CALIFORNIA EMPLOYMENT COMMISSION v. KOVACEVICH (1945)

This is an action to recover contributions claimed to be due under the Unemployment Insurance Act, Deering's Gen.Laws, and Supp. 1939, Act 8780d, based upon wages paid employees by John Kovacevich, Sr., during the years 1939 and 1940.

John Kovacevich, Sr., who has since died, was engaged in the business of packing and shipping grapes and plums, operating under the name of ‘The Arvin Fruit Distributors.’ He handled no fruit except his own. He owned no land during 1939 but bought some land late in 1940. Most of the fruit he handled was obtained by purchasing the crops of various growers under contracts by which he agreed to buy, and the owner of the land agreed to sell, the crops on certain land for that year at a fixed price payable in installments, the last one being due about harvest time. In most of the contracts he agreed to do the ‘girdling, thinning and harvesting’ at his own expense and the seller agreed to do the cultivating, irrigating and other farm work, but in a few of them Kovacevich also agreed to do the pruning and irrigating or other parts of the work of raising the crops. The contracts were entered into at various dates between January and May of the particular year.

He operated a packing house in Arvin containing the usual machinery and equipment at which he packed and loaded this fruit on cars for shipment. On his records, his employees were divided into three classifications: ‘packing house labor’ covering employees engaged in packing and shipping the fruit, ‘field labor’ covering those employed in picking and harvesting and such other services as were performed on the various farms, and ‘office help’. The assessment or contribution here involved was based upon the wages paid to employees in all of these classifications, and the record fails to show the exact amounts paid to the respective classes.

The court adopted the defendant's theory that in operating this business Kovacevich was not acting as a commercial packer or shipper but was packing and shipping his own fruit which he had grown and harvested, that his business was related solely to growing and marketing his own produce, and that the entire business was exempt from contributions under the act in question. Judgment was entered in favor of the defendant and the plaintiff commission has appealed.

Appellant's position is that none of the services here involved, either in connection with growing or picking the fruit or in connection with packing and shipping the same, constituted agricultural labor within the meaning of section 7(a) of this act nor within the meaning of Rule 7.1 adopted by the commission; that most of these services were performed at the packing house and away from the farms; that the remainder were closely connected therewith and essential thereto; that Kovacevich was engaged in commercial rather than agricultural activities; that he purchased crops from various farms but was not a tenant of those farms; that such work as he did on these farms was done solely for the purpose of furthering his commercial business by getting fruit of a better quality and of earlier maturity; that such work was not done for the owners or tenants of the farms; and that such work was carried on not as an incident to ordinary farming operations but as an incident to manufacturing or commercial operations. It is further argued that the purpose of this act is remedial in nature and that its provisions should be liberally construed to the end that its coverage and benefits be extended to as many workers as possible.

While it may be true that such legislation should be liberally construed, this should not go beyond the limits of the statutory intent. By section 7(a), the Legislature has definitely excluded agricultural labor from the operation of this act, without limiting or defining that term. In Stuart v. Kleck, 9 Cir., 129 F.2d 400, 402, in speaking of the Federal Social Security Act, the court said: ‘When the Congress * * * made use of the broad term ‘agricultural labor’, this expression, used by itself, must be given a meaning wide enough to include agricultural labor of any kind, as generally understood throughout the United States.' And, further, ‘Accordingly, the exemption attaches to the ‘services performed’, which refers to the type of work that is being done, and is not dependent on the form of the contract or whether the employee is employed by the owner or tenant of the farm or an independent contractor.' By statute, the exclusion is based upon the kind of work done and not on the status of the employer. Our statute recognizes that the same employee may be engaged in both industrial and agricultural activities and provides, in section 7, that his classification shall be determined by the kind of service in which he spends the greater part of his time. In view of the express statutory inent to exclude agricultural labor any labor which is, in fact, agricultural in character, and which cannot be otherwise regardless of any change in the custom of doing it, should not be included within the operation of the act by administrative or judicial legislation under the guise of liberal interpretation. Any extension of the act to cover services which can only be performed on a farm and which are an essential part of the production of crops should, and easily may be, made by legislative action.

In may be conceded that some things formerly done by a farmer and which would have been considered purely agricultural in character have become, in all reason, much more industrial or commercial in character than agricultural because of the changed way of doing them, brought about by modern economic development. However, those changes have occurred in connection with the handling of products of the soil after they have come into being, that is, after the crops have been harvested. Products of the soil do not become the raw materials which may be handled and dealt with in industrial and commercial activities until they are grown and harvested. There is a natural and distinct difference between activities in handling such raw materials, and activities inproducing those materials which are not ‘produced’ until they are severed from the soil or harvested. The work of growing and producing crops is, by its very nature, agricultural in character, as universally understood, and cannot be anything else regardless of any change in the custom of doing that work. Until the crops are harvested, any change in the way of doing such work is but a change in agricultural methods, and the labor is still performed in producing crops. Since picking or harvesting is an indispensable and inseparable part of the production of crops and is necessarily performed on a farm it follows that such labor is agricultural.

Moreover, we think this distinction is recognized by the language and arrangement of the rule defining agricultural labor adopted by the commission (Rule 7.1) and that this rule, properly interpreted, leads to the same result. The former rule in this regard was divided into two clear and definite subdivisions. Subdivision (a) provided that all labor performed by an employee on a farm in connection with the cultivation of the soil and the harvesting of crops was agricultural labor. Subdivision (b) provided that services in connection with processing, packing, transporting or marketing materials produced on a farm did not constitute agricultural labor unless they were performed by an employee of the owner or tenant of the farm on which the materials were produced, nor unless they were carried on as an incident to ordinary farming operations as distinguished from manufacturing or commercial operations.

In February, 1937, the commission adopted a new rule. So far as material here, this rule provides that 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; * * *

‘(2) By an employee in connection with the drying, processing, packing, packaging, transportation, 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 hereinabove 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.’

In 1940, this rule was amended by adding another paragraph excluding from the exemption services performed by persons pursuing special trades not closely connected with agriculture.

It will be observed that in changing the rule subdivision (a) of the old rule, which had clearly covered all services on the farm in raising and harvesting crops, was placed in subdivision 1 of the new rule without material change. The provisions of subdivision (b) of the old rule, in somewhat changed language, were all placed in subdivision (2) of the new rule but were divided into two paragraphs. The first provides that the described services in connection with ‘materials * * * produced on the farm’ are exempt only if they are incidental to ordinary farming operations. The second contains the additional requirement that the services ‘hereinabove set forth’ must be performed ‘by an employee of the owner or tenant of the farm on which the materials * * * were produced.’ The two paragraphs, in form and substance, seem to be merely a restatement of the provisions of subdivision (b) of the old rule. They are placed together in a separate subdivision marked (2); each refers to materials as completed things, and to the farms on which they were produced; and both relate to the same matter—the handling of materials which have already been produced. The most reasonable interpretation of the language and arrangement of Rule 7.1 is that the second paragraph of subdivision (2) relates only to the same kind of services described in the first paragraph thereof, the handling of agricultural commodities which have already been produced, or harvested. This is especially true since subdivision (1) had already clearly and definitely covered all services on a farm up to and including the harvesting of crops.

Under any other interpretation this rule would, as stated in Cal. Employment Com. v. Bowden, 52 Cal.App.2d Supp. 841, 126 P.2d 972, 976: ‘amount to unauthorized legislation by the Commission, in that it would purport to restrict the meaning of the expression ‘agricultural labor’ as used by the legislature in the act itself, * * *.'

This act was adopted as a part of a national plan of social welfare and was designed to work closely with similar federal legislation. It is even provided, in section 2 of the act, that a change in the national legislation or in the interpretation placed thereon shall, under some circumstances, affect the requirement for contributions under our act. In 1939, the Federal Social Security Act was amended by Congress, 26 U.S.C.A. Int.Rev.Code, § 1426(h), so as to define as agricultural labor all services performed on a farm, in the employ of any person, in connection with cultivating the soil or raising and harvesting any agricultural commodity. Before that amendment, in a number of federal cases it was pointed out that there was a line of demarcation after the crops had been harvested, and that services in producing and harvesting all crops were agricultural. In Latimer v. United States, D.C., 52 F.Supp. 228, 235, the court said: ‘It is all done in the grower's orchard, in other words, on the farm, and it all precedes delivery of the fruit for processing or marketing purposes. Thus the stage of operations at which such services cease to be an incident to ordinary farming and become incidental to the commercial operations of the packing house is reached after the fruit has been picked and upon actual delivery of the fruit to the employees of the association for transmission to the packing house.’ In Ellis v. Continental Cas. Co., 5 Cir., 115 F.2d 1006, 1007, in holding that the picking of oranges was agricultural labor within the meaning of the Workmen's Compensation Act, Rev.St.Tex. 1925, art. 8306 et seq., the court said: ‘Gathering fruit by hand is manual labor. The operation of an orchard is an agricultural pursuit. The performance of manual labor in an orchard upon the produce of the soil is farm work.’ In North Whittier Heights Citrus Ass'n v. National Labor Relations Board, 9 Cir., 109 P.2d 76, 80, a case involving the processing, packing and shipping of citrus fruits, the court said: ‘Industrial activity commonly means the treatment or processing of raw products in factories. 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’.' In that case the court quoted from Pinnacle Packing Co. v. State Unemployment Commission, an unreported Oregon case, as follows: “The fruit growers who are engaged in the care, cultivation, picking, and delivery of the products of the orchard to be processed, graded, packed and marketed are engaged in agricultural labor and are exampt from the provisions of the statute. As soon as the fruit is delivered by the growers to the plaintiff for processing, grading, packing, and marketing, then the exemption ceases.” The last two quotations were cited with apparent approval in the recent case of Cal. Emp. Com. v. Butte County etc. Ass'n, Cal., 154 P.2d 892.

It is true, in Fosgate Co. v. United States, 5 Cir., 125 F.2d 775, 778, in speaking of businesses which have arisen in recent years which are more nearly mercantile and manufacturing than agricultural, the court said: ‘Such businesses have increasingly tended to buy crops in the field or on the trees, thus cutting short the agricultural operations and transferring the harvest to the new business field.’ Agricultural operations, the act of producing agricultural commodities, cannot be cut short prior to the harvest, and this statement confuses the kind of service with the identity and nature of the employer, a thing which is immaterial under our act. Also, in Employment Security Commission v. Arizona Citrus Growers, Ariz., 144 P.2d 682, 687, the court upheld the right of certain claimants to receive unemployment benefits. There were twelve claimants, eleven of whom worked in a packing house and one was engaged in picking fruit from trees belonging to members of the association. However, the language in the opinion is limited to a discussion with respect to services performed in packing and processing fruit and the court's conclusion is thus expressed: ‘We conclude that the claimants who worked in the Association's packing house are not agricultural laborers, * * *.’

It has been said that the true test in determining whether a worker is or is not an agricultural laborer is ‘the nature of the work modified by the custom of doing it.’ Services in connection with the handling of agricultural commodities after they have been harvested may or may not be agricultural labor, depending on circumstances, as the nature of such work may well be modified by the custom of doing it. But no change in the custom or method of doing work in the actual production of agricultural crops can make such labor anything other than agricultural, even though the work be done by or for a person or corporation whose business is industrial or commercial in nature. While men are engaged in the actual work of cultivating the soil and harvesting crops therefrom, that part of their activities is necessarily agricultural.

We, therefore, hold that the second paragraph of subdivision (2) of Rule 7.1 does not relate or apply to subdivision 1 of that rule, and that all services here in question in connection with raising and producing these crops, up to and including the harvesting thereof, constituted agricultural labor within the meaning of this act.

A different situation is presented with respect to that part of the services in question which was embraced within the classifications ‘office help’ and ‘packing house labor’, as made by the respondent. Those services were performed either in the packing house or as an integral part of the respondent's general business. Under the principles laid down in North Whittier Heights Citrus Ass'n v. National Labor Relations Board and Cal. Emp. Com. v. Butte County etc. Ass'n, supra, it clearly appears that those services were not agricultural labor within the meaning of this act. These services were of the kind described in both paragraphs of subdivision (2) of Rule 7.1 and it is, therefore, immaterial whether or not the contracts under which Kovacevich purchased this fruit made him, in law, a tenant with respect to the various properties, as contended by the respondent.

The judgment is reversed with directions to the trial court to take such evidence as may be necessary in order to determine the amount of contributions assessed with respect to that part of the services in question which were classified as ‘office help’ and ‘packing house labor’, and enter a judgment for the appellant accordingly.

BARNARD, Presiding Justice.

MARKS and GRIFFIN, JJ., concur.