EXCLUSIVE: Feds probing Puerto Rico’s coffee industry wage practices

Written by  //  September 3, 2012  //  Labor/HR  //  No comments

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Puerto Rico’s coffee workers earn an average compensation of $3 an hour. (Credit: © Mauricio Pascual)

Puerto Rico’s coffee industry and its wage practices are under scrutiny by the U.S. Department of Labor: starting this month, the agency will target this sector to verify that employers are in compliance with the federal minimum wage.

As part of the initiative, investigators from DOL’s Wage and Hour Division will fan out across the island’s mountainous coffee region to conduct unannounced visits to targeted coffee farms where they will check if these operations are paying their employees according to labor standards, WHD Caribbean District Director José R. Vázquez told News is my Business.

WHD interventions stem mainly from employee complaints but may be triggered by the division’s own research into various industries. Vázquez did not identify any of the employers on WHD’s radar but said that under a Strategic Enforcement Approach to Compliance the division chooses targets that will generate “the most impact.”

“The most vulnerable workers in the U.S. are Puerto Rico’s agricultural workers,” said Vázquez. That’s because fear of losing their jobs makes them less likely to file a complaint against an employer even while they may be earning much less than what is owed to them by law.”

The local coffee industry employs about 30,000 seasonal workers who are hired to pick coffee beans between the months of July and November.

“The problem is that when you take the total compensation and divide it by the number of hours worked, it is a lot less than the federal minimum wage and the local minimum,” Vázquez said. The hourly federal minimum wage is $7.25 while the local minimum wage stands at $5.08.

Coffee workers earn an average compensation of $3 an hour.

Nursing homes, security companies in crosshairs
But coffee is not the sole area of interest for WHD. Come 2013, the office plans to scrutinize the island’s nursing homes and security guard businesses, both of which also lag in compliance with wage standards, according to Vázquez.

When it comes to FLSA compliance, Puerto Rico’s record is less than stellar. Vázquez estimated that 70 percent to 80 percent of employers in both public and private sectors are in compliance. (Credit: Wikipedia)

Security guard companies are sometimes difficult to track down because smaller outfits tend to work out of a home instead of an office with a physical address. There is little WHD can do if it can’t locate an operator.

In this case, the only recourse for employees seeking redress on wage matters is to hire a lawyer and try to pursue the case on their own, Vázquez said.

Meanwhile, about half of all the nursing homes operating in Puerto Rico — a number that Vázquez put at around 2,000 between licensed and unlicensed homes — are underpaying their employees. This is most often the case with smaller operations, he said.

Part of the problem, according to Vázquez, is a misconception by smaller nursing homes that the federal minimum does not apply to them because their revenues fall below the half million mark. (Their average yearly income is $100,000 to $200,000, he said.)

The Fair Labor Standards Act, which establishes minimum wage, overtime pay, record keeping and child labor standards, covers enterprises engaged in interstate commerce or with more than $500,000 in gross volume of sales.

But the law also applies automatically to state and local government branches, educational institutions, hospitals, and other residential care facilities, including nursing homes.

Shady minimum wage compliance record
When it comes to FLSA compliance, Puerto Rico’s record is less than stellar. Vázquez estimated that 70 percent to 80 percent of employers in both public and private sectors are in compliance.

“We find many more violations than any other jurisdiction in the U.S.,” said Assistant District Director David G. Marín, during the interview with this media outlet.

“Most cases in the U.S. are related to overtime. In Puerto Rico, it is more a minimum wage problem,” said the federal officer who joined the local enforcement staff after nine years with WHD on the mainland.

Interestingly, cases having to do with public employers mostly involve overtime.

WHD’s approach combines the carrot with the stick. Vázquez said the office has stepped up its outreach efforts: it holds between 25 to 30 activities per year aimed at informing employees of their rights and employers of their obligations under the various labor statutes.

And to maximize its efforts it has entered into collaborative partnerships with local government agencies and even the Dominican Republic Consulate. Dominicans in Puerto Rico are mostly engaged in agricultural and domestic work, he said.

Coffee sector review to take 3 months
Investigations such as the one into the coffee industry usually take three months from start to finish.

Vázquez said the division is assigning five to six of its local enforcement staffers to check out coffee operations with an extra five or six people coming down from the states to provide additional support and expertise on farm workers. As part of their duties, investigators will examine company records such as payroll and time sheets and interview workers on the field. If necessary, they might even do surveillance.

While unlikely to roll down the red carpet for any federal investigator, Puerto Rico employers are cooperative for the most part, according to Vázquez. Marín reminded that WHD also counts with legal resources to deal with recalcitrant employers.

If found at fault, most employers agree to settle wage claims to avoid lengthy, and thus costly, litigation. Vázquez said the government will try to recoup wages owed to employees as quickly as possible but will extend a payment plan to financially strapped companies.

Only about 10 percent of cases end up in court with the division usually prevailing. That’s because the legal department is unlikely to litigate a case unless it is confident of a win, Vázquez said.

WHD, which has jurisdiction over the U.S. Virgin Islands as well, has a staff of 17 people working out  of the district office in Guaynabo and field offices in Arecibo, Mayaguez, and Ponce.

In addition to the Fair Labor Standards Act, WHD also enforces other statutes such as the Migrant and Seasonal Worker Protection Act and the Family and Medical Leave Act.

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