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Castro Valley winery fined $115,000 for using volunteers

Source: Mercury-News

By Rebecca Parr


A small-time vintner's use of volunteer workers has put him out of business after the state squeezed him like a late-summer grape for $115,000 in fines -- and sent a chill through the wine industry.

The volunteers, some of them learning to make wine while helping out, were illegally unpaid laborers, and Westover Winery should have been paying them and paying worker taxes, the state Department of Industrial Relations said.

"I didn't know it was illegal to use volunteers at a winery; it's a common practice," said winery owner Bill Smyth.

State law prohibits for-profit businesses from using volunteers.

"But not anymore," he said Monday. When word got around, several wineries sent their volunteers home.

Westover was cited in July for not paying minimum wage, not providing wage statements and not paying workers' compensation insurance, said Peter Melton, a spokesman for the state.

"These are not idle things. People should be paid for their labor. The workers' compensation violations are very serious. What happens if someone has a catastrophic injury at the winery?" he asked.

And, he added, "It isn't fair to wineries that are paying their employees to have to compete against for-profit wineries that do not."

Some in the industry were already aware of the risk. After learning in early 2013 that two member wineries were using volunteers, the Livermore Valley Winegrowers Association told its members that for-profit businesses can't do that, said Chris Chandler, the association's executive director.

The Wine Institute, which represents more than 1,000 California wineries, gives the same advice. "If our member wineries are using volunteers, they might want to reconsider," said Wendell Lee, its attorney and vice president.

While he was not familiar with all the facts in the Westover case, Lee said the size of the fine surprised him.

"It seems to be a case of a small-business owner who inadvertently thought it was OK" to use volunteers, he said. "It just seems the penalties shouldn't be so punitive as to put someone out of business."

Smyth has paid some of the fines and is appealing the rest.

Meanwhile, he and his wife, Jill, are holding a going-out-of-business sale and plan to shut down before the end of the year. The fines represent more than a decade's worth of profits for the winery, which nets about $11,000 a year, Smyth said.

"There's just no money left; they've taken everything," he said.

"We're a small winery, open only 10 hours a week. We didn't really need any helpers; we were just educating people about wine," he said.

About half the people the state considered Westover employees were taking a free class at the Palomares Canyon Road winery. Students learned about growing vines, harvesting and blending grapes and marketing the finished product.

"This was an incredible opportunity for me," said Peter Goodwin, a home winemaker from Walnut Creek who said he dreams of opening a winery with some friends. "I got to learn from someone who knows the business."

The winery sometimes asked Goodwin if he wanted to assist in different tasks.

"That's what I wanted, to be as involved as much as possible -- it was all about learning," he said. "I don't understand the state's action. It was my time, and I volunteered."

Ken Tatum took the classes because he thought it would be fun to learn more about making wine and running a winery. The state fines were ridiculous and unfair, he said.

"I should be able to volunteer my time," said the retired Castro Valley resident.

Why, Tatum asked, didn't the state first warn Smyth that using volunteers was not OK?

The law does not allow for warnings, Melton said. If Department of Industrial Relations representatives see violations, he said, they are required to issue citations.

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Exactly... if they were interns though they get paid minimum wage. This is the kind of flat out shit California does on a regular basis, who could be so knowledgeable about these kinds of things. I know of not less than 10 distilleries that pay for bottling, you get a bottle and lunch in trade. This is not the same thing but equates to the same thing, though not in California. Geez... no wonder all the good companies start here... get traction, then leave from dissuasion.

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Our new wonderful ground water laws are going to destroy new businesses. To open a business in California which requires water or waste you will now have to hire engineering firms to get you through the clearance which is more than almost all start up business costs. You are looking at about 50-100k now if the water authority becomes similar to the state waterboards. I can not get clearance for an IDEA, pending preliminary conditional approval for a business idea until the waste discharge report is approved, which requires a septic eengineer, civil engineer to design the form 200 formal document that waterboardsWaterboards wants to see, then the ararchitectural design has to be in place so they can see drain flow, etc. This is just to find out if your use is permitted? . Then they steal it from you via penalties... there should be a first time offenders clause to keep businesses alive. And to think... there is a thriving underground economy in my area which does not pay taxes and has not for 40 years. Wonder why:..

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All great points so far folks, but this also brings up the issue of workers compensation insurance and general liability insurance as touched on by One Eight. In my dealings with a lot of craft distillers in all parts of this great country I have some suggestions to offer on how this potential issue can be handled:

  • Check with your state department of labor ( You can check your specific state here:http://www.dol.gov/whd/contacts/state_of.htm ) to find out what exactly needs to be done (if anything) in order to use volunteer labor. In many states there is nothing that needs to happen out of the ordinary but it is always best to check. Luck favors the prepared!
    • In many states volunteers would be considered a "guest" or permissive user of yours or of your business. If something unforeseen were to happen to a volunteer and it resulted in a claim it most certain could be covered by your overall Commercial General Liability (CGL) policy either under the "Occurrence" limit or under the "Medical Payments" portion.
    • In several states there is the ability to add volunteer workers to your current "workers compensation" policy. Via endorsement (usually titled something along the lines of "Volunteer Workers Endorsement") you would elect to cover workers that are engaged in volunteer labor. Usually this approach has language associated with "assumed wages" stating that the assumed wage must be reported that is equal to the remuneration normally received by a regular, paid employee that would be doing the same or similar work. Usually this endorsement is continuous and in effect until a written request is issued to rescind the coverage. Usually the rate on this should be well worth the premium paid to ensure coverage is in place.

Again, the best way to handle the issue of volunteers is to do your research, check with your state and check with your insurance provider. I know a lot of folks rely on the help of family and friends in order to get their product to market and it is a key component for a lot of you. I don’t think it is an issue of "you can’t use volunteers", it is a case of making sure you are protecting them as well as yourself.

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Thank you. I think these types of issues, as well as any insurance issues for the most part, are easily overlooked. Many distilleries move at a quick pace in order to keep up with the daily rigmarole and insurance issues are often at the bottom of the list. As I always say, insurance seems to be the least concerning issue for many people until something bad happens. I would like to change that mindset. If you are uncertain about doing something new or different in your business you may consult the TTB or an attorney, or possibly a CPA. Add your insurance person to the list as well. There are a lot of aspects that either directly or indirectly impact your insurance which in turn impacts your business. If you are ever not sure, pick up the phone and make a call. Then, if you get an answer you are not sure of, call me and I will give you real answer!

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I love California, probably my favorite state but you can't live there or do business because of all the idiots in the Gov. Let's see, small business being creative using volunteers, let's fine them and shut them down to cover expenses to illegals who are working for cash and not paying taxes.

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Certainly seems insane that "the law does not allow for warnings". I think this is a really interesting issue for distilleries. So many people want to learn the art, and proactively contact distilleries insisting that they want to work for free to learn the ropes. If you didn't know better, it would be very tempting to take them up on their offer of help with cleaning, bottling in exchange for teaching them distillation.

Now, I'm not a labor lawyer, but I had a conversation with an agent for the worker's comp board of the Province of Ontario, and he laid out to me a very clear framework, one which I thought was quite sensible. First, he said there is no prohibition in Ontario on for-profit companies having volunteers come by. But whether a person is a volunteer will be determined by how you interacted with them, not how you chose to label them. Basically, don't attempt to direct or control them in any way like you might with an intern/trainee/employee. Don't even say "be here at 9am". Say "We'll be doing [x] at 9am, you're welcome to come by". Definitely don't schedule individuals with conveyed expectations that they show up. Treat all volunteers as you would an elderly church lady who wandered in on a Sunday after service and said she loved labeling and asked if it'd be alright if she put some labels on bottles for a while to relax.

Anyway, take it for what it's worth (which is probably not much for everyone outside Ontario), but I thought it was good advice generally.

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