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How to avoid liabilities of a CSA

Published on January 9, 2013 3:01AM

Last changed on February 6, 2013 12:29PM


Capital Press

When people join her farm's "community supported agriculture" program, Katie Kulla said she makes sure they understand that nature is fickle.

Customers sign a form agreeing to pay for 45 weeks of vegetables with the caveat that "some factors are beyond the farmers' control."

Kulla and her husband, Casey, also provide additional paperwork explaining what to expect when members buy shares in the Dayton, Ore., farm's crop output.

"It's to guide them into the process," she said. "It's also about listening to them when they're in the program, not just trying to prepare them for the program."

Experts say that educating CSA members about the system's potential pitfalls is key to retaining customers from year to year and protecting the farm from legal liabilities.

The popularity of the CSA model -- in which members buy a share of the farm's yearly production -- also creates the potential for problems, said Rachel Armstrong, founder of the Farm Commons nonprofit legal services organization.

"As anything grows, its vulnerabilities increase along with that growth," she said.

The informal nature of many CSAs means that customers often agree to join on a handshake without really understanding what they will get in return for their money, Armstrong said.

Signed, written agreements between farmers and CSA members should spell out the farmer's obligations, prices, produce pickup procedures and information about sharing the risk of crop failure, she said.

Clients should also be asked to check boxes that outline specific parameters of the deal, Armstrong said. The agreement presents a chance to dispel confusion among members who aren't familiar with the CSA system.

Anecdotally, about 40 percent of CSA members quit after a year, but solid communication can reduce the turnover, Armstrong said.

"Every customer that doesn't return is a missed opportunity," she said. "We suspect some of that is lack of clarity and misguided expectations."

There's a perception that CSAs function better when they're casual and "grass roots" but farmers shouldn't forget that they're operating a business that runs the same risks as any other, said Bryan Endres, an agricultural law professor at the University of Illinois.

"A lot of these are small-scale people who need to be more nuanced in their business dealings," he said, noting that legal protections won't detract from the customer's experience. "From the consumer perspective, they don't mind that kind of sophistication."

Many growers that offer CSA membership unnecessarily expose themselves to liability by not separating the program from the farm, said Endres.

CSAs are often run as sole proprietorships that leave farmers' personal assets at risk if there's a lawsuit over an illness outbreak or another problem, he said.

Instead, the CSA should adopt the structure of a limited liability company that's separate from the farm, Endres said. "Take the land out of the business and rent the land to the LLC."

Growers also put themselves in a potentially hazardous situation when they allow members to pay for a portion of their CSA by pulling weeds or completing other tasks, said Armstrong.

"People doing work on the farm is not a simple matter," she said.

In many states, farm workers are subject to minimum wage and workers compensation laws from which CSA members cannot opt out, even voluntarily, said Armstrong.

Farmers who let members pay for CSA shares with work should document that the in-kind compensation is worth at least the minimum wage, she said. "The value should be equivalent."

Armstrong also recommends signing an agreement that details each parties' obligations. These steps help address minimum wage laws, but the arrangement may also have tax and insurance implications.

Farm injuries are common, so growers shouldn't leave themselves open to the "unpleasant surprise" of a lawsuit if a member is hurt while working, she said.

Buying workers compensation insurance will help prevent such lawsuits for negligence, Armstrong said.

Growers shouldn't assume that cordial relations with CSA members will protect them from litigation, she said. "It's not going to be the volunteer who sues you. It's going to be their insurance company."

More info

For more information and model CSA agreements, go online to farmcommons.org and click on the "Guides & Forms" link.


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