Title 29—Labor--Volume 1
PART 510—IMPLEMENTATION OF THE MINIMUM WAGE PROVISIONS OF THE 1989 AMENDMENTS TO THE FAIR LABOR STANDARDS ACT IN PUERTO RICO
§ 510.1   Summary.
(a) The Fair Labor Standards Amendments of 1989 (Pub. L. 101-157) were enacted into law on November 17, 1989. Among other provisions, these amendments to the Fair Labor Standards Act (FLSA) increased the minimum wage in section 6(a)(1) of the Act to $3.80 an hour effective April 1, 1990, and to $4.25 an hour effective April 1, 1991. With respect to certain industries and governmental entities in the Commonwealth of Puerto Rico, the Amendments provided that these increases would be phased in over extended periods of time.
(b) Section 6(c) of the FLSA provides for four separate categories or tiers for implementing the minimum wage rate increases in Puerto Rico.
(1) For Tier 1, which includes employees of the United States, employees of hotels, motels, or restaurants, retail or service establishments that employ such employees primarily in connection with the preparation or offering of food or beverages for human consumption, and industries in which the average hourly wage is greater than $4.64, there shall be no phase-in. The wage rates and effective dates shall be those specified in section 6(a)(1) of FLSA, i.e., $3.80 per hour beginning April 1, 1990 and $4.25 per hour beginning April 1, 1991.
(2) For Tier 2, which includes industries in which the average hourly wage is not less than $4.00 but not more than $4.64, the increases in the minimum wage rates shall be phased-in in five annual increments (rounded to the nearest 5 cents) beginning April 1, 1990, and ending April 1, 1994.
(3) For Tier 3, which includes industries in which the average hourly wage is less than $4.00, the increases in the minimum wage shall be phased-in in six annual increments (rounded to the nearest 5 cents) beginning April 1, 1990, and ending April 1, 1995.
(4) For Tier 4, which includes certain employees of the Commonwealth of Puerto Rico, municipalities, and other governmental entities of the Commonwealth in which the average hourly wage is less than $4.00, the increases shall be phased-in in seven annual increments (rounded to the nearest 5 cents) beginning April 1, 1990 and ending April 1, 1996.
(c) The Amendments also eliminated reference to Puerto Rico in those sections of FLSA relating to the establishment and conduct of special industry committees which recommend minimum wage rates in certain territories. These sections now apply only to American Samoa. (Industry committee regulations pertaining to American Samoa are found in 29 CFR parts 511 and 697).
§ 510.2   Purpose and scope of regulations.
(a) The purpose of these regulations is to implement the 1989 Amendments to the FLSA with respect to minimum wage increases in Puerto Rico. These regulations establish the applicable wage rates and effective dates in the four statutory tiers and categorize industries and governmental entities in Puerto Rico in those tiers according to average hourly wage rates. In addition, these regulations explain the methodology used to determine appropriate tiers, including the use of standard industrial classification (SIC) codes to categorize industries.
(b) Subpart A of this part summarizes the provisions of the Amendments as applicable to Puerto Rico and defines the terms used herein. Subpart B of this part states the specific minimum wage rates for each tier and the effective dates of those rates. Subpart C of this part explains how industry and governmental categories were determined, the general methodology used to conduct the surveys which provided the data used to determine average hourly wage rates, and special issues in the classification of governmental entities. Appendix A of this part contains a listing of manufacturing industries by Standard Industrial Classification (SIC) code and indicates the tier to which each industry is subject. Appendix B of this part contains a listing of nonmanufacturing industries by SIC code and indicates the tier to which each industry is subject. Appendix C of this part contains a listing of government corporations and indicates the tier to which each such corporation is subject. Appendix D of this part contains a listing of municipalities and indicates the tier to which each municipality is subject.
(c) Nothing contained in this part should be construed as precluding the Puerto Rico Minimum Wage Board, which has been granted authority to promulgate minimum wage rates above the Federal statutory minimum, from providing for increases in any industry which would exceed the rates provided for in these regulations or in section 6(a)(1) of the Act.
§ 510.3   Definitions.
(a) Act or FLSA means the Fair Labor Standards Act of 1938, as amended (29 U.S.C. 201, et seq. ).
(b) Amendments or 1989 Amendments means the Fair Labor Standards Amendments of 1989 (Pub. L. 101-157).
(c) Secretary means the Secretary of Labor, or a duly authorized representative of the Secretary.
(d) Administrator means the Administrator of the Wage and Hour Division of the Employment Standards Administration, U.S. Department of Labor, or a duly authorized representative of the Administrator.
(e) Department means the U.S. Department of Labor.
(f) Tier means one of the four categories established for an extended phase-in of the statutory increases in the minimum wage under section 6(c) of the Act as amended.
(g) Standard Industrial Classification (SIC) refers to the classifications established in the Standard Industrial Classification Manual, 1987, published by the Office of Management and Budget, Executive Office of the President.
§ 510.10   Table of wage rates and effective dates.
(a) The following table provides effective dates of minimum wage increases for the four statutory tiers. Appendices A and B to these regulations contain listings of manufacturing and non-manufacturing industries in Puerto Rico by SIC code, and indicate which tier is applicable. Appendices C and D contain listings of government corporations and municipalities and indicate which tier is applicable.
Effective Dates
(b) Tier 1 applies to employees of the United States, employees of hotels, motels, or restaurants, retail or service establishments that employ such employees primarily in connection with the preparation or offering of food or beverages for human consumption, and industries in which the average hourly wage is greater than $4.64.
(c) Tier 2 applies to industries in which the average hourly wage is not less than $4.00 but not more than $4.64.
(d) Tier 3 applies to industries in which the average hourly wage is less than $4.00.
(e) Tier 4 applies to certain employees of the Commonwealth of Puerto Rico, municipalities, and other governmental entities of the Commonwealth in which the average hourly wage is less than $4.00.
§ 510.20   Wage surveys in Puerto Rico.
(a) The legislative history to the 1989 Amendments (Conference Report 101-47 on H.R. 2, May 8, 1989) stated that for any industry to qualify for an extended minimum wage phase-in, the government of Puerto Rico would be required to furnish official survey data substantiating that an industry's average hourly wage is below either the $4.65 or $4.00 threshold level. Such data were to be compiled and submitted for review to the Department.
(b) Manufacturing industries. For purposes of implementing section 6(c) of the Act, as amended, Puerto Rico has submitted its Census of Manufacturing Industries. The Bureau of Labor Statistics of Puerto Rico regularly gathers data from manufacturing establishments regarding employment, hours and earnings. The data include hourly earnings for production and related workers and are generally specific to the four-digit SIC code level.
(c) Non-manufacturing industries. The Bureau of Labor Statistics of Puerto Rico designed and executed a survey to supplement data regularly gathered for the U.S. Bureau of Labor Statistics ( i.e. , that included in the payroll establishment survey published in Employment and Earnings ). The supplemental survey was carried out to determine average hourly earnings for production workers or non-supervisory employees in the private non-agricultural, non-manufacturing sector. Employment and payroll information was collected for the payroll period which included April 12, 1989. The data provided to the Department were generally specific to the four-digit SIC code level.
(d) Agriculture. At the request of the Department, the Bureau of Labor Statistics of Puerto Rico conducted a survey of wages paid to agricultural workers which included employment and earnings from at least a specified number of sugarcane farms, coffee farms, ornamental farms, vegetable farms, and other farms, following standard statistical random sampling techniques. The survey included information on earnings, employment, and hourly wage rates paid to workers for the workweek including March 11 through March 17, 1990. In addition, applicable collective bargaining agreements were reviewed for sugarcane farms.
(e) Commonwealth government. In the case of the Commonwealth Government of Puerto Rico, a census of hourly earnings was undertaken of all government departments, commissions and other agencies. A separate survey was conducted of government corporations. Managers, officials and employees in positions which require a college degree were excluded from the surveys.
(f) Municipalities. In the case of the municipalities of Puerto Rico, a census of hourly earnings was conducted. Managers, officials and employees in positions which require a college degree were excluded from the survey.
§ 510.21   SIC codes.
(a) The Conference Report specifically cites Puerto Rico's annual Census of Manufacturing Industries as a source of average hourly wage data by industry. Industries in that census are organized by Standard Industrial Classification (SIC), the statistical classification system used for a variety of governmental and statistical purposes. With respect to non-manufacturing industries, or other industries not included in the Census of Manufacturing, the Conference Report stated that data “should be at a level of specificity comparable to the four digit Standard Industry Code (SIC) code level.”
(b) The Standard Industrial Classification (SIC) codes listed in appendix A and B herein are designated in accordance with the Standard Industrial Classification (SIC) Manual, 1987, published by the Executive Office of the President, Office of Management and Budget. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be obtained from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161. Copies may be inspected at all federal depository libraries in the Commonwealth of Puerto Rico; at the district office of the Wage and Hour Division, U.S. Department of Labor, New San Juan Office Building, 159 Chardon St., room 102, Hato Rey, PR 00918; at the Commonwealth of Puerto Rico Department of Labor and Human Resources, Prudencio Rivera Building, Munoz Rivera Avenue 505, Mato Rey, PR 00918; or at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. Establishments are classified according to their primary activity. The classification structure classifies industries by:
(1) Two-digit major group,
(2) Three digit industry group, or
(3) Four-digit industry code, according to the level of industrial detail which may be required.
§ 510.22   Industries eligible for minimum wage phase-in.
(a) Appendix A contains a listing of all industries included in the Census of Manufacturing. Appendix B contains a listing of non-manufacturing industries. These listing are organized by SIC numbers, presented by:
(1) Major group (two-digit classification),
(2) Industry group (three-digit classification), and (3) industry (four-digit classification). In each instance the phase-in tier which applies to that industry or group is indicated.
(b) Employers are required to utilize the most detailed classification which applies to their industry. Where an employer's four-digit SIC code is listed, the tier applicable to that code determines the minimum wage phase-in schedule for that employer. (See § 510.10, above).
(c) Where an industry is not listed by four-digit SIC code, employers shall utilize the three-digit which applies to their industry. If a three-digit code is not listed, employers shall use the applicable two-digit code.
§ 510.23   Agricultural activities eligible for minimum wage phase-in.
Agriculture activities eligible for an extended phase-in of the minimum wage in Major groups 01, 02, and 07 have been incorporated into Appendix B—Nonmanufacturing Industries Eligible for Minimum Wage Phase-In. Applicable wage rates are effective retroactive to April 1, 1990. Employers in the sugarcane farming industry (SIC Number 0133) who are subject to Tier 3 wage rates but who have paid wage rates based on Tier 2 wage rates may not take any action to recoup such payments where those actions would have the effect of reducing the wage rate being paid at the time of such recoupment to below that required under Tier 3.
§ 510.24   Governmental entities eligible for minimum wage phase-in.
(a) The Commonwealth government of Puerto Rico has been determined to be eligible for treatment under Tier 2, on the basis of wage data supplied to the Department.
(b) Appendix C of this part contains a listing of Commonwealth government corporations, indicating the phase-in tier which applies. Entities which do not appear on the list are those for which no wage data were supplied. These entities are therefore categorized under Tier 1, and are ineligible for an extended phase-in.
(c) Appendix D of the part contains a listing of municipalities, indicating the phase-in tier which applies. Municipalities categorized under Tier 1 are those which failed to supply wage data.
(d) Employees of municipalities who have reason to believe that the municipality by which they are employed has been incorrectly categorized, e.g., categorized under Tier 3 instead of Tier 2, may no later than June 1, 1990, file with the Administrator a petition for review. The petition shall be accompanied by any information the employee may have to support a determination that the municipality is incorrectly categorized. In the event the Administrator determines that a tier other than that listed in appendix D of this part applies, the affected municipality shall be liable for retroactive payment of any back wages found to be due.
(e) Certain employees of municipalities or government corporations in which the average wage is less than $4.00 per hour are eligible to be paid under Tier 4, rather than Tier 3. Tier 4 applies only to those employees employed by municipalities or government corporations who are principally engaged in one or more of the “traditional” functions listed in § 510.24 (a) or (b). All other employees of such entities must be paid in accordance with Tier 3.
§ 510.25   Traditional functions of government.
(a) Section 6(c)(4) of the Act, as amended, limits the six-year phase-in of the statutory minimum wage (“Tier 4”) to those employees with an average wage of less than $4.00 per hour who were brought under minimum wage coverage “pursuant to an amendment made by the Fair Labor Standards Amendments of 1985.” The Department has interpreted this language as referring to section 2(c) of the 1985 FLSA Amendments, which provided for deferred liability for minimum wage violations (until April 15, 1986) “with respect to any employee who would not have been covered under the Secretary's special enforcement policy” published in 29 CFR 775.2 and 775.4. The latter subsection listed those functions of State or local government which were determined by the Supreme Court's ruling in National League of Cities v. Usery, 426 U.S. 833 (1976) (subsequently overruled by Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985)) to be integral operations of the governments in areas of traditional governmental functions. The listed “traditional” functions included the following:
(1) Schools.
(2) Hospitals.
(3) Fire prevention.
(4) Police protection.
(5) Sanitation.
(6) Public health.
(7) Parks and recreation.
(8) Libraries.
(9) Museums.
(b) The Supreme Court in National League of Cities clearly did not limit “traditional” functions of government to those set out in paragraph (a) of this section. The Court included within this concept all those governmental services which the States and their political subdivisions have traditionally afforded their citizens, which the States have regarded as integral parts of their governmental activities, and which State and local governments are created to provide. The Department interprets the Court's analysis of “traditional” functions as turning in large part upon whether the States or local governments had, prior to initial enactment of federal regulatory legislation applicable to a particular field of service or activity (such as FLSA), generally established themselves as providers of the services. The Department therefore views the following government functions as falling within the “traditional” category:
(1) Finance (including Auditor, Budget and Comptroller).
(2) Elections.
(3) Personnel.
(4) Public works.
(5) Office of the Mayor.
(6) Legal Affairs.
(7) Planning.
(8) Waterworks.
(9) Social services.
(10) Street and highway construction and maintenance.
(11) Automobile licensing.
(12) Sewage treatment.
(c) Employees whose primary function falls within one or more of the activities listed in paragraph (a) or (b) of this section, are therefore considered to be engaged in “traditional” functions of government. This would include employees who provide support functions for such activities, such as clerical, secretarial, supply and janitorial.
(d) No employees of a municipality or government corporation may be paid in accordance with the Tier 4 phase-in schedule unless the employee:
(1) Is engaged in one of the specific activities listed in paragraphs (a) and (b) of this section, and
(2) Is employed by a municipality or government corporation in which the average wage is less than $4.00 per hour.