect that the commission “Shall adopt and enforce rules and regulations which to it seem necessary and suitable to carry out the provisions of this act,” rule 7.1 was adopted, as follows:

“Agricultural Labor Defined.––The term ‘Agricultural Labor’ includes all services performed:

“(1) By an employee on a farm, in connection with the cultivation of the soil, the raising and harvesting of crops; the raising, feeding, management of live stock, poultry, and bees; which includes, among others, the spraying, pruning, fumigating, fertilizing, irrigating, and heating which may be necessary and incident thereto;

“(2) By an employee in connection with the drying, processing, packing, packaging, transporting, and marketing of materials which are produced on the farm or articles produced from such materials, providing such drying, processing, packing, packaging, transporting, or marketing is carried on as an incident to ordinary farming operations as distinguished from manufacturing or commercial operations;

“The services hereinbefore set forth do not constitute agricultural labor unless they are performed by an employee of the owner or tenant of the farm on which the materials in their raw or natural state were produced. Such services, however, do not constitute agricultural labor if they are carried on as an incident to manufacturing or commercial operations.

“As used herein the term ‘farm’ includes, among others, stock, dairy, poultry, fruit, and truck farms, plantations, ranches, ranges, orchards and vineyards.

“Forestry and lumbering are not included within the exemption of agricultural labor.” (Italics added.)

Clearly the defendant Association was organized and the warehouse was maintained as an agency and means of producing, preparing and marketing the crops of the respective members. It furnishes a method of jointly procuring farm supplies and handling the crops of members through their agents and employees in the manner provided by law. In no sense may the business of the Association be deemed to be a commercial enterprise as distinguished from a farming industry. The organization was maintained as a valuable adjunct to the farming activities of each member. The creation of non–profit, cooperative farming and marketing associations was authorized by law to benefit both the producers and the consumers by securing group handling of crops. That procedure is an incident to and a valuable part of the farming enterprise of each member. Recognizing the disadvantages and serious losses sustained by the farmers and the consumers of food products by individual handling of crops, the Legislature wisely enacted the previously mentioned statute in 1923, “to promote, foster and encourage the intelligent and orderly marketing of agricultural products through co–operation.” § 653aa, Civ.Code. In declaring the urgent necessity for that legislation section 653ee of the same code asserts that:

“The public has an interest in permitting farmers to bring their industry to the high degree of efficiency and merchandising skill evidenced in the manufacturing industries; and that the public interest urgently needs to prevent the migration from the farm to the city in order to keep up farm production and to preserve the agricultural supply of the nation; and that the public interest demands that the farmer be encouraged to attain a superior and more direct system of marketing.”

Regarding the nonprofit feature of such associations, section 1192 of the Agricultural Code provides that: “Associations organized hereunder shall be deemed ‘nonprofit’, inasmuch as they are not organized to make profit for themselves, as such, or for their members, as such, but only for their members as producers.” (Italics ours.)

Section 1213 of the last–mentioned code specifically provides that all statutory exemptions applicable to individual agriculturists shall likewise apply to their products in the possession or control of the association of which they are members. It reads:

“Any provisions of law which are in conflict with this chapter shall not be construed as applying to the associations herein provided for.

“Any exemptions under any and all existing laws applying to agricultural products in the possession or under the control of the individual producer, shall apply similarly and completely to such products delivered by its farmer members, in the possession or under the control of the association.”

The spirit and purpose of the legislation authorizing the incorporation of non–profit, cooperative agricultural associations was to create a system of group handling and marketing of produce of the farms as a part of the farmer's agricultural industry for the benefit of both the producers and the consumers.

In Cowiche Growers, Inc. v. Bates, Com'r of Unemployment Comp., 10 Wash.2d 585, 117 P.2d 624, upon which the appellant relies, it was held that employees of cooperative fruit associations, two of which handled only fruit of its own members, were not exempt from payment of contributions to the Unemployment Compensation Fund. Several associations united as plaintiffs to maintain that action. Some of the associations washed, packed and handled fruit as commercial industries independently of the growers. Some of them handled fruit for their own members, but also for others as a commercial business independently of its members. Two of them handled fruit for their own members only, on a nonprofit basis. The workmen who were employed in the warehouses did not perform services on the farms of the owners or lessees of the land. The court held that the plaintiffs, associations, were liable under such circumstances, for payment of unemployment contributions. There is a clear distinction between the above Cowiche Growers case and the present action. In that suit the Washington statute Laws Wash.1939, c. 214, p. 857, specifically defined the term “agricultural labor” as “services customarily performed by a farm hand on a farm for the owner or tenant of a farm.” In this case the Unemployment Insurance Act contains no such definition of what is meant by the exclusion of agricultural labor from the provisions of the statute. In fact, it contains no definition of that term at all. The character of labor which was excluded by the Washington statute is much more limited than that of the California act. That statute specifically excluded only such services as were performed “on a farm for the owner or tenant of a farm.” The laborers who were employed in the warehouses in that case clearly were not working “on a farm for the owner or tenant.” In the present case the California statute contains no such limitation of services. It is much more comprehensive than the Washington statute. It provides, in effect, that “agricultural labor” of every character shall be exempt from the operation of the Unemployment Act, wherever such services may be performed. If the laborers in the warehouse of this association, as agents of the farmers who were members thereof, were engaged in hauling, cleaning, sacking or marketing the rice of its members exclusively for the members, certainly they were employed in agricultural labor. Those duties are necessary incidents to raising rice. They are therefore agricultural in their nature. If the Cowiche Growers case were accepted as authority for holding that the employment of workmen in the warehouse under the circumstances of this case did not bring them within the exemption of agricultural labor under our statute because they did not actually work “on a farm for the owner or tenant,” then farm laborers who are engaged on a neighbor's property in the customary reciprocal exchange of agricultural services could not be so exempted. Yet it has been held an agreement between farmers to exchange farm labor renders the owner liable for injuries sustained by his employee even though the workman is injured while so employed on the property of a neighbor. It is nevertheless services performed in the course of employment. Gabel v. Industrial Acc. Comm., 83 Cal.App. 122, 256 P. 564.

In the case of North Whittier Heights Citrus Assoc. v. National Labor Relations Board, 109 F.2d 76, upon which the appellant relies, it was held by the Ninth Circuit Court of Appeals that the employees of the marketing association did not come within the exemption clause of section 2, subdivision 3, of the National Labor Relations Act, commonly called the “Wagner Act”, 29 U.S.C.A., § 151 et seq., so as to exclude them as agricultural laborers from its application. That suit involved the alleged interference of the Association with efforts on the part of Citrus Packing House Workers Union Local No. 21,091, a labor organization, to solicit membership in its union from the employees in the association. In applying the Wagner Act to “employees,” the foregoing section of the act provides that the term “employee” “shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed by his parent or spouse.” That case may be reasonably distinguished from the present action, for the reason that it involved “the business of receiving, handling, washing, grading, assembling, packing and shipping the citrus fruit” for not only its members, but also for other producers who were not members of the association. In other words, it was engaged in a separate business of handling and shipping fruit as a commercial industry because it served all producers whether they were members or not. The opinion so states. A rule is suggested to aid in determining what pursuits are included within the term “agricultural labor,” as follows:

“When the product of the soil leaves the farmer, as such, and enters a factory for processing and marketing it has entered upon the status of ‘industry.’ * * *

“Petitioner maintains that the nature of the work is the true test. Perhaps it would more nearly conform to the true test to say that the nature of the work modified by the custom of doing it determines whether the worker is or is not an agricultural laborer.”

In all that the court very properly says regarding the question as to what constitutes “agricultural labor,” it evidently had in mind the fact that it was dealing with a fruit marketing association, as an industry separate and apart from the producers, although some of them were members of that organization. We heartily concur with the conclusion that when a farmer turns his produce over to an organization which is engaged wholly, or even in part, as a commercial industry in handling, packing, preparing and marketing farm products, regardless of its membership, its employees may not be considered agricultural laborers. Clearly they are then working for a separate industry. That situation is not true in the present action. We are of the opinion that case is not conclusive of the present appeal. The very purpose of the cooperative agricultural marketing association statutes of California, previously mentioned, is to enable the farmers to jointly handle their crops for mutual benefit as a part of their agricultural pursuits. A narrow construction of those statutes would defeat the very purpose for which they were enacted.

The meaning of the word “argiculture” is very comprehensive. It is derived from the Latin words “ager,” a field, and “culture,” cultivation. Primarily, it implies cultivation of the fields. It synonyms are farming, husbandry and tillage. 3 C.J.S., Agriculture, p. 366, § 1; Webster's Dictionary of Synonyms, p. 36. In the authority last cited it is said, “Agriculture is by far the most comprehensive of these terms.” It is almost uniformly defined by the authorities as the art or science of cultivating the ground and raising and harvesting crops; the science and art of producing plants, grains, vegetables, foods and animals useful to man, including to a variable extent their prepartion for the use of man, and their disposal by marketing. Webster's New International Dictionary, p. 52; 3 C.J.S., Agriculture, p. 365, § 1; 2 Am.Jur. 395, § 2. In the authority last cited it is said that agriculture includes “every process and step necessary and incident to the completion of products therefrom for consumption or market and the incidental turning of them to account.” We know of no necessity for a limited or strained construction of the term “agricultural labor” in the present case.

The appellant also cites two Colorado cases upon which it relies in support of the contention that the judgment should be reversed. Great Western Mushroom Co. v. Industrial Comm., 103 Colo. 39, 82 P.2d 751, and Park Floral Co. v. Industrial Comm., 104 Colo. 350, 91 P.2d 492. These cases, both of which were decided by the same court, involved the artificial production of mushrooms and flowers in hothouses or greenhouses with the use of heating plants. They were not produced in the ordinary method of outdoor farming. On the contrary, nature's process of producing mushrooms and shrubs was substituted by an artificial hothouse method. On that account, the court held that the businesses did not come within the ordinary meaning of agriculture, but constituted commercial industries. In that case two justices dissented. In the later case of Industrial Comm. v. United Fruit Growers Ass'n, 106 Colo. 223, 103 P.2d 15, 17, involving the production and marketing of fruit by the growers through a nonprofit cooperative association exactly like the one which is involved in the present action, the Colorado court held that the employees of the association were engaged in agricultural labor. The latter case is distinguished from the mushroom and flower cases in the following language:

“It is certain that the products involved herein are purely agricultural in character and were produced under ordinary field operations on fruit farms and orchards. Thus the decisions in Great Western Mushroom Co. v. Industrial Commission, 103 Colo. 39, 82 P.2d 751, and Park Floral Co. v. Industrial Commission, 104 Colo. 350, 91 P.2d 492, 494, wherein the products involved were ‘specially cultivated under artificial structures or diggings' and not ‘produced under ordinary field operations', are in no manner applicable in the case at bar.”

We are of the opinion that paragraph (1) of Rule 7.1, which was adopted by the California Employment Commission, is an unreasonable restriction of the term “agricultural labor,” as it is used in section 7 of the Unemployment Insurance Act, and therefore void to that extent. Section 90 of the act authorized the Commission to “adopt and enforce rules and regulations * * * to carry out the provisions of this act.” The foregoing rule provides in part that, to exempt agricultural labor from the provisions of the act it must be performed “by an employee on a farm.” Paragraph (2) further declares that “The services hereinbefore set forth do not constitute agricultural labor unless they are performed by an employee of the owner or tenant of the farm on which the materials in their raw or natural state were produced.” The quoted provisions of paragraph (1) of that rule are clear limitations of the ordinary meaning of the term “agricultural labor,” as it is used in the act. It restricts the evident intention of the Legislature to exclude all agricultural labor whether it be performed on or off the farm belonging to the employer. If paragraph (1) of the foregoing rule should prevail, then a regular farmhand could not haul his employer's hay or fruit to market, without bringing himself within the provisions of the act, because his services would not be performed “on the farm.” Nor could a fruit grower operate his own fruit dryer on land separated from the farm upon which the fruit is produced, which is a common practice in California, without subjecting his employees engaged in that work to the provisions of the Unemployment Act. Paragraph (1) of the foregoing rule is therefore an unreasonable assumption of legislative power which is prohibited by law.

It is true that the Legislature may delegate authority to administrative boards to adopt and enforce reasonable rules for carrying into effect the expressed purpose of a statute even though such rules include the authorization to exercise discretion in so doing, provided that discretion is not purely arbitrary and it does not amount to a sanction to add to or enlarge or detract from or restrict the plain language and intent of the Legislature contained in the statute. It has been uniformly held that a board, by the adoption of rules of administration, may not be permitted to determine what the law shall be in a particular case. American Distilling Co. v. State Board of Equalization, 55 Cal.App.2d 799, 131 P.2d 609; Fillmore Union High School Dist. v. Cobb, 5 Cal.2d 26, 33, 53 P.2d 349; 5 Cal.Jur. 677, § 94; 16 C.J.S., Constitutional Law, p. 337, 341, § 133; 11 Am.Jur. 955, § 240. It is an established principle of law that the Legislature may not delegate authority to a board or commission to adopt rules which abridge, enlarge, extend or modify the statute creating the right. Campbell v. Galeno Chemical Co., 281 U.S. 599, 50 S.Ct. 412, 74 L.Ed. 1063, 1069; People v. Kuder, 93 Cal.App. 42, 51, 269 P. 198, 630; Hodge v. McCall, 185 Cal. 330, 197 P. 86; Flickenger v. Industrial Acc. Comm., 181 Cal. 425, 432, 184 P. 851, 19 A.L.R. 1150; 11 Am.Jur. 955, § 240. In the authority last cited, at page 956, it is said:

“Clearly, the legislative body must declare the policy of the law and fix some kind of legal principles which are to control in given cases. It must provide an adequate yardstick for the guidance of the executive or administrative body or officer empowered to execute the law, because regulations made by executive officers are valid only as subordinate to a legislative policy sufficiently defined by statute, and must, moreover, be within the framework of such policy. * * *

“* * * In all cases the rules and regulations may be tested in the courts to determine whether they are reasonably directed to the accomplishment of the purposes of the statute under which they are made. Moreover, regulations promulgated by administrative departments may not extend the statute or modify its provisions.” (Italics added.)

We conclude that paragraph (1) of rule 7.1 which is involved in the present case is an unwarranted and unlawful restriction of the Unemployment Act with respect to the application of that statute to “agricultural labor” and it is therefore void. To construe paragraph (2) of the Rule as excluding employees of a farmers' cooperative association which is engaged solely in marketing produce for its members from the term “agricultural labor” would also render that paragraph invalid.

The judgment is affirmed.

THOMPSON, Justice.

PEEK, J., and ADAMS, P. J., concurred.