As Puerto Rico is subject to U.S. federal law, in order to qualify as an exempt or 'white-collar' employee, an employee must meet the requirements of the Fair Labor Standards Act (FLSA). That is, the employee must earn a minimum salary of USD455 per week, or USD23,660 per year. The employee’s compensation must not be subject to reduction because of variations in the quality or quantity of work performed. In addition, the employee’s duties must satisfy a 'duties test' to determine if he or she is a bona fide executive, administrator, professional or outside salesperson.
If an employee qualifies as a white-collar employee, he or she is not entitled to overtime pay. As is the case in most U.S. jurisdictions, in Puerto Rico, the terms and conditions of compensation for exempt employees are typically governed by contractual agreement between the employer and the employee, rather than being statutorily established, as in the case of rank-and-file employees. Parties may negotiate a broad variety of compensation and benefits, such as, for example, health, stock options, incentive plans, tax equalisation, other deferred compensation and bonuses.
By contrast, non-exempt or 'blue-collar' employees are non-management personnel who have a right to overtime pay and meal periods, as well as a host of other statutory entitlements and protections under both federal and Puerto Rico law. In consequence, the relationship between the employer and blue-collar employees is extensively regulated, and there is less flexibility to negotiate the terms and conditions of employment. In line with the white-collar exemptions of the FLSA, Puerto Rico also adopted Regulation No 13 (2005), which virtually incorporated the same tests and definitions to classify exempt employees.
On 26 January 2017, the Governor of Puerto Rico signed into law the Labor Transformation and Flexibility Act of 2017, Law Number 4 of 26 January 2017 (Law No 4). Law No 4, also known as the Labour Reform Act amends most of the major employment laws that apply to employees in the private sector. Employees retained prior to the enactment of the law are grandfathered, according to certain specific provisions of Law No 4, so the changes mainly apply to employees hired after the law was signed.
In Puerto Rico, parties are free to enter into any employment contracts they deem appropriate, so long as this arrangement is not contrary to the law, social mores or public policy. Accordingly, employers may retain full-time, part-time, indefinite and temporary employees, among others. Pursuant to Law No 80 of May 30, 1976 (Law No 80), a temporary employee is one who is retained:
Fixed-term employees are those who are retained for a specific project or a specific period of time. An employee will be deemed to be a bona fide fixed-term employee if the employment relationship lasts for no more than three years, including any renewals of the contract. That being said, exempt employees may contractually agree to be deemed fixed-term even if the total period of employment exceeds three years. Employers may also retain the services of independent contractors.
An employment agreement can be verbal. Written contracts are not required for employees hired for an indefinite period. Furthermore, after the enactment of Law No 4, contracts for fixed-term and temporary employees, as well as independent contractor agreements are no longer required to be in writing. However, it is strongly suggested that it be done.
For employees hired before the enactment of Law No 4, probationary employment contracts had to be in writing, for exactly 90 days, dated, and executed by the parties before the beginning of the employment relationship. However, after the enactment of Law No 4, all non-exempt employees are presumed to have an automatic nine-month probationary period. Exempt employees are presumed to have an automatic twelve-month probationary period. Employers and employees can negotiate a shorter probationary period. There is no need for the probationary contract to be in writing.
Finally, Section 2.17 of Law No 4 provides that an employer may assign employees from other jurisdictions to work in Puerto Rico without those employees being deemed to be Puerto Rico employees, as long as he or she maintains an employment relationship with his or her foreign employer and the assignment to Puerto Rico lasts less than three years in total. In such cases, the legal and contractual rights and obligations shall be interpreted in accordance with the employment agreement, including any dispositions regarding choice of law. However, the employee will still be subject to Puerto Rico law for the purposes of income tax, discrimination laws, and workplace accidents or illnesses. If no choice of law is made in the employment agreement, Puerto Rico law will apply.
According to Puerto Rico Act Number 379 of 15 May 1948, 29 L.P.R.A. §271 et seq (Law No 379), which also covers non-exempt (hourly) employees, eight hours of work constitutes a regular working day in Puerto Rico. 40 hours of work constitutes a workweek. Work in excess of these minimums must be compensated as overtime.
In general, and according to the amendments of Law No 4, extra hours are those hours that an employee works for his or her employer in excess of eight hours during the calendar day, in excess of 40 hours during any week, during a day when the establishment should remain closed to the public by law or in excess of the maximum number of working hours a day fixed in a collective bargaining agreement.
If the employer requires overtime, the employer is obliged to pay such employees for each extra hour a wage rate equal to at least time and a half, or double the agreed rate for regular hours. If the industry of the employer is covered by the provisions of the FLSA, that employer will be under an obligation to pay employees for extra hours at a wage rate no less than time and a half of the rate agreed upon for regular hours for both daily and weekly overtime, except when other standards are fixed by a mandatory decree or a collective bargaining agreement. After the enactment of Law No 4, overtime is to be paid at a rate of time and a half of the base salary rate. Employees hired before the law was passed will preserve any benefits they currently enjoy.
Law No 4 also amended the flexitime provisions of Law No 379 so that employers and employees can agree to a voluntary flexible work schedule of no more than ten regular hours a day in a period of four days in a workweek, without incurring overtime liability. Any arrangement for a flexible work schedule can be revoked by mutual agreement of the parties, or unilaterally after one year. Employees may request flexibility as to the place of employment and working hours, and the employer is obliged to respond and/or provide alternatives to the employee’s request within 20 days.
Pursuant to the amendments enacted by Law No 4, employers can also allow employees to replace hours not worked for personal reasons during the workweek. These hours will not be considered overtime if they are replaced during the same workweek as the leave, do not exceed 12 hours in a day, or 40 hours in a week.
Law No 379 also provides meal periods for non-exempt employees. A meal period consists of one hour, but can be reduced to 30 minutes by mutual agreement in writing between the employer and the employee. The meal period for croupiers, nurses, and security guards, can be reduced to 20 minutes. The meal period should commence not before the conclusion of the third, nor after the commencement of the sixth, consecutive hour of work, so that at no time will the employees be required to work more than five consecutive hours without pausing in their duties to take food. As an exception, the Secretary of Labor and Human Resources may authorise that the meal period be enjoyed between the second and the third consecutive hour of work. If during this period the employer requires the employees to work, the employer shall be bound, as a penalty, to pay that period at a wage rate equal to double the rate agreed upon for regular hours. Certain other provisions apply to meal periods after regular hours of work.
After the enactment of Law No 4, the meal period shall be paid at a rate of one and a half times the base rate of pay. The meal period can be waived in cases in which the total number of hours worked does not exceed six hours in a day.
As to exempt employees, in 2005 the Puerto Rico Department of Labour and Human Resources reviewed Regulation Number 13, which included the white-collar exceptions under Puerto Rico law for administrative, professional, and executive employees. The exceptions are very similar to those provided by federal regulations under the FLSA for exempt employees.
Law No 4 reduces the statute of limitations for claims under Law No 379 from three years to one year.
Puerto Rico Law Number 289 of 9 April 1946, 29 L.P.R.A. §295 et seq., (Law No 289) provides that all non-exempt employees shall have the right to one day of rest for every six working days. No employer shall be allowed to deduct from the salary of any employee the day of rest. If the employer requests employees to work on the day of rest, the employer will be bound to pay those employees for the hours worked on the day of rest at a rate double the wage rate agreed upon for regular working hours. After the enactment of Law No 4, the penalty is at the rate of time and a half. Administrators, executives, and professionals, as well as other employees or industries not covered by the FLSA or Law No 379, as amended by Law No 4, are exempted from Law No 289.
Law No 4 repealed Puerto Rico Law No 1 of 1 December 1989, 29 L.P.R.A.§301 et seq., also known as Puerto Rico’s Closing Law, which regulated the operation of commercial establishments in Puerto Rico. As a result, employers are no longer required to pay employees a minimum of USD11.50 per hour for working on Sundays. However, those commercial establishments that, prior to Law No 4, were required to remain closed during Good Friday and Easter must still remain closed.
Puerto Rico’s Minimum Wage, Vacation and Sick Leave Act, Law Number 180 of 27 July 1998, 29 L.P.R.A. § 250 et seq. (Law No 180), which covers non-exempt (hourly) employees, provides that the federal minimum wage law, which in turn provides for a minimum wage of USD7.25 per hour, automatically applies to all employers in Puerto Rico that are covered by the FLSA. The law also provides that those employers that are not covered by the federal statute must pay its employees at least 70% of the prevailing minimum wage. Those employees who have a higher salary will, pursuant to a mandatory decree issued by the Puerto Rico Department of Labour and Human Resources, continue to receive those higher salaries. The minimum wage for exempt employees is USD455 per week.
After the enactment of Law No 4, the statute of limitations established by this law has been reduced from three years to one year. An employee who is working with the employer can only claim the salaries to which she or he is entitled for any reason during the three years prior to the date the action is filed. In the event that the employee has ceased working for the employer, the claim shall only include the last three years prior to the date she or he ceased working for the employer. It is illegal to terminate and rehire, or substitute current employees in order to obtain the benefits to the amendments to Law No 180.
Law Number 160 of 19 September 2014 amended Puerto Rico’s Law No 180 to include additional penalties to employers who do not comply or violate the obligations set forth in this law. Also, through this amendment, authority has been given to the Office of Mediation and Adjudication of the Puerto Rico Department of Labour and Human Resources to consider and entertain salary claims under Law No 180.
Despite the above, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), Pub. L. 114-187, effective 30 June 2016, amended the FLSA to allow the Puerto Rico Governor, with the approval of the Oversight Board, to set a minimum wage of no less than USD4.25 an hour for workers under the age of 25 who first became employed after the enactment of the Act, for a period of four years, or until the termination of the Oversight Board. Employers may not take any action to oust current employees for the purpose of hiring individuals at the reduced hourly rate. Any employer engaging in such conduct will be deemed to have violated the non-retaliation provisions included in the FLSA.
Puerto Rico also provides for a Christmas bonus. Pursuant to Law Number 148 of 30 June 1969, 29 L.P.R.A. §501 et seq. (Law No 148), employers in Puerto Rico must pay a Christmas bonus to employees who work 700 hours between October 1st and September 30th of the bonus year. The maximum statutory bonus under Law No 148 is 6% of salaries up to USD10,000 or USD600. The bonus must be paid between November 15th and December 15th. For employees hired after the enactment of Law No 4, the minimum number of hours to qualify for the Christmas bonus has increased to 1,350 hours in the period between October 1st and September 30th of the year in which the bonus will be paid.
Law No 4 also amends Law No 148 so that employers who employ more than 20 employees within a 26-week period between October 1st and September 30th of the following year will pay a Christmas bonus of 2% of the salaries earned with a cap of USD600, while employers who employ fewer than 20 employees during the relevant period will pay a bonus of USD300. Newly hired employees will be entitled to 50% of the bonus during the first year of employment.
Puerto Rico Law Number 17 of 17 April 1931, 29 L.P.R.A. §171 et seq (Law No 17), was amended by Laws Number 74 of 1 May 1995, and 213 of 26 December 2007, to allow the payment of salaries to employees in either cash, cheque, direct deposit, electronic transfer or payroll credit cards to each employee’s bank account, in payroll intervals not to exceed 15 days. Employers must obtain the employee’s prior voluntary written authorisation for the employer to be allowed to make payments in direct deposit or electronic transfer transactions. These transactions must be made effective the same day. If the payment of wages is made by direct deposit or electronic transfer, each employee must receive a pay slip from the employer acknowledging that the corresponding payment has been deposited in the employee’s bank account and the date of the deposit. The deposit must be available to employees on the regular pay day. Moreover, the salary payments can be made to the employee at the workplace or can be paid in commercial establishments belonging to the employer. Law No 17 applies to non-exempt (hourly) employees.
The law allows employees to file a complaint with the Secretary of Labour and Human Resources requesting the posting of a bond by the employer if an employer makes payments with cheques drawn against insufficient funds, or if the employer’s bank account has been closed. Employers are not allowed to make any payroll deductions from the employee's wages unless the employee authorises the employer in writing. Deductions are limited to one of the following purposes:
An employer that affects in any way the employment of an individual because the employee has not authorised the payment of salaries by direct deposit or electronic transfer shall be held liable and, if found guilty, shall be subject to a penalty.
Furthermore, under Puerto Rico Law Number 3 of March 13, 1942 (Law No 3), female employees who give birth or adopt a child are entitled to receive 100% of their salary during the statutory eight week maternity leave.
The only limitation for executives is the payment provided by the white-collar exceptions of the FLSA, which provide for a minimum salary of USD455 per week.
In general, Law No 180 allows employees to accrue one and a quarter days of vacation leave and one day of medical leave per month, for each month in which the employee works at least 130 hours, for employees retained prior to 26 January 2017. Law No 180 has numerous requirements that regulate the use of vacation and sick leave. Certain mandatory decrees, which are still in effect, could provide for lesser or superior vacation and sick leave benefits.
After the enactment of Law No 4, all employees are required to work 130 hours to accrue vacation and sick leave. Newly hired employees will accrue a minimum of half a day's vacation leave per month during the first year of employment. The employee will then accrue three quarters of a day's vacation leave from the second to the fifth year of employment. From the sixth to the fifteenth year of employment, the employee will accrue one vacation day per month, and one and a quarter days of vacation leave after the 15th year of employment. Sick leave accrual remains the same, at one day per month.
Under Law Number 251 of 31 December 2015, Puerto Rico also allows employees to use up to five days of medical leave in connection with the illness or medical treatment of a child, parent, spouse, person of advanced age or with a disability, or under the employee’s custody or tutelage.
Vacation and Leave
On 31 January 2018, Puerto Rico passed Law Number 28, which establishes special leave for employees with serious catastrophic illnesses. Law No 28 provides six additional paid days off per year for public and private sector employees who suffer any of the following catastrophic illnesses: AIDS, tuberculosis, leprosy, lupus, cystic fibrosis, cancer, haemophilia, aplastic anaemia, rheumatoid arthritis, autism, post-organ transplant complications, scleroderma, multiple sclerosis, amyotrophic lateral sclerosis (ALS) and chronic renal disease stages three, four and five. Use of this special leave is subject to the following requirements:
In addition, an employer may not consider the use of this special paid leave as an unfavourable factor in an employee’s performance evaluation or take adverse actions against employees for taking this leave, such as reducing their work hours, reclassifying their position, or changing their shifts or schedule.
After the enactment of Law No 4, employees are required to work 130 hours to accrue vacation and sick leave. Newly hired employees will accrue a minimum of half a day's vacation leave per month during the first year of employment. The employee will then accrue three quarters of a day's vacation leave from the second to the fifth year of employment. From the sixth to the fifteenth year of employment, the employee will accrue one vacation day per month, and one and a quarter days of vacation leave after the 15th year of employment. Sick leave accrual remains the same, at one day per month.
On 27 January 2018, Puerto Rico passed Law No 60 to amend Article 6 of Law No 180 in order to forbid employers from using justified medical absences as efficiency criteria in an employee’s yearly performance evaluation. Law No 60 sets forth that employees are entitled to use their sick leave in such cases as is necessary and warranted. Therefore, it is a violation of that right, guaranteed by law, for employers to establish an internal policy which allows them to treat justified medical absences in the same manner as unjustified or irresponsible absences, thereby creating a negative impression of the employee when he or she is considered for a pay increase, a promotion, or other job-related benefits.
Under Law No 3, working mothers are entitled to eight weeks of paid maternity leave and employment reservation. Law No 3 also applies to all employees; exempt and non-exempt. Paid maternity leave is also available to women who adopt a child under five years of age. The Puerto Rico Department of Labour and Human Resources has issued regulations pursuant to Law No 3. Also, Puerto Rico’s breastfeeding law, Law No 427 of 16 December 2000 (Law No 427), requires a safe, private and hygienic place for employees who are nursing or extracting breast milk. Law No 427 entitles breastfeeding mothers to a break of one hour for each working day, which may be divided into two 30-minute or three 20-minute breaks, for up to one year after the employee’s return from maternity leave. Law No 4 also amended Law No 427 to allow mothers who work part-time but more than four hours a day a period of 20 minutes to nurse or extract breast milk. Law No 4 also establishes a USD3,000 penalty for violations of the law.
Maternity is perhaps the most protected condition covered by Puerto Rico labour laws.
As to disability, Puerto Rico’s Workmen’s Accident Compensation Law, Law No 45 of 18 April 1935, 11 L.P.R.A. §1 et seq (Law No 45), provides up to twelve months of leave with reservation of employment for work-related accidents or conditions. All employees must be insured for work-related accidents through the State Insurance Fund, a state monopoly created for this purpose. Failure to insure employees or late payment of the insurance premiums can result in stiff penalties. However, an insured employer will have immunity against lawsuits for work-related accidents.
Puerto Rico’s Short Term Non-Occupational Disability Law, Law No 139 of 26 June 1968, (Law No 139 or SINOT by its initials in Spanish) provides up to one year of leave with reservation of employment for temporary disability not connected with employment. Law No 139 also provides for certain weekly payments for up to six months. Employees can be insured through the Puerto Rico Department of Labour, through a private insurance company, or can be self-insured. Further, similar to the Americans with Disabilities Act (ADA), local law provides that leave may be a form of reasonable accommodation.
Law No 4 decreases the employment reservation provided by Law No 45 and Law No 139 to six months for employers with 15 employees or fewer at the time of accident or disability.
In addition, Puerto Rico law provides, under specific circumstances, statutory leave for employees summoned as witnesses in criminal cases, serving as jurors, for employees receiving treatment for substance abuse, and for sports-related activities. Puerto Rico Law No. 138 of 26 June 1968 also creates statutory protection for individuals involved in automobile accidents. Under the statute, the Administration for Compensation for Automobile Accidents (ACAA), a Puerto Rico public corporation, is charged with providing health services and employment reservation for victims of automobile accidents. The period of employment reservation is six months.
Finally, Law No 4 creates an obligation for employers to accommodate the religious practices of their employees. While this is not a source of statutory leave, it does require employers to reach agreements with their employees to provide accommodations that reasonably allow them to observe their religious practices, so long as it is not unduly burdensome for the employer to do so. In the event that the religious accommodation includes any period of leave, Law No 4 does not require that such leave be compensated.
The Family and Medical Leave Act (FMLA) applies in Puerto Rico just as in any other US state.
Confidentiality and Non-Disparagement
In general there are no restrictions on well-crafted confidentiality and non-disparagement policies in Puerto Rico. However, Puerto Rico is subject to the same restrictions and limitations imposed by agencies such as the National Labor Relations Board (NLRB) to regulate employee comments on social media. The basic right for employees, whether unionised or not, to engage in concerted activities for the mutual aid and protection of co-workers has given the NLRB a mandate to regulate expressions on social media. Accordingly, any policy that in the view of the NLRB would impede employees in the exercise of their right to engage in concerted activities would be contrary to the law.
Covenants not to compete are enforceable in Puerto Rico, under general freedom of contract principles, as long as they comply with certain requirements. In fact, Section 2.15 of Law No 4 sets forth a general obligation that all employees have a duty of loyalty and must refrain from competing with the business activities of their employer during the course of their employment, even in the absence of a written non-competition agreement.
According to case law established by the Puerto Rico Supreme Court, in order for a covenant not to compete to be valid in this jurisdiction it must be made in writing, in exchange for adequate consideration, and must not impose an undue burden on the employee. The non-competition clause must be tailored to the employer’s legitimate need to protect its business in terms of duration, geographic limitation, and clients affected. Typically, a non-competition agreement must not exceed twelve months, although longer periods have been found valid for shareholders and consultants. Non-competition agreements may not be against public policy. If the non-competition clause is part of the original employment agreement, no independent consideration is required. However, if the non-competition clause comes into force after the individual has become employed, adequate consideration must be provided. What constitutes 'adequate' consideration varies by industry, position, any by the employee’s overall compensation package.
Under general freedom of contract principles, non-solicitation of employee provisions may be valid. Such provisions are generally included in non-competition agreements, separation agreements and settlement agreements.
However, the Puerto Rico Constitution and the case law of the Puerto Rico Supreme Court provide for the right of every employee to choose and resign freely from his or her employment. In the absence of a valid non-competition agreement or an employment contract for a fixed period of time, any employee is free to resign and work for any other employer, including a competitor.
There is no data protection authority or overarching law that governs information privacy in Puerto Rico. There is only a Citizens Advice Bureau on Information Privacy Protection within the Puerto Rico Department of Consumer Affairs (DACO from its Spanish initials), created by Law Number 112 of 7 October 2009, the duties and responsibilities of which are primarily advisory. Accordingly, Puerto Rico’s privacy regime is limited in scope as it lacks a uniform rule of law or structure to protect individuals’ privacy concerns. Nonetheless, the following laws relating to data privacy could also have an impact on the employment relationship:
Employment of foreign workers in Puerto Rico is governed by US immigration law.
All foreign employees are subject to the registration requirements of US immigration law.
Puerto Rico employees in the private sector can obtain union representation pursuant to the provisions of the US National Labour Relations Act (NLRA” and the procedures of the NLRB. Under the NLRA, employees can organise or join a union to negotiate (with their employer) matters pertaining to wages, hours, and other terms and conditions of employment. They can also discuss matters related to union organisation and working conditions with co-workers. Moreover, employees can engage in concerted action which could include strikes and pickets, depending on the purposes of such activities. Accordingly, under the principles established by the NLRB and the US Supreme Court in N.L.R.B. v J. Weingarten, Inc, employees have a right to union representation at investigatory interviews. They also have a right to union representation during disciplinary procedures and arbitration.
The percentage of union representation in the private sector in Puerto Rico is in single digits. Certain industries have traditionally been organised, such as the maritime industry, hotels, casinos, transportation, and hospitals but even in those strongholds unions have lost ground in recent years.
The most active and combative union representation is presently limited to government-sponsored corporations such as the Puerto Rico Power Authority, Puerto Rico Aqueduct and Sewer Authority, the State Insurance Fund, certain state-sponsored medical facilities and public transportation.
The framework and requirements for union elections in the private sector are provided by the NLRB rules and regulations, just as in any other US state.
See 5.1 Status/Role of Unions above
Under the NLRA, employees can organise or join a union to negotiate matters pertaining to wages, hours, and other terms and conditions of employment.
Employers with unions must comply with the requirements of the applicable collective bargaining agreement, in particular with the grievance and arbitration procedures, prior to implementing terminations.
Puerto Rico is a for-cause jurisdiction. Just cause for termination is required in Puerto Rico. Law No 80 of 30 May 1976, 29 L.P.R.A. 185a et seq (Law No 80), which covers employees hired for an indefinite period of time, states that good cause for the discharge of an employee from an establishment is understood to be:
This list is not exhaustive, and just cause refers to any reason that relates to the proper and normal operation of the establishment. For example, in 2019, the Puerto Rico Supreme Court held that a criminal accusation against an employee for off-duty criminal conduct may put at risk the safety, order, and efficiency of an employer’s operation, and may be just cause for termination under Law No 80.
Law No 80 provides a statutory formula in cases of wrongful discharge. Such an amount is considered to be an indemnity and consists of the sum of two payments. Law No 128 of 7 October 2005 amended the statutory formula provided by Law No 80. Accordingly, any employee who is discharged from his or her employment without good cause shall be entitled to receive from his or her employer, in addition to any salary earned, an indemnity consisting of the following:
In addition to this indemnity, the employer must also pay to the employee a progressive indemnity equivalent to one week for each year of service if the discharge occurred within the first five years of service; two weeks for each year of completed service if the discharge occurred after five years, and until 15 years; and three weeks for each year of completed service if the discharge occurred after 15 years of service. Law No 4 amends the formula, and reduces it to a basic indemnity of three months of salary, plus two weeks for every completed year of service. The severance is capped to nine months of salary. The cap of nine months does not apply to employees hired prior to the enactment of Law No 4; these employees will be entitled to claim under the prior indemnity formula.
The computation for the indemnity for discharge without good cause shall be paid on the basis of the highest rate of salary earned by the employee during the three years immediately preceding his or her discharge. Law No 4 clarifies the definition of the term “basic salary” to exclude certain benefits such as deferred compensation, income from tips that surpasses the federal minimum wage, and disability payments. Also, that computation shall be based on the highest number of regular working hours of the employee during any period of 30 consecutive calendar days within the year immediately preceding the discharge. In addition, no payroll deductions, except for social security, shall be made on such an indemnity. Law No 4 amends the Puerto Rico Internal Revenue Code to make payments under Law No 80 tax-exempt.
Law No 4 reduces the statute of limitations from three years to one year. However, the statute of limitations for terminations prior to the enactment of Law No 4 will continue to be three years. Law No 4 also establishes mandatory settlement conferences within 60 days of the filing of the answer to the complaint in cases under Law No 80.
The Puerto Rico Department of Labour and Human Resources has issued extensive guidelines regarding the interpretation of Law No 80.
Currently, Law No 80 is one of the most important statutes to consider when establishing the employer-employee relationship in Puerto Rico. That being said, the derogation of Law No 80 is currently an ongoing discussion in the context of the negotiations between the government of the Commonwealth of Puerto Rico and the Fiscal Control Board established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The Fiscal Oversight Board is strongly in favour of eliminating Law No 80 and making Puerto Rico an 'at-will' jurisdiction, arguing that will incentivise hiring and, consequently, stimulate the economy. This position has been met with intense resistance from local congress, which has now voted against repealing the statute twice. It remains to be seen whether Law No 80 will ultimately survive and, if so, in what form.
There are no required notice periods under local law. However, under federal law, specifically the Worker Adjustment and Retraining Notification Act (Warn Act), covered employers must provide affected employees, certain government entities and officers, as well as union representatives, with 60 days' advance notice of plant closings and mass layoffs, as such terms are defined by law.
Union-free employers are at liberty to establish reasonable procedures for progressive discipline and employment terminations. Law No 80, however, requires that internal rules, regulations and policies adopted by the employer must be provided to employees in writing. Case law from the Puerto Rico Supreme Court provides for the courts to determine if such work rules are reasonable. The court system in Puerto Rico has jurisdiction under Law No 80 to determine whether an employment termination is justified. However, the Puerto Rico Department of Justice’s opinion is to the effect that the burden of proof in wrongful discharge cases still falls on the employer.
As discussed above employers with unions are required to comply with the terms and conditions of the applicable collective bargaining agreement, in particular with the grievance and arbitration procedure, prior to implementing terminations. There are no required internal procedures or appeal procedures for terminations. However, once the employer has adopted particular internal rules, regulations, and policies and implemented a progressive discipline and a termination procedure, it must follow those procedures. There is case law to that effect.
There are no required notice periods under local law. However, under the Warn Act, a 60-day advance notice of plant closings and mass layoffs is required for covered employers.
The aforementioned Law No 80 establishes statutory severance for terminations without just cause. All out-of-court payments should be made in exchange for a separation or settlement agreement and full release.
Summary dismissal is not favoured in Puerto Rico. However, Law No 80, its guidelines, and interpretative case law have recognised that, in certain circumstances, summary dismissal is warranted. Such cases are usually reserved for infractions or behaviour of a kind that it would make it imprudent to await its repetition. Typically, summary dismissal is reserved for incidents that lay bare a clear and undoubtable condition of character that carries with it either actual or potential grave consequences or reveals an attitude not susceptible to change. For example, the Puerto Rico Supreme Court has upheld summary dismissal in cases of workplace violence, sexual harassment and falsification of employment documents or records (including providing false information on a job application).
Releases in connection with termination agreements are permitted in Puerto Rico.
Releases are contracts under Puerto Rico law. Accordingly, they cannot contravene laws, morals, or public order. Moreover, consent to them cannot be obtained by duress or undue pressure. Releases must be supported by adequate consideration.
Under Law No 80, employees cannot waive and release their right to sue the employer for wrongful discharge in an employment contract. However, Law No 4 expressly allows employees to settle Law No 80 claims as part of the termination process.
Regarding the protection of certain classes of employees, as discussed below in 7.2 Anti-Discrimination Issues in more detail, employees are protected from discrimination on the basis of age, race, colour, creed, sex, disability, sexual orientation, gender identity, social or national origin, social condition, political affiliation, religious ideology, being a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, serving or having served in the armed forces of the United States or holding veteran status. Employers cannot take any adverse employment action because of any of the aforementioned conditions. In addition, Puerto Rico law provides whistle-blower protection which forbids employers from taking adverse employment action against any employee for providing or attempting to provide truthful, non-defamatory testimony before any administrative, legislative, or judicial forum.
As discussed above, in 6.1 Grounds for Termination, Puerto Rico is currently a jurisdiction that requires just cause for termination. That being the case, any employee who believes that he or she has been wrongfully terminated can file a claim under Law No 80. The exclusive remedy for wrongful discharge claims is the statutory severance, as calculated under Law No 80. After the enactment of Law No 4, the statute of limitations for wrongful termination claims under Law No 80 is one year. For employees who are hired for a specific period of time under a written employment agreement, what constitutes adequate cause for termination shall be determined by the contract, which usually incorporates the principles of Law No 80. Contract claims are governed by the Puerto Rico Civil Code. The statute of limitations for breach of contract claims is 15 years.
The employer typically bears the burden of proof in wrongful discharge cases. However, in cases where the employee claims constructive discharge, the employee bears the initial burden of proof to establish that the circumstances surrounding his or her resignation meet the criteria for an involuntary discharge.
Under Puerto Rico laws, employees are protected from discrimination on the basis of age, race, colour, creed, sex, disability, sexual orientation, gender identity, social or national origin, social condition, political affiliation, religious ideology, being a victim or being perceived as a victim of domestic violence, sexual aggression or stalking, serving or having served in the armed forces of the United States or holding veteran status.
Specifically, under Puerto Rico Law No 100 of 30 June 1959, 29 L.P.R.A. §146 et seq (Law No 100), any employer who discharges, lays off or discriminates against an employee regarding his or her salary, terms or conditions of employment; refuses to hire a person or classifies its employees in any manner which tends to deprive a person of employment opportunities or affect his or her status as an employee on the basis of the aforementioned factors, will incur civil liability, which may consist of a sum equal to twice the amount of damages sustained by the employee, and will also be guilty of a misdemeanour. The law also provides the same penalties for any employer that discriminates due to the fact that the person in question is married to an employee of the employer.
Law No 100 applies to all employers and it includes all agencies or instruments of the Government of Puerto Rico operating as private businesses or enterprises.
In connection with the above, Law No 217 of 29 September 2006 requires all public and private employers to develop and implement a protocol to avoid and/or manage episodes of violence in the workplace.
Law No 4 amended Law No 100 to cap compensatory and punitive damages in discrimination cases pursuant to the limits established by Title VII of the Civil Rights Act of 1964. Employers who have fewer than 101 employees will have a cap of USD50,000; employers who have between 101 and 200 employees have a cap of USD100,000; employers who have between 201 and 300 employees have a cap of USD200,000 and employers who have upwards of 501 employees have a cap of USD300,000. This cap also applies in cases of retaliation.
The rights of working mothers under Law No 3 are discussed above in 1.5 Other Terms of Employment. In addition, a pregnant employee cannot be penalised for any decrease in her productivity. If discrimination is found, the prevailing employee may be awarded back pay, front pay, emotional and compensatory damages, attorney’s fees and/or reinstatement. Any award of damages must be doubled.
Puerto Rico Law No 69 of 6 July 1985, 29 L.P.R.A. §1321 et seq (Law No 69), requires strict compliance with the constitutional guarantee that no person shall be discriminated against on account of sex. The main purpose of this law is to guarantee the equal right to employment for women as well as men, while prohibiting those who promote discrimination, fixing responsibilities and imposing penalties. Under the Act, prohibition of discrimination on the basis of sex extends to all agencies or instruments of the Government of Puerto Rico. In addition, in furtherance of its goal of achieving pay equality, in 2017 Puerto Rico enacted Act No 16 of March 8, 2017, 29 L.P.R.A. 251 et seq which specifically prohibits employers from inquiring as to an employment candidate’s salary history, including salary, benefits, perquisites, and any other form or remuneration, or combination thereof. The law entered into force immediately after its enactment, though employers were granted a one year grace period to enter into full compliance with its provisions. Presently, employers are expected to be fully compliant.
Puerto Rico Law No 17 of 22 April 1988, 29 L.P.R.A. §155 et seq (Law No 17) explicitly prohibits sexual harassment in the workplace. Law No 17 also establishes responsibilities and penalties.
Law No 17 defines sexual harassment as any type of undesired sexual approach, demand for sexual favours and any other verbal or physical behaviour of a sexual nature, through any means, including electronic means such as emails or the use of the internet, when one or more of the following circumstances occurs:
In cases of sexual harassment, the employer’s responsibility extends not only to its actions, but also to the actions of its agents and supervisors, regardless of whether the employer knew, or should have known, about the illegal behaviour. The employer must take the following measures in order to maintain a sexual harassment-free environment:
The person responsible for acts of sexual harassment will be responsible for civil liability, including a sum equal to double the amount of the damages that the action has caused the employee or job applicant, among other remedies.
Puerto Rico Law No 44 of 2 July 1985, 1 L.P.R.A. §501 et seq (Law No 44), was enacted a few years before the ADA and later amended to conform further to it. Law No 44 establishes that private and public institutions shall not use discriminatory employment procedures against persons with physical or mental disabilities. This prohibition includes recruitment, compensation, fringe benefits, reasonable accommodation and access facilities, seniority, participation in training programmes, promotions or any other term or condition of employment.
Another local counterpart of the ADA is Law No 81 of 27 July 1996, 29 L.P.RA. §1401 et seq. This statute focuses on the implementation of reasonable accommodation measures. Violations will result in fines and other remedies.
Puerto Rico Law No 44 of 19 May 1976, 25 L.P.R.A. §2084 prevents employers from dismissing or discriminating against an employee by reason of his or her absences in the performance of any military duty. If the employer violates the provisions of this law, it will be guilty of a felony and shall be punished with a fine not to exceed USD5,000 or by imprisonment for no more than three years, or both. The employee shall have the right to reinstatement without any loss of pay, as well as privileges and/or benefit rights.
In addition to the above, there is also legislation in Puerto Rico which extends protection to jurors and witnesses from any action adverse to their employment.
Federal legislation regarding discrimination in the workplace, such as the ADA, the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act of 1964, and the Equal Pay Act, as amended, also apply in Puerto Rico.
All discrimination cases under Puerto Rico law are adjudicated using a burden-shifting framework similar to that applied under Title VII.
There is also statutory protection for employees who complain about employer wrongdoing, whether they do so internally or to authorities or regulators. Puerto Rico Law No 115 of 21 December 1991, 29 L.P.R.A. §194a et seq (Law No 115), provides protection for any employee who testifies or attempts to testify before any administrative, legislative or judicial forum. Law No 169 of 29 September 2014 extended this protection to internal complaints.
Under Law No 115, employers are exposed to double damages, reinstatement, back pay, benefits and attorney’s fees if any employee proves an adverse employment action for whistle-blowing activities covered under the law. The statute of limitations under Law No 115 is three years.
Anonymous complaint procedures are not required.
The Puerto Rico Department of Labour and Human Resources created the Office of Mediation and Adjudication (OMA” pursuant to Law No 384 of 17 September 2004. Parties can elect mediation and adjudication of their cases and other benefit claims by the OMA under Law No 80, Law No 180, and Law No 379.
The Puerto Rico Department of Labour and Human Resources also provides arbitration services. The Bureau of Conciliation and Arbitration was created to mediate in labour-management disputes, to assist parties in collective bargaining negotiations, and to provide labour arbitration services free of charge.
The Anti-discrimination Unit (ADU) is another specialised forum of the Puerto Rico Department of Labour and Human Resources. Although exhausting administrative remedies is not required under Puerto Rico employment laws, the ADU mediates and conducts informal hearings in discrimination cases under Law No 100 (general anti-discrimination law), Law No 17 (sexual harassment) Law No 44 (disability), Law No 69 (sex), Law No 3 (maternity), and Law No 427 (breastfeeding).
For federal claims, agencies such as the NLRB and the Equal Employment Opportunity Commission (EEOC) have offices in Puerto Rico. Claims can be brought at federal and state levels, and class actions are available in Puerto Rico.
Pre-dispute arbitration procedures agreements are enforceable.
Pursuant to the Alternative Dispute Resolution Regulations of the Puerto Rico Supreme Court, a party cannot be forced to mediate a case. Mediation requires the consent of both parties.
If discrimination or retaliation is found, the prevailing employee may be awarded back pay, front pay, emotional and compensatory damages, attorney’s fees and/or reinstatement. Under Puerto Rico’s discrimination and retaliation statutes, any award of damages must be doubled. As discussed above, Law No 4 establishes a cap for compensatory and punitive damages. The award of attorneys’ fees in favour of the prevailing employee will be between 15-25% of the judgment.
Puerto Rico Law No 402 of 12 May 1950, 32 L.P.R.A. 3114, explicitly prohibits the imposition of attorney’s fees on employees who are forced to file suit against their employers under federal or local labour and employment legislation or an employment or collective bargaining agreement. However, though unusual, some courts have held that employers can be awarded attorney’s fees if it is found that the employee’s complaint was frivolous or vexatious.