Subpart C-Classification of Industries 510.20 Wage surveys in Puerto Rico. 510.21 SIC codes.

510.22 Industries eligible for minimum wage phase-in.

510.23 Agricultural activities eligible for minimum wage phase-in.

510.24 Governmental entities eligible for minimum wage phase-in.

510.25 Traditional functions of government.

APPENDIX A TO PART 510-MANUFACTURING INDUSTRIES ELIGIBLE FOR MINIMUM WAGE PHASE-IN

APPENDIX B TO Part 510-NONMANUFACTURING INDUSTRIES ELIGIBLE FOR MINIMUM WAGE PHASE-IN

APPENDIX C TO PART 510-GOVERNMENT CORPORATIONS ELIGIBLE FOR MINIMUM WAGE PHASE-IN

APPENDIX D TO PART 510—MUNICIPALITIES ELIGIBLE FOR MINIMUM WAGE PHASE-IN

AUTHORITY: Sec. 4, Pub. L. 101-157, 103 Stat. 938; 29 U.S.C. 201 et seq.

SOURCE: 55 FR 12120, Mar. 30, 1990, unless otherwise noted.

Subpart A-General

§ 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 nonmanufactur

(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.

(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.

Subpart C-Classification of Industries

§ 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 Manufac turing 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 specif. ic to the four-digit SIC code level.

(c) Non-manufacturing industries. The Bureau of Labor Statistics of Puerto Rico designed and executed & 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 infor mation was collected for the payroll period which included April 12, 1989. The data provided to the Department were generally specific to the fourdigit SIC code level.

(d) Agriculture. At the request of the Department, the Bureau of Labor Statistics of Puerto Rico conducted & 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. [55 FR 12120, Mar. 30, 1990, as amended at 55 FR 53247, Dec. 27, 1990]

§ 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 Office of the Federal Register, 1100 L Street, NW., room 8401, Washington, DC. 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.

Each operating establishment is assigned an industry code on the basis of its primary activity, which is determined by its principal product or group of products produced or distributed, or services rendered.

[55 FR 12120, Mar. 30, 1990; 55 FR 12778, Apr. 5, 1990]

§ 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 minumum wage phase

in schedule for that employer. (See § 510.10, above).

(c) Where an indusry 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.

[55 FR 12120, Mar. 30, 1990; 55 FR 12778, Apr. 5, 1990]

§ 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.

[55 FR 53247, Dec. 27, 1990]

§ 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.

[55 FR 12120, Mar. 30, 1990; 55 FR 12778, Apr. 5, 1990]

§ 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