You’ve decided to hire Juan for the position of herdsman. In addition to the fair wage you’re paying him, you are providing him with a house to live in. Juan and his family move in and he begins employment. Besides move-in day, you may never give Juan’s house or any of your other employee houses another thought.

You may see your housing as a benefit to your employees. But unfortunately, employee housing, if not handled properly, can be a real liability for dairy operations.

One way to protect your operation from liability is to have a written housing agreement. “There is no law that says you must have a written housing agreement for employee housing,” says Anthony Raimondo, agriculture labor law attorney with McCormick Barstow in Fresno, Calif. “But, one of the biggest issues I see with employee housing is the lack of written agreements.”

Here’s a look at why a written housing agreement is a good idea and how it can protect you and your dairy operation.

License vs. tenancy

A basic decision that needs to be made when it comes to employee housing is whether you want your employees to occupy your housing under a license or tenancy.

A license says the employee is here under the owner’s permission, and housing is connected directly to his or her   employment. “It’s easier to evict an employee if an employee occupies the housing under a license,” notes Raimondo. Yet, there is a greater risk for the housing to be treated as an employee’s wage, which will drive up overtime pay.

With tenancy, it is easier to separate housing from an employee’s wages. The downside to tenancy is that it is not as easy to evict the occupant after employment has been terminated. The law sets the legal minimum amount of notice that must be given prior to eviction. The minimum is usually 30 or 60 days, depending upon the type of lease.

Whether you decide to handle your employees through a license or tenancy is your choice, but it needs to be established through a written agreement, notes Raimondo.

Establish who occupies the property

A written housing agreement states who can and cannot live in the house.

It is recommended that only the employee, spouse and minor children be allowed to live in the property. Any additional person or persons who wish to occupy the house should be approved by the dairy in writing. As the owner of the property, you have the right to say “no,” says Raimondo.

But, if there is no housing agreement, you have little or no control over who lives in the house.

Miguel and Jose were hired by your dairy, and with that employment came a house. What you didn’t know when you hired Miguel and Jose is that they have eight cousins who are now coming to town looking for jobs. Before you know it, you have eight more guys sleeping on the floor.  Or, you hired Joe, and then his girlfriend moves in, and then her adult children move in unannounced.

These are both very real situations that can be avoided if you have a written housing agreement, says Tom Maloney, senior extension associate in the Department of Applied Economics and Management at Cornell University. A written agreement allows you to clearly communicate your expectations related to occupancy of the housing. And, it lets you maintain control of your housing property.

Sets housing rules

Control liability by writing housing rules into a housing agreement.

Any kind of animal is a potential for liability. Require health records for pets, and require that an employee obtain written permission from you before an animal is brought into the housing, notes Raimondo. Make sure that all animals on the premises have current vaccinations.

You can also require all dogs to be properly restrained in pens or on a leash. “If someone is bit by an employee’s dog, the dairy will get sued, not the employee,” explains Raimondo. Female dogs in heat wandering the property can also create problems.        

Prohibit employees from having animals that are banned by law. This is a huge area of risk for dairy owners and needs to be enforced. Keep your eyes open; if you see roosters in your employees’ backyards, or cock-fighting gear hanging up outside the house, you can’t deny that you don’t know about it, notes Raimondo. Without a written agreement, it becomes a he said/she said argument.

Rules that prohibit children from playing in non-safe areas, such as traffic thoroughfares and animal pens, can be written into a housing agreement. It should also be stated that employees cannot bring children to work with them.

Having these rules in a housing agreement can prevent a tragedy from occurring or protect you from the liability of a tragedy. “If a child is stepped on, injured in the workplace or killed, you will be dealing with a very tragic, ugly and expensive lawsuit,” notes Raimondo.

A written housing agreement can also prevent derelict cars on premises, establish quiet hours, alcohol use, and make employees responsible for visitors.

Decide who pays for utilities

State in the written agreement who is responsible to pay for utilities.

Set utilities up in the employee’s name and not the dairy’s. If they are in the dairy’s name, you will be on “the hook” for the full dollar amount. The amount you pay for utilities can also be capped, says Raimondo. “This is why a written housing agreement is so important — all of these details about who pays for what and how much can be stated,” he explains. Whenever possible, the best approach is for employees to maintain utility accounts in their own names.

Other things to keep in mind when it comes to employee housing is to decide whether or not to require renter’s insurance and to make sure that the dairy’s liability insurance will cover the worst-case scenario.

Housing is a simple issue that dairy owners are not paying attention to. Yet, it is one area that could leave the dairy open to a whole host of liabilities if the proper protections are not in place. There is no right or wrong way to deal with employee housing; the mistake is not dealing with it at all.

Your local attorney should be able to help you develop a written agreement that is tailored to your individual dairy and needs.

The rent debate

Some dairy owners may choose to charge their employees rent.

The upside to charging an employee rent is that if a person goes out on workers’ comp, it simplifies the person staying in the house. If the employee stops paying rent, he or she is evicted.

If, on the other hand, rent is not charged, workers comp becomes a gray area. If an employee goes out on extended workers’ comp, when is he or she is no longer employed? It could become a discrimination complaint, says Anthony Raimondo, agriculture labor law attorney with McCormick Barstow in Fresno, Calif. The employee might claim that he or she was evicted due to the workplace injury, and was discriminated against for filing a worker’s comp claim.

Be careful of arrangements where the dairy is paying rent for an employee. A cash payment like that will likely be construed as a wage, which can drive up payroll taxes and overtime wages.

Inspect employee housing

Establish the right to do periodic inspections with a written housing agreement.

Inspections should be performed at a minimum once per year. After inspecting the property, perform any necessary repairs. Don’t close your eyes to the repairs.

It is a good idea to have your housing inspected by a third-party housing inspector. “Usually, you can negotiate a flat rate with an inspector for all housing to be inspected at least once per year,” says Anthony Raimondo, agriculture labor law attorney with McCormick Barstow in Fresno, Calif.  A housing inspection will ensure that your housing meets both state and federal standards. Housing standards vary by state.

Make sure that you have all necessary permits for employee housing. California’s employee housing act requires employers with five or more employees to obtain a permit from their local housing authorities. “Dairies are exempt from the permit; however, they must file for the exemption,” says Raimondo. “If you haven’t applied for the exemption, you are breaking the law.”

It’s important to make sure your housing is up to code. “I’ve seen very good housing and embarrassingly bad housing,” notes Raimondo. “Those with an agenda against the dairy industry could use images of substandard housing like animal-rights activists have used footage of practices like tail docking to smear the industry.”

Employee housing has not been the centerpiece of a lawsuit yet, but it is only a matter of time before employee housing becomes the focal point of lawsuits, notes Raimondo. Housing could also be used as a tool by the unions to drive a wedge between employees and employers.