Although that is or may be true to a certain extent, there is a little bit more to it than that. I have realized lately something which I confess I should have realized much before, and that is that the actual competition doesn't come from really foreign products, but from domestic products sent out of the country as unfinished merchandise, finished outside by manual labor and brought back.

Senator DOUGLAS. China?

Mr. FERNÓS-ISERN. China, the Philippines, the Madeira Islands, the Portuguese Islands. In that case what is being imported is not foreign products, but foreign labor, foreign cheap labor. It is in practice the same thing as if a group of Chinamen and Filipinos were allowed to work for a low wage on the mainland on the same job with perhaps an extra charge for transportation.

I have had many times people in Puerto Rico in this business tell me they would like to pay high wages, but the minute they are going to pay higher wages, they will have to charge the contractor in New York a higher price for the work they are doing for him, and then they are told, "Well, if that is the case, we will send our work to China or we will send it to the Philippines or we will send it to Madeira", and in order not to lose the business they have to keep at the rates they are paying.

While those conditions exist, while we develop industrially, while we try to do away with the chronic situation there where no less than 75,000 are chronically unemployed out of a population of 2,000,000, we all feel that although it would be most desirable to have the same rates as in the mainland, we must have special treatment, a differential that will allow us to develop and finally find ourselves.

I want to say, too, that the insular government has adopted, the legislature of Puerto Rico had adopted since about 80 years ago an insular minimum wages law. We have a minimum wages board, and it works on the basis of industries. That is, it determines with each industry what the minimum wage for it should be, and it is a matter of record that more than once this board has found that a certain industry may pay a higher wage than they had bargained for with the labor unions themselves.

In other words, the minimum wages board of Puerto Rico is looking after the best interests of the laborers, at times even going further than they would have gone, probably because of better knowledge of facts.

Senator DOUGLAS. Mr. Commissioner, is there a wages board for the needlework industry in Puerto Rico?

Mr. FERNÓS-ISERN. The Insular Minimum Wages Board would cover every industry, but naturally, with the Federal law applying there, then the Federal law supersedes the local law.

Senator DOUGLAS. What is the minimum wage prescribed for the needlework industry in Puerto Rico?

Mr. FERNÓS-ISERN. For the needlework industry?

Senator DOUGLAS. Yes.

Mr. FERNÓS-ISERN. I understand an average of 20 cents an hour, very low. What is proposed in the bill is that there should continue to exist these special boards appointed by the Secretary of Labor with local representation on them, and that they may find for each industry what each one of them may pay.

That is all. Thank you very much.

Senator THOMAS. Thank you very much.

Next is Mr. C. Tracy Taylor, counsel, Pennsylvania Bakers' Association.

STATEMENT OF C. TRACY TAYLOR, COUNSEL, PENNSYLVANIA BAKERS' ASSOCIATION, ON BEHALF OF WILLIAM A. QUINLAN, COUNSEL FOR THE ASSOCIATED RETAIL BAKERS OF AMERICA

Mr. TAYLOR. I am C. Tracy Taylor, appearing today for William A. Quinlan, counsel for the Associated Retail Bakers of America. Mr. Quinlan was notified yesterday that he would have an opportunity to appear today, and he is engaged before the Interstate Commerce Commission and was unable to come.

I am authorized to state that the American Bakers Association concurs in the views which I will express. The Associated Retail Bakers and the American Bakers Association will file statements, and we will appreciate if if they would appear after my remarks in the record. I have also filed a statement on behalf of my own association, the Pennsylvania Bakers Association, and I would appreciate it if that can appear at the same place.

Senator THOMAS. Without objection, they will appear at the end of Mr. Taylor's remarks as requested.

Mr. TAYLOR. We particularly asked permission to appear orally before the committee for the reason that we have in mind a problem which is not treated at all in S. 653. We believe that the first matter to which the committee should turn its attention is the tremendous problems that have arisen under the Fair Labor Standards Act before they determine the expansion of its coverage. That has been done. with great care in the field of the regular rate of pay.

We wish to call the committee's attention to a situation which still exists with regard to the question of what are hours worked. If I may, I would like to read briefly from this statement and then discuss this for a moment.

When Congress required payment of a minimum hourly wage and overtime premium pay in 1938 it did not define the time, or activities, of employees with respect to which the payments should be made. The Wage and Hour Administrator and the courts construed the 1938 act to require such payments with respect to all time spent by employees in activities deemed by the Administrator and the courts to be work. They adopted a completely legalistic concept of work, having no regard for concepts accepted by collective-bargaining agreements, or contracts, customs or practices prevailing in industry where collective bargaining did not obtain.

The unrealistic approach to this question by the Wage and Hour Division and the courts inspired the flood of so-called portal litigation. Faced with the serious obstruction to interstate commerce inherent in the then pending and threatening litigation, Congress, in 1947, enacted emergency legislation, known as the Portal-to-Portal Act, and catastrophe was averted by superimposing a bar upon then existing claims arising under the Fair Labor Standards Act when they rested on activities which were not compensated as work by collectivebargaining agreements, other forms of employer-employee contract, or custom or practice.

Congress at the same time recognized that the legalistic approach of the Administrator and the courts to the working time question had severely impaired the collective-bargaining process and threatened to do so in the future. So long as unions and employers could not by contract fix what should be working time and were uncertain what a Department of Labor lawyer or a judge might consider to be working time, the rights of employees and the liabilities of employers operating under such agreements would remain in doubt. Contracting under such circumstances would obviously be difficult and unsatisfactory to both parties.

Therefore, Congress also sought to ameliorate this condition when it enacted the Portal-to-Portal Act. It must be borne in mind, however, that that legislation was emergency in character, and hence did not attempt to get at the root of the problem by direct amendment of the laws under which the problem arose, particularly the Fair Labor Standards Act of 1938. Rather, leaving the basic laws, including the Fair Labor Standards Act of 1938, unchanged, it superimposed a bar on liabilities under those laws in the areas believed to involve the greatest uncertainties.

While at the time of enactment of the Portal-to-Portal Act this approach to the problem was clearly warranted, at best it could hardly be expected to be satisfactory. Even to understand the relationship between the Fair Labor Standards Act of 1938 and the Portal-toPortal Act is far more than can be expected of the average employer and employee, or for that matter, the average adviser of either one. The Administrator has employed over 1,000 words in a bulletin seeking to make clear this relationship as it relates to the present working-time problem alone. In addition to the basic difficulty in construing the two laws as they relate to each other, the bar imposed by the Portal-to-Portal Act upon Fair Labor Standards Act prospective liabilities, as construed by the Administrator, leaves a vast area of uncertainty to hamper free collective bargaining.

Since S. 653 is a complete rewrite of the Fair Labor Standards Act, with amendments deemed by its draftsmen to be desirable, it should take cognizance of this problem and clarify the situation.

A word about the continuing area of uncertainty is necessary to an understanding of the full scope of the problem. It will be remembered that the activities involved in the Portal litigation generally were travel on the employer's premises to and from the work benchthis being first raised in mining operations and preparatory activities or washing up at the end of the day and similar matters.

Congress, by the Portal-to-Portal Act, sought to bar liability under the Fair Labor Standards Act of 1938 for such activities. It did so in so many words as to travel time because that could be readily described as "walking, riding, or traveling," but with regard to the myriad other things which an employee might do on an employer's premises before the beginning of his regular work or after work ended, no such simple language could be employed. Congress described such activities as those "preliminary" and "postliminary" to the “principal activity or activities" of the employees, and barred liability with respect to them.

Unfortunately, this nomenclature lends itself to legalistic, unrealistic construction to a greater degree than the original language"work" or "employment"-in the Fair Labor Standards Act. The

Administrator or his legal advisers have made it clear in the bulletin issued under the Portal-to-Portal Act that they intend to determine what is "preliminary" or "postliminary" as opposed to a "principal” activity without regard to collective bargaining agreements or other indicia of what the industrial society may regard to be work. Jargon unknown to employers and employees has already been adopted. We are advised by the Administrator that activities which may be considered "preliminary" as to one job may be considered an "integral part" of the "principal activities" of another, without regard to whether or not they are differently treated in collective-bargaining agreements.

The result of this situation is that if an employer and a union agree upon rates of pay and overtime provisions with an express understanding that certain activities are to be excluded from measured working time, or if when agreeing upon rates of pay and overtime provisions there is a custom or practice in effect of excluding certain activities from measured working time so that such exclusion is intended under their agreement, neither party can be certain that such activities will not nevertheless be treated as "work" for purposes of the Fair Labor Standards Act. A well informed employer will hold otherwise available funds in reserve against possible unintended liabilities. The union will be subject to a constant threat that its position may be undermined by someone claiming inconsistency with its contracts.

In order that collective bargaining may be freed from the effects of this uncertainty under the Fair Labor Standards Act, it is proposed that S. 653 be amended to include among the definitions the following:

() HOURS WORKED. In determining for the purposes of sections 6 and 7 the hours for which an employee is employed, there shall be excluded any time which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.

We think it is extremely important to clarify the present situation. Nobody knows today what is a preliminary activity, what is a principal activity, what is an integral part of a principal activity with respect to a half-dozen jobs, let alone the thousands of different jobs in this country.

The only conceivable way of obtaining any certainty in the matter is to permit the agreements reached between industry and labor to determine that fact. Otherwise, you are always open to the same type of situation that gave rise to the Portal litigation. It is extremely difficult to bargain under circumstances where neither of the parties knows what the law is in this respect. The instances that could be cited of problems are just as broad as the industry of the country.

We have limited this proposal to exclusion of activities by collective bargaining agreements. We have not extended it to the field of unorganized shops where we have met the contention from others with whom we have discussed the problem that an employer might overreach by establishing customs which would exclude from working time things which actually were work but we do not feel that Congress should reenact in effect the Fair Labor Standards Act without treating the problem in some manner, and this is the proposal which we have advanced here. We think it will produce clarity in the field of the greatest trouble, and without leaving the door open for anyone to claim that we are asking for an opportunity for employers to abuse the employee.

Senator DOUGLAS. What percentage of your industry is organized? Mr. TAYLOR. The vast majority of it. I couldn't give you in detail what it would be, but the Bakery and Confectionery Workers, A. F. of L., is an old, old union. My own area is in Pennsylvania, and I know we are quite completely organized in Pennsylvania.

Senator DOUGLAS. Would you say that 75 percent of the bakery workers are operating under collective bargaining agreements?

Mr. TAYLOR. I would say that. Mr. Creed represents the American Bakers Association and he says "yes."

Actually, of course, what we are proposing would not correct the situation so far as the unorganized shops are concerned. They would still be in an area of doubt, but at least in the field where we can with some confidence of fairness clarify the situation we believe it should be done.

I would like to mention a couple of other points on the question of the extension of coverage. I think the committee should have in mind that the present language would extend this law to every little hand-bake shop throughout the United States. Most bakers obtain their flour from outside the State. They bake in the back of the building and sell in a little store in the front, a retailer, but he gets something from outside the State, and in one sense at least he is in competition with the big fellow.

Senator DOUGLAS. What is the ruling now in the case of local bake shops? Are the men who work in the bakery included under the act? Mr. TAYLOR. They are not included under the act because the employees are not engaged in interstate commerce, but the employer, in a sense, is engaged in interstate commerce because he buys flour from outside the State or he buys other ingredients from outside the State.

Senator DOUGLAS. Perhaps because of the rule that the local bake shop is not producing goods for interstate commerce, they have been granted an exemption.

Mr. TAYLOR. They are not granted an exemption. The employees are simply not under the basic coverage language of the act because the employees are not engaged in interstate commerce or the production of goods for interstate commerce.

The retail exemption would apply if you separated the establishment into the little store in front and the bakeshop behind, the retail exemption would apply to the store in front.

I should say in that connection that Mr. Quinlan's statement, I believe, will contain a proposal with respect to the revision of the retail exemption to cover the little hand shop, all of the employees; that is, the baker as well as the store personnel. I am not qualified

to comment on that.

Senator WITHERS. Would you know where interstate commerce begins and ends?

Mr. TAYLOR. I don't know where it begins and ends, sir, and I am sure I don't know where "affecting interstate commerce" begins and ends, and I don't know where "activities in competition with interstate commerce" begins and ends, but I am confident of this: that without an amendment in the retail exemption, certainly, and even with it, many, many little local bakers can reasonably, under the language as here proposed, be found to be covered by the act.

I would like to say this: In connection with that, I understand the Secretary and his counsel have indicated that if they are granted the