Responsibly Connected Cases
PACA establishes licensing and employment restrictions against individuals who are responsibly connected with companies whose license has been revoked or suspended for committing PACA violations.
Produce companies do business as: a sole proprietorship; a partnership; a corporation; or a limited liability company (LLC).
In a sole proprietorship, the owner is responsibility connected. In a partnership, the partners are responsibly connected.
A corporation has shareholders who own the stock of the company. The shareholders elect a board of directors to oversee the general direction of the company. The board selects officers who run the company on a day-to-day basis. The officers usually consist of a president, one or more vice-presidents, a secretary and a treasurer. In a corporation, shareholders who own more than 10% of the stock, all members of the board of directors, and all officers are responsibly connected.
An LLC is an unincorporated association with limited liability. Its members, managers, officers, directors and owners of more than 10% of any stock are responsibly connected.
PACA sends a letter to any person it thinks is responsibly connected to a company when PACA files a Disciplinary Complaint against the company. The person has 30 days to file a written response to the PACA Director challenging that determination. If no response is filed, the initial determination becomes final, and the person is subject to the restrictions described below.
If a challenge is filed, the PACA Director either affirms or reverses the initial determination. If the Director reverses, the person is not responsibly connected and the case is over, and the person is not subject to any restrictions. If the Director affirms, then the person can challenge the determination in a hearing proceeding before any Administrative Law Judge (ALJ). This is the same kind of Hearing proceeding that occurs in a disciplinary case.
If a person may have a defense to being charged as responsibly connected, and desires to remain in the produce industry, then a lawyer should be consulted when the initial letter from PACA is received due to the severe restriction from a finding of responsible connector.
If a person is found to be responsibly connected, the person is subject to employment and licensing restrictions.
PACA’s definition of employment is broad: Any affiliation of the responsibly connected person with a produce company is considered employment.
If a license is suspended (meaning the license is temporarily removed for up to 90 days), the responsibly connected person cannot be employed during the suspension period.
A company’s license is also suspended for not paying a reparation award. (See PACA Reparation Cases.) If there is a reparation suspension, the responsibly connected person can work for a produce company if the employer posts a bond for four (4) years and nine (9) months in an amount set by PACA. (See Employee Bond.) A reparation suspension lasts two (2) years unless the reparation award is paid. If the award is paid, there are no further employment restrictions. If the award is not paid, the responsibly connected person can work without a bond after two (2) years from the date of the award.
If a company’s license is revoked (or the company is not licensed and is found to have committed repeated and flagrant violations), more serious employment penalties apply to persons who are responsibly connected.
First, the person cannot be employed for one year in the produce industry.
Second, the person can be employed at anytime in the second year, but only if the employer posts an employment bond for four (4) years and nine (9) months in an amount set by PACA. (See Employee Bond.) After the second year, a responsibly connected person can be employed without a bond.
A person responsibly connected to a company, which has had its license suspended as the result of a disciplinary case, cannot obtain a license during the suspension period.
If the suspension is for failing to pay a reparation award, then the responsibly connected person cannot obtain a license for two (2) years from the date of the suspension.
A person, responsibly connected to a company with a revoked license, cannot obtain a license for two (2) years. In the third year, the person can obtain a license, but only if the applicant posts a bond in an amount set by PACA for four (4) years and nine (9) months. (See Licensee Bond.) After the third year, the person can obtain a license without a bond.
Even if a person is in a responsibly connected position, that person will not be considered responsibly connected if the person can prove certain facts:
First, the person must prove no active involvement in the violations. This means the person did not exercise any judgment, discretion or control over the activities causing the violation. For example, a person ordered to sign checks without control over the amount or payee of the checks would not be actively involved in a nonpayment violation.
Second, the person must also prove either:
the person was not really a partner, officer, director or shareholder because he/she had only a title with no power or authority;
the company was the alter ego of another person meaning it was really run as a sole proprietorship by an individual.
A restricted person, who is found to have worked in the produce industry during the restriction period, faces an additional one (1) year of restriction.
If PACA learns a restricted person is working for a produce company, PACA sends a letter to the company advising the employer either to terminate the responsibly connected person in 30 days; or, if the person can work with a bond, to obtain a bond. (See Employee Bond.)
If the employer continues to employ the restricted person without terminating the employment or obtaining a bond, then PACA considers this prohibited conduct and PACA will bring a disciplinary complaint against the employer.