N.C. industries fear new wage rules

Staff WriterSeptember 21, 2011 

North Carolina industries that rely on seasonal foreign workers are fighting new federal rules that sharply raise wages, with some arguing that the regulations will put them out of business.

Seafood processors, for instance, would see the hourly minimum wage they pay go up by 50 percent - from $7.43 an hour to $11.18.

"It's impossible to pay that," said Sharon Carawan, whose family has owned Mattamuskeet Seafood in Hyde County for 28 years. "The bottom line is, I think we'd close."

Last week, Carawan was among a group of seafood processors who went to Washington D.C. to lobby Congress. Other businesses, including timber and hotel operators, also are frantically lobbying and marching to the courthouse to head off the new rules. It's a race against the clock - the Department of Labor rules are scheduled to take effect Sept. 30. The wage increase applies to the few thousand temporary workers who enter North Carolina with H-2B visas; it won't affect foreign agricultural workers, white-collar professionals or students who obtain visas to work here.

Advocacy groups complain that the H-2B program is rife with abuse across the nation and that the pay scale the government now uses for foreign workers is artificially low. That pay scale, they contend, also has depressed wages for American workers.

If implemented, the hourly rates, which vary with job types, would rise as much as 129 percent. According to one estimate, rates would increase an average of $4 an hour. It couldn't come at a worse time for many of the industries, which are struggling because of the sour economy.

The new pay scale is "devastating for seasonal employers," said Shawn McBurney, senior vice president of government affairs at the American Hotel & Lodging Association. "The wages DOL is applying bear no relation to the economic reality of the businesses."

Employers say they rely on these foreign workers for the dirty, back-breaking tasks that Americans aren't willing to do - even with the current high unemployment rate. And, they stress, they're required to document their efforts to hire Americans before the government permits them to hire foreign workers.

The wage scale varies by region. For example, while North Carolina seafood processors would pay $11.18 an hour, their counterparts in Maryland would pay nearly $2 less. For some forestry workers, North Carolina employers would pay $16.86 - more than double the current wage - while other Southern states' wages would range from $12.09 in Tennessee to $21.16 in Alabama, according to court documents.

"You hear people saying, 'Are they just pulling these numbers out of the air?' " said Mike Kelly, owner of a Montgomery County company that relies on seasonal foreign workers to plant seedlings on cleared timberland.

'Prevailing' wages

For years the federal government has set minimum wages for H-2B workers based on the "prevailing" wage for a specific job in a specific location. The new wage scale that has drawn industry's ire, however, was triggered by a lawsuit challenging the existing hourly rates filed by a coalition of advocacy groups, including the Southern Poverty Law Center and the N.C. Justice Center.

In August 2010, a federal judge found that the government hadn't followed the proper procedures in establishing the wage scale and ordered it to do so. The Labor Department responded by revising its methodology for calculating wages and said it would implement the new pay scale next January. But on June 28, the judge disallowed the delay and ordered the government to install the new wage rates quickly.

Mary Bauer, legal director at the Southern Poverty Law Center, is behind the new pay scale. "We believe these are the appropriate wage rates," she said.

Bauer allows that industry may have some legitimate complaints about specific wages in specific geographic areas, but added, "They do have a recourse for that. They can ask the Department of Labor to reconsider a particular wage rate if they think, at this particular location, they simply got it wrong. (But) they aren't doing that. They are saying this methodology is wrong across the board."

The new rates are often at odds with average weekly wages in the counties where the workers are located. For instance, a seafood worker who earns $11.18 an hour would gross $447.20 for a 40-hour week. That's higher than the $402 average weekly wage across all industries in Hyde County, and the $388 in Tyrell County, according to Employment Security Commission data. A forestry worker in Montgomery County who earns $16.86 an hour would make $674.40 for a 40-hour week. The average weekly wage in Montgomery County across all industries is $554.

But those numbers don't always tell the whole story, advocates say.

Clermont Fraser, a migrant worker attorney with the nonprofit N.C. Justice Center, said foreign workers typically go into debt to pay for the transportation, the visa and the passport they need to come here. When they arrive, there are no guarantees about how many hours they will work - a problem in industries such as seafood processing that depend on the quantity of oysters and crabs available.

So a willing worker can end up sitting idle for long stretches "because they aren't allowed to work for anybody else," said Fraser. H-2B visas tie workers to a specific employer.

Many foreign workers

For the 12 months that ended in September 2010, 3,161 visas for H-2B workers were approved for North Carolina - ninth among the states - but not all of those workers ultimately came here. Nationwide, the number of H-2B visas is capped at 66,000 a year.

Some businesses depend highly on foreign workers. Sixty of the 72 workers that Mattamuskeet Seafood currently employs have H-2B visas. At Captain Neill's Seafood, a seafood processor in Columbia, 85 of the 115 workers were brought in from foreign countries.

Tara Foreman, whose family owns Captain Neill's, said that with intense competition from crabs imported from Venezuela, she doesn't see how she can stay in business if wages rise dramatically.

Foreman notes that seafood processors also support local fishermen, crab pot makers and others. "This not only affects us personally, it goes right on down the line," she said.

Jordan Timberlands in Mount Gilead is a good example of the indirect impact of the new wage scale. The company doesn't directly employ H-2B workers, but it does hire contractors that rely on them to plant seedlings on its 68,000 acres of land.

Bob Jordan, a former lieutenant governor and president of Jordan Timberlands, stated in an affidavit filed in court that the new wage rule "would be disastrous and would cause immediate and irreparable harm to our company" by raising its costs of "reforestation" by 83 percent.

"If these regulations are not blocked, we will have to examine if we can reduce our workforce of U.S. workers," he stated. "Other land owners will not plant or will plant fewer trees. These actions will not only result in loss (of) jobs for our employees but would also result in massive losses for tree seedling nurseries, chemical distributors ... and other 'supply chain' companies."

Technical objections

Jordan's filing supports a lawsuit filed against the federal government by a group of industries seeking a preliminary injunction to stop the regulations from going into effect. The lawsuit also says the government didn't follow the proper procedure for establishing the wage scale and it should be declared null and void.

The rule's wide-ranging impact is clear from the lengthy list of plaintiffs behind the lawsuit: national groups representing the forestry, lodging, sugar cane and outdoor amusement industries, plus two seafood processing groups.

Susan Pentz, 60, who along with her husband owns the 18-room Harborside Motel on Ocracoke Island, has been bringing in two housekeepers each tourist season for the past decade. She turned to foreign workers, she said, after struggling to hire locals and discovering that those she was able to hire soon quit or showed up only when they felt like it.

"The bottom line is, I ended up cleaning the rooms because ... no one wanted to do that kind of manual labor," Pentz said.

david.ranii@newsobserver.com or 919-829-4877

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