So we understand now that the employers in Puerto Rico, although it is only a territory and not a state of the Union, still must pay the federal minimum wage if they are liable to follow the Fair Labor Standards Act. On the other hand, what goes on with the other employers on the islands that do not have to follow the Fair Labor Standards Act because of their smaller size or smaller geographical business footprint?
In those cases, according to the laws in Puerto Rico, employers would have to pay 70 percent of the federal minimum wage. In today’s situation—with the federal minimum wage still $5.15 for the time being—that makes the Puerto Rican minimum wage set at $3.61 per hour. There is also something called the applicable mandatory decree rate. The Puerto Rican employers have to either pay this applicable mandatory decree rate or the 70 percent of the federal minimum wage rate, whichever is higher.
What happens when the federal minimum wage goes up to $5.85, $6.55, and then $7.25 per hour in the coming years if that bill is finally passed in Washington DC? Then the Puerto Rican minimum wage would go up to about $4.10, $4.58, and $5.08 respectively.
But depending on how successful an employer is, or how small they might be, at a certain point if this minimum wage gets so high that it might affect the welfare of their business, they can request a special minimum wage just for their business. This new minimum wage must be accepted by the Secretary of Labor and Human Resources. The key to this authorization is to show that the higher minimum wage could hurt employment—i.e., lead to people getting laid off, or less people getting hired in that particular business of industry.
Welcome to the beautiful territory of Puerto Rico, where every once in a while they vote whether to become a state in the United States, stay as a territory, or even break free from the United States in entirety and go it alone. What generally wins in these voting procedures is the status quo, the urge to stay with the way things have worked since Puerto Rico was taken in by its big neighbor to the north back in the Spanish American War of 1898.
As an official territory of the United States, employers and other business folks in the state also have to deal with many of the same laws that employers and business folks in Alabama or Alaska have to deal with. And one such labor law is the minimum wage. The employers in Puerto Rico also have to know whether they are liable to follow the Fair Labor Standards Act. And as we know, the federal minimum wage and the Fair Labor Standards Act go hand in hand. If an employer follows the latter, then they must pay the former.
We’ve covered the Fair Labor Standards Act a bunch in this blog, but here’s one more go at it (and probably not the last go either). Employers who have to follow the Fair Labor Standards Act are either bringing in an annual revenue of more than $500,000, or they operate across multiple states (and in this situation, territorial) boundaries. Other types of businesses are also automatically drawn into the FLSA, such as hospitals and schools and a few other similar types of businesses.
These folks in Puerto Rico have to pay the federal minimum wage, so if and when it goes up they will face the new pay rates of $5.85, $6.55, and then $7.25 in the years 2007, 2008, and 2009, respectively.
The minimum wage in Puerto Rico varies from $3.61 per hour to $5.15 per hour. For those employers who are covered by the Federal Fair Labor Standards Act (FLSA) must pay the Federal minimum wage of $5.15 per hour. Employers who are not covered by the FLSA are allowed to pay their workers at least seventy percent of the Federal minimum wage or the applicable mandatory decree rate as stated under Puerto Rican law. Also any hours worked over forty hours in a week is paid at double the rate.
In June of 2006 the House of Representatives in Puerto Rico attempted to pass H.B. 1714 that would increase the minimum wage rate for workers throughout Puerto Rico. This bill designated the basic hourly state minimum wage to be $5.40 per hour as of July 1, 2006. This proposed bill also would increase the minimum wage by twenty cents annually every July 1st until the year 2020 at which time it would increase to twenty-five cents thereafter. Passage of this bill is still pending.
Most of the employment in Puerto Rico can be broken down into several different occupational categories. For example, the largest employment (42.1%) is in manufacturing with 9.9% in the services industry, 9.6% or 250,000 employees are government workers and only 0.3% in agriculture. As a result any increase in the minimum wage would help the economy of Puerto Rico by redistributing the wealth to the less advantaged classes, subsidize agricultural jobs and move those workers from the poverty level.
The H.B. 1714 provided an exclusion clause that stated that those jobs such as agricultural workers and those workers in a particular industries or businesses or municipal governments where the State minimum wage would substantially affect their jobs the increase in the minimum wage would not apply. Even though Puerto Rico is not a state of the U.S. many goods and services are directly affected by their participation with the U.S. economy.