Supplemental Unemployment Benefit Plans

Contributions by an employer under a supplemental unemployment benefit plan may be excluded from the regular rate of pay on which overtime is computed if the plan qualifies as a bona fide employee benefit plan under section 7(d)(4) of the act. Supplemental unemployment benefit plans provide unemployment benefits to laid-off employees in addition to or as a substitute for those provided by State unemployment laws. Although the law does not require that such plans be submitted to the Divisions for approval, substantial numbers of requests are made for rulings. Typically, adoption of a plan is made provisional on the Administrator's approval.

The plans submitted during the year were generally similar to those originally presented in 1955, when such plans began to be adopted. However, most of the requests were for approval of amendments to existing plans under which the benefits for employees have been revised to increase the amount and duration of benefits, and to include severance payments when employment is terminated. In many instances the amendments were readily approvable, but the wide variety of additional provisions in amended plans presents increasing numbers of novel questions under this section of the law.

Administration of Minimum Wage
Provisions

The Fair Labor Standards Act contains certain sections designed to provide more flexibility in the application of the minimum wage standards in particular situations, while at the same time safeguarding the position of employees in general and the competitive status of firms which must observe the statutory minimum. Thus, there are provisions authorizing the setting of minimum wage rates by wage orders for Puerto Rico, the Virgin Islands, and American Samoa. Also, special minimum rates are set by administrative regulation for learners, apprentices, and the handicapped. The employment of homeworkers, another economically vulnerable group, is subject to administrative regulation or prohibition, though they must be paid at least the minimum wage.

The minimum wage provisions of the Public Contracts Act are intended to prevent the Government's purchasing power from being used to depress the standards already being maintained by firms in the industry. These provisions thus require payment by contractors of prevailing minimum wages, as determined by the Secretary of Labor.

Puerto Rico, the Virgin Islands, and American Samoa

Since enactment of the 1955 amendments, which set a statutory minimum wage of $1 an hour and which substantially changed the procedures for issuing wage orders, there has been much progress toward achieving higher minimum wage

levels through such proceedings. Originally applicable in Puerto Rico and the Virgin Islands, the wage order procedure was extended to American Samoa in fiscal year 1957. Wage orders setting minimum wage rates for employees in these islands are issued by the Administrator on the basis of recommendations of industry committees, composed of residents of the island and the mainland, and equally representative of employers, employees, and the public. Such committees are authorized by the act to recommend minimum wage rates at or below $1 an hour.

I

On August 25, 1958, the President approved an amendment to the Fair Labor Standards Act which changed the wage order program from an annual to a biennial basis. In addition, the amendment gave the Secretary discretionary authority to order in the biennial period an additional review of particular rates and made it clear that rates which had already reached the statutory objective need not be reviewed.

As a result of this legislation, this year's wage order program was reduced from 10 series of committees, including 8 in Puerto Rico and I each in the Virgin Islands and American Samoa, to 5 series of committees, each of which considered industries in Puerto Rico. Appendix table D lists the new wage order rates by industry, together with the corresponding rates at the preceding year's end.

The new wage orders involved 70 rates or changes in rates for industries, classifications, or individual products. The median increase amounted to 5 cents an hour. However, as in former years, there was wide variation from industry to industry. For example, two of the lowest rates, the 25-cent minimum for hand-sewing fabric gloves and the 36-cent minimum for processing Puerto Rican cigar filler tobacco, remained unchanged. In each instance, employment has declined markedly in the past year or two. On the other hand, the rates for several other classifications or products were raised 15 or 20 cents an hour up to the $1 goal.

Since the 1955 amendments, very substantial progress toward higher minimum wage levels has been achieved in the offshore areas to which the tripartite industry committee procedure for establishing rates is applicable. For example, as shown in appendix table E, approximately 85 percent of the rates in Puerto Rico have been increased by one-third or more since the autumn of 1955, and about 55 percent of the rates have gone up by 50 percent or more. Similarly, over threefifths of the rates went up 25 cents an hour or more, and almost one-fifth of the rates went up 40 cents an hour or more. This progress is particularly noteworthy when it is borne in mind that rates in Puerto Rico were subject to periodic adjustment throughout the period from January 25, 1950, to March 1, 1956, when the legal minimum on the mainland remained unchanged.

Despite the overall improvement in the level of Puerto Rican rates, it is apparent that some industries have not shared fully in the gains since 1955. These are primarily the older handwork industries which are gradually losing out in competition because of substantially lower wages in other areas of the world, more technologically advanced methods of production, or changes in modes of living 1 Public Law 85-750.

and consumer demands. Rates for a few industries of this type were increased less than 20 percent and less than 10 cents an hour. These industries are not competitive with comparable industries on the mainland of the United States, yet they employ a significant though sharply declining proportion of the Puerto Rican labor force.

Another method of showing the significant changes that have occurred in Puerto Rican minimum wage levels is an analysis of the proportion of employees working in industries with particular rates. Appendix table F indicates that at the end of the first year of annual review of the minimum wage rates applicable on the island, over one-fifth of the covered employees were subject to rates of less than 40 cents an hour and less than one-fifth to a rate of $1 an hour. By the close of the fiscal year 1959, the proportion below 40 cents had been reduced more than half and the proportion at a $1 minimum had more than doubled. At present, more than two-fifths of the covered workers in Puerto Rico are employed in industries with a legal minimum of $1, and only one-tenth, all of them hand-stemmers of cigar tobacco or homeworkers engaged in hand-sewing gloves or handkerchiefs, in industries with rates of less than 40 cents. Similarly, at the end of the fiscal year 1957, slightly over one-third of the Puerto Rican workers were subject to a minimum rate of 80 cents or higher. Two years later this proportion had risen to almost three-fifths.

It was to be expected that the greatest strides toward higher minimum wage standards in Puerto Rico would be achieved shortly after the Congress enacted the Şı minimum and that subsequent increases would be more modest. As illustrated in appendix table G, this has in fact happened. During the first full fiscal year subsequent to the 1955 amendments, the median increase in Puerto Rican rates amounted to 10 cents an hour. In each of the 2 succeeding fiscal years, this figure amounted to 5 cents an hour. In the fiscal year 1957, minimum rates were left un changed for a small number of industries, with less than 1 percent of the employees, and increases of 15 cents an hour or more were approved for numerous industries, with 37.8 percent of the employees. Two years later, however, the proportion of employees in the industries for which rates were unchanged rose to 18.6 percent, and the proportion in the industries which received increases of 15 cents an hour or more dropped to 1.7 percent.

Learners, Apprentices, and Handicapped Workers

Under section 14 of the Fair Labor Standards Act, learners, apprentices, certain messengers, and handicapped workers may be employed under certificates pursuant to regulations at special minimum rates lower than the statutory (or wage order) minimum, to the extent necessary to prevent the curtailment of opportunities for employment. Separate regulations established for each category of worker and the certificates issued thereunder serve to protect the statutory minimum and at the same time prevent a curtailment of employment opportunities. Reappraisal of regulations, standards, and operating policies and procedures is a continuing function in the administration of this exemption.

Learners

A comprehensive review of the terms and conditions under which learners are permitted to be employed, initiated during the preceding year, was completed. As a result, learner standards adopted in 1956 under the then newly amended minimum wage have been advanced to reflect changing economic conditions and administrative experience.

Regulations Amended.-Learner certificates are issued pursuant to general learner regulations which provide for the establishment of supplemental industry regulations where needed. Such regulations are in effect for these industries: Apparel, knitted wear, glove, shoe manufacturing, hosiery, cigar, and independent telephone. Following a study in each industry, proposed amendments to the regulations were announced, with opportunity for public comment. Subsequently, final amendments were adopted, becoming effective on a specified date at least 30 days later. They applied to all learner certificates previously issued to plants in these industries under which learners could continue to be employed after the effective date of the amendments.

The most significant type of amendment was the increase in minimum learner rates. The increases significantly reduced the margin between learner rates and the $1 minimum and kept pace with wage movements studied in the affected industries. The old and new learner rates are shown in appendix table H.

In addition to the changes in minimum learner rates, certain other revisions were adopted in order to improve the learner standards for particular industries. Such matters as the number of learners permitted, the extent of the learner period, the learner occupations involved, and similar issues were the subject of amendment.

The terms and conditions of employment in certificates not covered by supplemental regulations were also reviewed. By the year's end, no learner rates below 85 cents were in effect in any of these miscellaneous industries, and most of the certificates provided for learner rates of 90 and 95 cents an hour. Also, none of these certificates permitted training at learner rates in more than two occupations. In Puerto Rico and the Virgin Islands, learner rates continued to be revised upward in the light of increased minimum rates provided by new wage orders.

Certificates Issued.-A total of 2,092 certificates were issued during the year authorizing the employment of an estimated maximum of 42,952 learners. At the year's close, 1,834 certificates were in effect, authorizing the employment of an estimated 35,454 learners. At the preceding year's end, 1,809 certificates were in effect, authorizing the employment of an estimated 32,761 learners.

Some 1,800 of the certificates were issued to plants in industries covered by supplemental regulations, including 1,305 in the apparel industry. The hosiery industry accounted for 214 certificates, knitted wear for 148, and gloves, 71.

Details on actions taken during the year and certificates in effect at the year's end are contained in appendix tables I and J.

Student-Learners, Student-Workers, and Apprentices

Under the student-learner regulations, a total of 824 certificates were issued. Each certificate provides for part-time employment integrated with related school instruction. Certificates are issued on an individual basis, typically to high school students in their senior year, enabling them to gain practical experience in supplementing their studies with work. In addition, 39 student-worker certificates were issued to educational institutions, primarily Seventh-Day Adventist, providing for the training of needy students for employment in school-operated shops in order to assist in defraying expenses.

The Divisions also authorized the employment of 337 apprentices at special minimum rates, of whom 153 were in Puerto Rico.

Handicapped Workers

Nonprofit sheltered workshops continued to employ the great majority of handicapped persons requiring employment at special minimum rates. A total of 23,635 handicapped workers were employed, at the time of application, in the 433 sheltered workshops holding certificates at the end of the fiscal year. This represented increases of 11 percent in the number of workers and 9 percent in the number of workshops over the previous year. A very substantial proportion of the increases reflects the growing interest in sheltered workshop employment for disability groups, such as the mentally retarded, cerebral palsied, and mentally disturbed, whose employment formerly was generally regarded as not feasible.

The rapid growth in the number of workshops in recent years has pointed up the need for comprehensive standards for operating them. The Divisions cooperated with various government and private agencies in programs to meet this need by providing consultant services to national and local organizations on the applicability of the acts to handicapped workers employed under rehabilitation programs.

The Advisory Committee on Sheltered Workshops, composed of representatives from the sheltered-workshop field, labor, management, and the public, completed a study begun last year of the Divisions' workshop program and made various recommendations which were adopted by the Administrator. The Committee also offered its suggestions concerning a comprehensive revision of the sheltered-workshop regulations which the Divisions were contemplating, and these recommendations were being studied at the year's end.

Certificates issued to handicapped workers in regular industry totaled 3,137. Most of the certificates were issued to women production workers whose primary disability was their advanced age. The certificates enabled the workers to be employed in accordance with their productive ability, at prevailing industry rates. The number of certificates issued declined by 15 percent from the previous year. The greatest decrease took place in the women's and children's clothing and cigar manufacturing industries. Four major industry groups-knitting mills, men's and boys' clothing, tobacco manufacture, and women's and children's clothing-continued to account for well over the majortiy of workers with certificates.