Say YES to SB 628 (Grove)

California’s Ag Overtime Tax Credit

What would SB 628 do?

Senate Bill 628 would support California farmers and agricultural employees by creating a payroll tax credit to reimburse farmers for overtime wages paid to their employees. It would improve work opportunities and take-home pay for employees, delivering millions of dollars to working families and rural communities. The bill was authored by state Senator Shannon Grove, R-Bakersfield. It has bipartisan support.

Note: “Overtime wages” means the difference between the employees’ overtime rate of pay and their regular rate of pay, or the “half” in “time-and-a-half.”

Background

In 2016, California adopted Assembly Bill 1066, which beginning in 2019 phased in a requirement that agricultural employees—like workers in other sectors—be paid time-and-a-half when they work more than five days a week or eight hours a day. Previously, due to the seasonal nature of agriculture, farmers could employ workers for up to 60 hours a week without paying overtime.

AB 1066 was intended to increase earnings for agricultural employees. But research suggests the law lowered employee earnings as employers cut hours to balance their wage bills. During the first two years the law was phased in, the proportion of agricultural employees in California working more than 50 hours a week—the overtime threshold at that point in the phase-in—dropped by about half, according to a 2023 study by Alexandra Hill, an agricultural and resource economics professor at the University of California, Berkeley, which analyzed data from 2019 and 2020. The changes brought about by AB 1066 “may not be benefiting the workers they aim to protect,” the study concluded.

California’s world-renowned agriculture sector faces major challenges. Farmers and ranchers are struggling with rising production costs and low prices for many of the state’s signature crops. From 2017 to 2022, California lost 10% of its farms, according to the most recent Census of Agriculture released by the U.S. Department of Agriculture. An analysis by the American Farm Bureau Federation found that California farm bankruptcies rose 55% in 2024.

Because farmers sell perishable products in interstate and international markets, they are often unable to raise their prices to recover the cost of wage increases or other production expenses. Many farmers simply cannot absorb the cost of paying overtime.

Before 2016, agricultural employees in California often counted on working overtime when crops were in season in anticipation of going without work for months at a time during the offseason. AB 1066 has resulted in some employees losing up to a third of their hours and income, as the peak-season work week was cut back on many farms from 60 hours to 40 hours. The losses are concentrated in rural farming communities in counties with the highest poverty levels in the state.

The solution

SB 628 would address the unintended consequences of AB 1066 and make good on the state Legislature’s intention to increase earnings for agricultural employees. By reimbursing farmers for overtime wages, the tax credit would incentivize farmers to restore overtime hours for employees who want them. Every dollar of the credit would go directly to paying employees.

The measure:

• Is a win for agricultural workers.
• Provides more overtime pay and hours to work.
• Keeps families together by giving workers more hours and pay and therefore lets them stay in California rather than travel to other states for work.
• Allows that new income to stay in hardworking farm and rural communities thereby boosting the local economy.

Other states have already acted to restore overtime work hours on farms. Oregon created a refundable personal or corporate income tax credit for farmers based on overtime wages paid. New York created a similar agricultural overtime tax credit.

SB 628 follows the model created by the California Film & Television Tax Credit Program, capped at $330 million a year, which has proven successful at protecting the state’s iconic film and television industry. Governor Gavin Newsom has proposed increasing the cap on that tax credit to $750 million.

SB 628 could cost the state budget $200 million to $300 million a year, according to an estimate by the California Farm Bureau. The figure does not factor in economic benefits to farm businesses and rural communities the bill may create, or state revenues that would derive from those benefits.

As Governor Newsom said last year, “Farmworkers are the backbone of California’s nation-leading agricultural industry and play a critical role in ensuring the stability of the state, nation and world’s food supply. Investing in their well-being is investing in California’s success.”

Who supports SB 628?

California farmers and ranchers support improved wages for their employees and support decisions by California policymakers to forgo General Fund revenues to reimburse agricultural employers for the cost of overtime premium wages that will flow directly to California agricultural employees and their families.

Learn more

• California Farm Bureau: New Legislation Aims to Boost Farmworker Pay and Support Agricultural Employers
• Ag Alert: Tax credit proposed to offset cost of farmworker overtime
• Fresno Bee: California farmers should get a tax break for overtime paid to their workers | Opinion

Contact

• Michael Miiller, California Association of Winegrape Growers, Director of Government Relations; michael@cawg.org; (916) 204-0485
• Bryan Little, California Farm Bureau, Senior Director, Policy Advocacy; blittle@cfbf.com
• Peter Ansel, California Farm Bureau, Director, Policy Advocacy; pansel@cfbf.com

Increase take-home pay for agricultural employees